Call us on:  01933 510 022 
5 Min Read

Blog: Funding options for innovative SMEs

If you’re an SME founded on strong principles of research and development with an innovation-first approach, you might sometimes feel like you’re fighting a losing battle.

Large companies with extensive R&D budgets are always nipping at your heels, economical and societal challenges are constantly forcing you to change direction, and risks can take time to pay off.

However, there are substantial benefits to being an innovation-first SME! Including being able to access funding designed with your kind of business in mind.

Here are five options for innovation-active businesses looking to fund ideas and growth.

1: Innovate UK Smart Grants

Innovate UKdrives productivity and economic growth by supporting businesses to develop and realise the potential of new ideas.

As well as working with companies to ‘de-risk, enable and support innovation’ through connecting businesses to partners, customers and investors, it also funds innovation projects that have the possibility to become commercially successful.

Smart Grants are part of their open funding programme, providing financial support for great ideas. Grant applications must include at least one micro, small or medium-sized enterprise as the lead or collaborative claiming partner – great news for SMEs.

Up to 70% of project costs could be covered with a Smart Grant so it’s worth reading more about their eligibility criteria, what’s involved and seeking advice to see if you could apply.

2: R&D tax credits

Research and development tax reliefs are still underutilised by SMEs, either because of a lack of awareness of the scheme or confusion about eligibility and the claiming process.

R&D tax relief allows businesses to claim back a proportion of R&D expenditure as tax credits, which can reduce your tax bill, increase taxable losses or be claimed in cash.

A wide variety of R&D can be claimed for across any sector, and there are schemes for both SMEs and larger companies.

Like with Smart Grants, claiming R&D tax relief is free and can be relatively straightforward with the help of an advisor like MPA. What’s even better is that we also provide advance funding against claims for those who need cash quickly.

Patent Box is another form of innovation tax relief that allows a reduced corporation tax on profits resulting from the sale of products or services containing a qualifying patented innovation.

If you’ve undertaken research and development, or have an active patent in the market right now, it’s likely you can claim for at least one of these government incentives.

3: Enterprise Investment

The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are tax relief schemes offering tax breaks to investors who buy new shares in a company. They allow business owners to raise up to £5m each year (£12 million in a company’s lifetime) by making shares in the company more tax-appealing to investors.

Social Investment Tax Relief is similar, but is only available to community interest companies, community benefit societies, or charities.

These reliefs are designed to stimulate the creation and expansion of early-stage, high-growth start-ups, and over £24bn worth of funds have been raised through the EIS scheme since its launch in 1994 (£1.4bn through SEIS since its launch in 2012).

4: Start-up loans

There are, of course, several loan options available, both personal and business, to help turn ideas into a reality.

Start-up loans from the Start Up Loans Company (part of British Business Bank) provide finance and support for businesses that struggle to access other forms of finance.

They’re personal, government-backed loans for business purposes and they’re unsecured, so no assets or guarantors are needed to support an application.

The best thing about Start Up Loans Company loans is that they come with mentoring and advice to help you make sure your start-up business has the best possible chance of succeeding.

As the name suggests, these loans are open to start-ups. However, if you find later down the line that you need further financing to support growth, for example, is required, a second loan can also be applied for. They also partner with over 100 others to unlock finance for smaller businesses at any stage of maturity.

5: Horizon Europe

Horizon Europe (previously Horizon 2020) is a funding programme available to research or innovation projects that are ground-breaking enough to improve European research standards, or that directly respond to global challenges like climate change.

Since its exit from the European Union UK has associated to Horizon Europe (through the Trade and Cooperation Agreement) and so UK scientists, researchers and businesses still have access to funding under the programme.

To apply you usually have to be part of a consortium made up of at least three organisations from different countries.

SMEs can also get help from a coach or mentor so it’s a good option for first-time business owners looking for support.

How to decide

This blog has only touched on a fraction of the funding available to start-up and SME businesses, and even the options here can be complicated to navigate let alone chose between.

There are a range of things to consider, from how the options work together, tax implications of each, and qualification criteria, as well as risk analysis and financial security checks.

If you’re interested in seeking funding for your business, you won’t find anyone better positioned to listen to your ideas and help you on your way to achieving success than MPA.

We exist to release, accelerate and sustain world-leading innovation delivered by forward-thinking UK businesses and have a great team of qualified accountants, tax advisors and sector specialists who are ready to help you do just that.

Get in touch to chat all things innovation-funding today.