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Delivered by Innovate UK, the Innovation Loans programme is a government funded repayable finance product seeking to bridge the funding gap for innovative SMEs whilst also providing value for money for the taxpayer. A total of £75 million was committed through the pilot programme, with businesses able to borrow between £100,000 and £1 million to scale up and grow. The focus of the programme was on late-stage R&D projects with a clear route to commercialisation, covering a range of technologies, sectors and markets (including advanced manufacturing, clean energy, healthcare and education).

In 2019, SQW completed an interim evaluation of the pilot programme focusing on early outcomes. In 2021, SQW, supported by IFF Research and Middlesex University, was commissioned to undertake a follow-on interim evaluation to assess programme delivery and the extent to which additional outcomes and impacts had been achieved as a result of the programme.

The follow-on evaluation involved telephone interviews with representative samples of successful and unsuccessful applicant businesses; interviews with external and delivery stakeholders; beneficiary case studies; a review of programme documentation and monitoring data; and preliminary econometric analysis to inform the future impact evaluation.

The findings of the evaluation are very positive and provide evidence of strong progress since the previous interim evaluation in 2019. This is particularly encouraging given the relatively short time that has elapsed since businesses have been awarded and drawn down Innovation Loans, and the disruption to the economy from Covid-19.

The evaluation found additional benefits for business beneficiaries, including: enhanced innovation capacity and skills; increased R&D investment; introduction of new products/services/processes; commercialisation of innovations; and securing follow-on funding (mostly equity). The programme is also generating economic impacts in terms of additional employment and turnover. Critically, Innovation Loans is associated with a high level of finance additionality, helping to overcome the funding gap for innovative SMEs.

In March 2022, the Government announced a new series of loan competitions worth £150 million to support innovative SMEs and level up the UK. The decision to move forward from the pilot was supported by the evidence from the evaluation.

The evaluation report is available here. For more information about the evaluation or SQW’s wider work in innovation and enterprise, please contact Osman Anwar.