Research and Development (R&D) is crucial for all businesses. Therefore, organisations have different teams under this department. However, many times companies fail to find solutions to fund the innovation.
As a result, innovation gets delayed or stopped. Some organisations also switch to alternatives to the invention. But they could easily fund its many options, including an emergency £2000 loan.
A few solutions to fund R&D for technological include tax credits, grants, pilot programs, loans, etc. Each type of funding would come with its duration and monetary benefits.
9 Smart Ways to Fund Technological Innovations
● Startup Loan Scheme
Entrepreneurs and companies can avail £500 to £25,000 to launch a new product, or service through the Startup Loan Scheme. The money can also get utilised for business expansion, covering existing costs, or other purposes.
The Startup Loan Scheme is a government’s personal loan launched in 2012. The loan comes with a fixed APR of six per cent, and duration between one to five years. However, lenders, banks, and financial institutions would require cash-flow forecasts, and a business plan to approve the applicant.
Besides this, the loan is backed with a twelve-month business mentor to help organisational heads manage finances.
● Tax Credit Relief
Many companies provide the opportunity to manage R&D tax credits for startups, entrepreneurs, and large organisations. Through their assistance businesses can evaluate their current financial situation, and offer relief.
Businesses that offer R&D tax credit reliefs also provide sound advice on the eligibility criteria. They even assist their clients in successfully claiming their reliefs from the government. The R&D Tax Credit Scheme launched in 2000 covers details for the claim.
According to sources, businesses have already claimed £33.3 billion under the scheme. The eligible expenses include the relief include salary, EPWs, consumables, subcontractors, and software.
Another source suggests that large companies can recover eleven per cent of expenditure on RDEC or Research and Development Expenditure Credit. Similarly, SMEs have the opportunity to make twenty-five per cent of the R&D eligible for relief.
Additionally, SMEs suffering a loss don’t require to pay tax for the qualification of the R&D Tax Credit. They can claim thirty-three per cent of the eligible amount as cashback.
● Grant Funding
Many organisations conduct grant funding competitions throughout the UK. For example, Innovate UK’s Smart Grant program offers a tenure of six to thirty-six months for a £25,000 to £2.0 million grant.
However, it does require a project with an SME, and only covers the UK projects. Innovate UK belongs to the UK Research & Innovation. Similarly, Kent and Medway Business Fund provide zero APR loans with a maximum amount of £500,000.
Therefore, finding neighbourhood grants for small businesses would prove beneficial in funding innovations. However, only a few organisations that offer groundbreaking inventions such as AI can become eligible for most of them.
A more popular method for expansion and boosting innovations opted by most startups is crowdfunding. It even offers an opportunity for publicity, raising money, and more innovations. However, it comes in two forms, namely, consumer and investor-focused.
Crowdfunding focused on consumers guarantees sales before production. It even presents organisations’ chance to avoid share-splitting with the investor and attain rewards from the latter.
However, companies must ensure hidden costs to attain rewards. These include both production and distributions costs. A few platforms that provide crowdfunding focused on consumers include Kickstarter and Indiegogo.
Similarly, Crowdcube and Seedrs provide a platform for crowdfunding focused on the investor. However, the investors that provide the funding become shareholders. Such a financial boost is beneficial for companies seeking expansion.
However, crowdfunding focused on investor becomes unsuitable for product-based startups. Also, the investor would hold company equity. But the upside is that the company would receive more funding for innovation, R&D, and expansion than through other methods.
● Business Loans – Peer-to-Peer
Organisations have just entered the market, or haven’t shown any successful innovation become averse for bank loans. On the other hand, peer-to-peer lenders provide money to newly-established startups, or renowned organisations through many platforms.
Some of the peer-to-peer lending platforms include Funding Circle, RateSetter, and Zopa. The startups that qualify for the unsecured loan can attain upto £500,000. Companies can utilise the money for the desired purposes if they meet the terms and conditions.
Organisations that require immediate funding of small amounts can even apply for a 12-month loan. It would help recoup from a financial crisis, go forward with the innovation, clear existing debt, etc.
● Angel Investors
Many angel investors in the UK are interested in becoming a part of the early stages of a startup. Some of them have even launched their businesses. A few prominent angel investors in the UK include Angel Academe, OION, Cambridge Angels, Craige Capital, The Startup Funding Club, etc.
These angel investors can offer between £50,000 to £2 million to UK-based startups. Also, all angel investment companies specialise in select fields. Again, company heads must pitch to the investors to understand their interest in the area and business expansion.
Besides this, businesses seeking funding for innovation must conduct face-to-face meetings with angel investors. The most suitable place for meetup would include a co-sharing office environment or space. It promises positive growth prospects of the company.
● Venture Capital
Acquiring a venture capitalist for an organisation is one of the most challenging jobs. A single VC investor receives multiple investment applications every day. Therefore, crowdfunding and angel investors become must more suitable options for funding innovation and expansion.
Additionally, VC’s either become partners or associates of a firm. Startups might also struggle with the idea of direction and control change. Also, acquiring a VC requires a large amount of time and energy unavailable with growing organisations, especially startups.
A lot of venture capital has been enlisted in the British Venture Capital Association directory. Convincing a VC also requires focussing on research, a VC, networking, building investor relationships, and catering to the financial requirement.
● Government Aids
State aid is a subsidy or assistance given by a member state for SMEs, R&D, innovation, regional development, etc. The majority guidelines of the state aid are a part of the General Block Exemption Regulations or GBER.
Similarly, organisations can avail the De Minimis Aid for a maximum amount of €200,000 and three years. It is a form of State Aid that doesn’t require the approval of the European Commission.
Unfortunately, the active road freight transport section undertakings under the De Minimis Aid have eligibility of no more than €100,000. The Innovate UK government funding supports fundamental & industrial research, feasibility studies, and experimental development under its R&D categories.
Other government options include the Industrial Strategy Challenge Fund, Knowledge Transfer Partnerships, SBRI, Innovation Loans, Investment Accelerator, ICURe, etc.
● Friends and Family
Friends and family members often support your organisational growth in different ways. However, making them a part of the firm comes with both pros and cons than other methods.
Primarily, it would be best to be aware of the consequences of an investment in expansion or innovation. It includes showing forecasts, current growth status, concepts, competitive analysis, and more.
However, involving a friend or family member as an investor comes with many risks. They may ask for security in the form of a shareholder, board member, associate, etc. Additionally, non-repayment of the investment amount can spoil a lifelong relationship.
Therefore, a person borrowing money from a friend or family member should stay cautious. A lot of personal drawbacks also come with cash. These include heated conversations post-investment, family issues, spoiling of emotional bond, low credibility, etc.
Therefore, businesses can fund technological innovations through many different methods. These include Startup Loan Scheme, tax credit relief, government aids, venture capitalist, friends and family, peer-to-peer lending, etc.
However, organisations must meet the eligibility criteria of these smart technological funding options. Companies that find it difficult to understand the application process must visit the official government website, or hire a professional.
These solutions would provide funding for expansion, growth, innovation, and other purposes. Moreover, borrowers must stay prepared with the pitch, business plan, forecasts, etc., and explain the same to the investor.
It would help build a trustworthy and long-term relationship with the investor, mainly if it includes a VC. Moreover, it would help keep the same investor interested in company innovation, technology, and growth.
Therefore, making a pitch for a second loan would become much more comfortable. The company would flourish on its terms, bring innovations into the market, and stay ahead of the competition. Besides this, having a detailed structure would help the company stay focused on achieving the goals and receiving investors’ reward. It would also help to reduce the chance of involving an angel investor as a shareholder.