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Funding for innovation: grants

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13 September 2018

Funding is usually key to any innovation. In a series of three articles, we look at funding options for innovative companies.

In this article, together with Granted Consultancy, we examine grant funding for Research and Development.

Why apply for a R&D grant?

Grant funding can transform your business, unlocking opportunities that might otherwise be unattainable.

One of the main attractions of grant funding is that it does not involve giving away a share of the company. Grants can also accelerate the speed of development and might help to get your new product/service to the market before competitors.

R&D grant funding can be substantial:

  • Support for projects valued at £25,000 to £2 million.
  • Funding usually for 45% to 100% of eligible R&D costs, including staff wages, travel, materials, subcontractors etc.

In addition to financial support, there can be other potential benefits, for example:

  • PR opportunities; InnovateUK promotes projects that it funds, improving awareness and possibilities of further investment;
  • Opportunities to work with industry and academic partners. Collaborations can allow access to new technologies, techniques and processes that can enhance outcomes for your business;
  • Grant funding can validate and partially ‘de-risk’ the project for other potential investors, improving possibilities for further funding.

What do grant providers look for?

Generally, funders support R&D projects that align with certain identified criteria, addressing a clear problem, challenge or opportunity; funders look for a return on investment just as other investors would.

R&D projects should:

  • Show a comprehensive project plan (timescales, milestones, detailed costings etc.);
  • Demonstrate significant technical innovation;
  • Understand the market and any competing solutions;
  • Be commercially scalable;
  • Have an experienced and skilled project team; and
  • Identify an Intellectual Property strategy.

What is the process?

Most grants have a highly competitive tendering process. Typically, it can take:

6 to 10 weeks to develop a competitive grant application; it is key to allow time to understand the scope of the project and its alignment to the fund, secure match funding, secure partners, and finalise the application;

8 to 10 weeks following submission: funder’s decision;

1 to 2 months of due diligence on successful applications before the project can officially begin.

The funder will then require regular updates on progress and project spend.

Impact on R&D tax credits?

The most beneficial scheme of R&D tax incentives is only open to small or medium-sized companies (SMEs).

If a grant is received for an R&D project, that project is partially or wholly disqualified from an R&D tax credits claim under the ‘SME scheme’.

However, the company may then be eligible to claim an ‘R&D Expenditure Credit’ (RDEC). This can generate an HMRC contribution of 9% to 10% of eligible R&D expenditure in addition to the grant funding.

This article has been written in collaboration with Alex Chalkley, founder of Granted Consultancy, a niche team of business funding consultants, scientists and bid writers.