Grant Loans – A new way to finance UK innovation

Sprk Capital is the leading provider of Innovation Grant Loans, but what are they and how do they work?

“Our mission is to accelerate UK innovation-led growth for SMEs through smart funding solutions.” – Dom Peasley, CEO Sprk Capital

Sprk launched its Grant Advance product into the UK market in 2022. We have seen huge demand from SMEs and the advisor community, so wanted to highlight how it can benefit you and your company as it engages in innovation.

• Innovation Grant Loans (also known as Grant Advance Loans) are a new way to finance your innovation grant
• Grant awards are typically paid quarterly or against milestones and cover ~70%+ of your project expenditure
• Companies must finance their innovation project spending from the start of each grant award period until the grant body pays that period’s claim
• With claims typically paid one to two months after the period end that means SME can be waiting 5 months+ before they receive any positive cashflow from the grant award

That’s where Sprk comes in. We finance 80% of your Grant Eligible Expenditure on Day 1 of each Grant period.

• SMEs benefit from a lower cash/equity requirement to finance their project
• No interest or capital paid during the life of the Sprk Grant Advance
• Simple and transparent fee structure detailed on our website.
• Grant Advance eligibility checker launched for SMEs
• Repayments are simply made when the grant body pays out on that period’s grant award

Example:

• Biotech Company A has received an Innovation Grant for a £1m project over 12 months
• Company starts the project in Q1 and deploys their own cash reserves to fund the first quarter of their grant award, funding £250k from their balance sheet
• Second quarter starts and they begin to finance Q2 of their grant award
• 2 months after the end of Q1 (after spending another £167k) the Grant Body pays their claim for their Q1 Grant Eligible Expenditure, at which point the Company has spent £417k to date and gets a first payment for £175k (70% of Q1’s £250k).
• Their ‘peak’ negative cashflow on a £1m grant is therefore -£417k before the first grant receipt

Now use a Sprk Grant Loan:

• Sprk finances 80% of Q1’s Grant Eligible Expenditure (£250k x 70% Grant x 80% Advance) = £140k
• The Company now only has to find £110k through Q1 and not £250k
• At the start of Q2 the company draws down from the Sprk Grant Advance facility another £140k to finance Q2’s project expenditure.
• At the end of month 5 the Grant Award body pays £175k (70% x £250k) and the SME uses this to clear the Q1 grant Advance of £140k plus accrued interest of £9,600, leaving a positive balance of £25.4k
• The Company’s peak negative cashflow moves from £417k (£1m * 5/12 months) without the Sprk Grant Advance to £137k with the Sprk Grant Advance (£417k peak Project Spend – Q1 Sprk Advance £140k – Q2 Sprk Advance £140k)
• This cycle of drawing down from the Sprk Grant Advance facility at the start of each grant period then continues over the life of the grant award

“Sprk has simply moved 80% of the quarterly grant award payments to the start of each quarter, freeing up your cashflow.”

Freeing up capital can extend your cash runway, accelerate investment, help you bridge between funding rounds or just simply fund your project expenditure on time and on budget. A truly non-dilutive source of funding.

Case Study:

Energy Storage Company (“ESC”)

ESC was awarded a £4m Innovation Grant with specific milestones to meet to release their Grant Award tranches. Their aim was is to commercialise a revolutionary new efficient way of storing energy, part of the Government’s Net Zero agenda.

The timing of expenditure between each milestone meant that ESC had peak expenditure of £1.5m on their project. The company was looking to raise equity to fund this expenditure.

“The worst point to raise equity is before you’ve completed a project and valuations are typically higher once you’ve finished your development.”

Sprk was able to arrange a £3m Grant Advance facility for ESC to draw down against through the life of the grant, working with them through the Grant approval process.

In Q1 of the project alone this cut ESC’s cash requirements by £1.2m, avoiding the need for a dilutive funding round at a critical stage in their growth journey.

Sprk has arranged and funded Grant Advance facilities from £50,000 to £5m and even works with businesses ahead of their grant submission to provide funding term sheets to support their applications.

You can apply/contact us online or simply give us a call on 0800 002 5100. A helpful Q&A can be found here.