Defence Innovation Loans

Programme:Innovate UK & Defra

Awards:Up to £1m loans at 7.4% interest

Geographical Scope:national

Beneficiaries:public

Key Features:The Defence Innovation Loans 2025/26 programme offers seven-year, low-interest loans (at 7.4% APR) to fund late-stage defence solutions, providing crucial capital to convert proven tech into deployable military capability.

Key Information

- Programme: Defence Innovation Loans (Ministry of Defence via DASA, delivered with Innovate UK Loans Ltd)
- Loan Amount: £100,000 to £1,000,000 per company
- Interest Rate: 7.4% per annum (fixed) – below typical market rates for unsecured lending in this sector
- Use of Funds:
  - Covers up to 100% of eligible project costs
  - For late-stage R&D and commercialisation of defence innovations
  - Includes prototyping, testing, manufacturing scale-up, and marketing to MOD
- Eligibility:
  - UK-registered SMEs only
  - Single-company applications (no consortia)
  - Innovation must address a defence or security problem
  - Technology readiness level (TRL) of 6 or higher
  - Must pass credit checks (loan suitability assessment by Innovate UK)
- Application Cycles:
  - Regular cycles throughout 2025/26 (approximately every 2 months)
  - Cycle 1: Opens 18 March 2025, closes 13 May 2025
  - Cycle 2: Opens 13 May, closes 1 July 2025
  - Cycle 3: Opens 1 July, closes 2 September 2025
  - Rolling up to 7 cycles total
- Decision Timeline: Approximately 8–9 weeks after the application deadline

Scope

This programme supports late-stage defence innovations that are ready to transition from TRL 6+ (tested in relevant environments) to real-world deployment.

Eligible activities include:

User trials with the military
Obtaining certifications for defence use
Tooling and production setup
Product refinement for operational field conditions
Integration with MOD systems or processes

Solutions should address a clear MOD capability need in areas such as:

Surveillance and sensing
Cybersecurity and information systems
Artificial Intelligence
Autonomous platforms
Advanced materials and manufacturing
Energy, power, and propulsion

To be in scope, your innovation must:

Be proven in a relevant environment
Be militarily useful
Be commercially viable within the loan term

Application Process

There are two parts to your application:

Innovation Application (submitted via DASA portal)
- Describe your solution, TRL level, MOD relevance
- Detail your use of funds, project milestones, technical outcomes
- Explain military impact and dual-use potential (if any)
Loan Request Application (submitted to Innovate UK)
- Provide financial accounts and forecasts
- Show how your company will repay the loan
- Demonstrate ability to manage debt responsibly

You must complete both parts of the application. Submitting only the innovation form means your proposal will not be assessed.

Loan Terms and Considerations

7.4% interest rate is well below market rate for unsecured loans in this sector
Likely to include an interest-only period during development
Repayment over up to 7 years
No equity dilution
No IP transfer
No collateral typically required

You must:

Be confident you can generate revenue during the loan term (e.g. MOD contracts, exports)
Treat this as a serious financial commitment
Only request what you can repay

Overview of Defence Innovation Loans

The Defence Innovation Loans scheme is a novel funding route from the UK Ministry of Defence, delivered by DASA in partnership with Innovate UK. It addresses a key funding gap: many defence innovations stall after initial prototyping due to lack of support for commercialisation.

Traditional venture capital is difficult for defence tech (long MOD sales cycles, security restrictions), and grants rarely fund later-stage development. This loan programme allows the MOD to act like a bank, offering affordable debt funding to help SMEs convert proven prototypes into deployed solutions.

These loans are aimed at:

Mature innovations with TRL 6+ (tested in relevant environment)
Companies needing support for:
- User trials with military end users
- Certifications and compliance
- Tooling and manufacturing setup
- MOD integration and deployment

Typical examples include:

A sensor device that needs ruggedising for field use
An AI software tested in lab conditions that now requires integration into MOD systems

Eligibility

To qualify, your business must:

Be a UK-registered SME
Apply as a single company (no consortia)
Hold a TRL 6+ innovation
Address a defence or security problem
Be creditworthy (as assessed by Innovate UK Loans Ltd)
Clearly articulate the MOD need for your product
Be able to repay the loan over a 7-year period

Important constraints:

Large companies and academic institutions are not eligible
You may subcontract work, but the loan is awarded to a single SME
Your company must pass:
- A technical evaluation by DASA (desirability, feasibility, viability)
- A creditworthiness check by Innovate UK Loans Ltd

Timelines and Resubmission

- Cycle-based entry allows multiple submission opportunities during 2025/26
- Example: Submit in Cycle 2 (by 1 July 2025) and expect a decision around 19 August 2025
- If unsuccessful:
  - You may revise and reapply in a later cycle
  - Common improvement areas: better financials, stronger MOD engagement, clearer project planning

Our Service Offering in Defence Loans

Applying for a DASA Innovation Loan is a demanding process that combines technical proposal writing with financial due diligence. FI Group offers end-to-end support to help SMEs succeed.

We assist with:

Strategic Positioning: Clearly articulating the MOD need, aligning your innovation with defence priorities and TRL expectations.
Innovation Application Writing: Collaborating with your technical team to build a compelling narrative that explains what the loan will fund, project milestones, and projected defence and economic impact.
Financial Application Prep: Helping you prepare financial forecasts, justify loan amounts, and present a creditworthy profile — essential for Innovate UK’s credit review.
Loan Offer Review: Supporting you in reviewing and negotiating loan terms if Innovate UK proposes a smaller offer or includes conditions.
Project Planning: Structuring a milestone roadmap with clear deliverables, like user trials, prototype refinement, and MOD engagement timelines.
Compliance & Documentation: Ensuring all required documents are complete, consistent, and tailored — from technical annexes to cashflow projections.
Ongoing Support: Assisting with project reporting, follow-on funding, and procurement planning post-loan approval.

FI Group also ensures security and discretion for sensitive defence innovations. We work under NDAs and help you frame classified elements responsibly for evaluators. With our dual expertise in R&D grants and innovation finance, we become a strategic extension of your team, helping you unlock this transformative funding route.

Book An Introductory Meeting

Our Service Offering in Defence Loans

Applying for a DASA Innovation Loan is a demanding process that combines technical proposal writing with financial due diligence. FI Group offers end-to-end support to help SMEs succeed.

We assist with:

Strategic Positioning: Clearly articulating the MOD need, aligning your innovation with defence priorities and TRL expectations.
Innovation Application Writing: Collaborating with your technical team to build a compelling narrative that explains what the loan will fund, project milestones, and projected defence and economic impact.
Financial Application Prep: Helping you prepare financial forecasts, justify loan amounts, and present a creditworthy profile — essential for Innovate UK’s credit review.
Loan Offer Review: Supporting you in reviewing and negotiating loan terms if Innovate UK proposes a smaller offer or includes conditions.
Project Planning: Structuring a milestone roadmap with clear deliverables, like user trials, prototype refinement, and MOD engagement timelines.
Compliance & Documentation: Ensuring all required documents are complete, consistent, and tailored — from technical annexes to cashflow projections.
Ongoing Support: Assisting with project reporting, follow-on funding, and procurement planning post-loan approval.

Book An Introductory Meeting

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