Tag Archive for: non-dilutive funding

Are Grants Enough? When SMEs Should Add Non-Dilutive Loans to the Mix

Are Grants Enough? When SMEs Should Add Non-Dilutive Loans to the Mix

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Many UK SMEs use grants to fund early-stage innovation. Grants protect equity and support technical risk, and they can also demonstrate credibility with customers and investors. However, they can also leave gaps between when SMEs pay staff and suppliers and when grant cash arrives.

Non-dilutive loans give SMEs another way to fund delivery without issuing new shares. When SMEs use these loans alongside grants, they can keep projects moving, maintain teams and reduce delays linked to claim and payment cycles.

In this guide we explain when grants alone may limit an SME’s progress and how to decide whether to add non-dilutive loans to the funding plan.

Are Grants Enough on Their Own for Growing SMEs?

Many SMEs rely on grants because they reduce early financial pressure and help validate technical plans. As companies progress, the limits become clearer. Grant cycles move slowly, payments arrive after claims, and awards often cover only part of project costs. These timing gaps affect hiring and supplier commitments and can slow overall delivery. Even SMEs working with their first significant grant can face these pressures once project costs start to ramp up.

When Should SMEs Combine Grants and Non-Dilutive Loans?

There is no single trigger point. Instead, a few practical signals show when grants alone start to constrain delivery. The scenarios below show where non-dilutive loans can support delivery and growth while grants remain part of the funding plan.

What if you have a grant but lack upfront cash to start delivery?

Many grant schemes pay in arrears and use claim cycles to release funds. In practice, SMEs need to commit to payroll, materials and supplier contracts before they submit the first claim.

If the company does not hold enough working capital to make those commitments, the project can start later than planned or move forward in smaller steps than the original scope assumed.

Here, a non-dilutive loan linked to the grant can bring the timing of payments to staff and suppliers closer to the timing of grant income. For example, grant advance funding or an innovation loan can provide part of the project budget upfront, and the approved grant secures the facility. The SME can then hire the team and place orders according to the technical plan rather than the claims timetable.

What if your R&D programme depends on tax credits that arrive too late?

Some SMEs run ongoing R&D programmes where R&D tax credits form a material part of expected cash inflow. The work continues each month, but tax credit payments arrive after the financial year-end and after HMRC has processed the claim.

If R&D costs rise faster than other income, this timing gap can put pressure on cash balances, even if the underlying claim is strong. Management may respond by slowing hiring, reducing external work or pacing experiments to match available cash rather than the technical opportunity.

In this case, non-dilutive loans that draw on expected R&D tax credits can help. An R&D tax credit loan brings forward part of the anticipated credit so that teams can continue work at the planned pace. When HMRC pays the claim, the company repays the facility from that inflow.

How can you scale beyond what the grant covers?

Grant briefs often define specific work packages and reporting lines. As projects progress, SMEs may identify adjacent features and new use cases that sit outside the written scope, including early commercial pilots.

If management waits for a new grant call to cover these extensions, the company may keep product and market work on hold. Equity funding is one option, but it may not fit the size or timing of the opportunity.

Here, non-dilutive loans linked to innovation work can help fund related development and commercial activity that sits outside the grant brief. Innovation term loans can support this work alongside grant-funded tasks. The SME can move into pilots, customer trials or integration work while it continues to claim under the existing grant.

What if work slows or pauses between grant calls?

Some SMEs build their funding plan around grant competitions, whether they are applying for a first award or managing a sequence of projects. This can work in the early stages but may lead to periods where teams slow down or pause work while they wait for competition results or new calls to open.

Repeated pauses in work can affect staff retention, delivery quality and customer confidence. They may also make it harder to plan longer-term work because each new phase depends on a separate grant decision.

Non-dilutive loans can reduce these delays. Where a company has a history of grant success or regular R&D tax credit claims, facilities such as grant advance funding or R&D tax credit loans can provide a more continuous source of project funding. The SME can then plan programmes over a longer horizon, using grants as part of the overall funding plan rather than as the sole source of external support.

How Does SPRK Support SMEs Using Grants and Non-Dilutive Loans?

SPRK works with UK SMEs that carry out innovation and rely on R&D tax credits or grants as part of their funding. SPRK designs its facilities to align cash inflows from these schemes with the timing of project costs.

SMEs can combine these non-dilutive loans with existing grants to build a funding plan that supports delivery and reduces timing gaps while preserving ownership.

Combine Grants and Non-Dilutive Loans for Timing and Scale

Grants remain a valuable part of funding for SME innovation. They help companies take technical risk and demonstrate quality without affecting equity. However, grant cycles and payment schedules do not always match the pace of project delivery.

Non-dilutive loans give SMEs another way to fund work that depends on R&D tax credits or grants, or to extend programmes beyond a specific brief. By reviewing how much of the funding plan relies on these schemes and where timing gaps appear, management teams can decide when to include non-dilutive loans in the funding plan.

If you want to discuss how non-dilutive loans such as R&D tax credit loans, grant advance funding or innovation term loans could support your projects, you can speak with the team via SPRK’s contact page.

This article provides general information only and does not constitute financial, legal or tax advice.

Scale with Non Dilutive Funding and Keep Your Equity

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You’ve built something customers want. The roadmap is real, the next milestone has a date, and the team can execute. What you don’t want is to sell another percentage point just to cover hiring, parts, or supplier deposits.

Non dilutive funding is capital you can use to scale without giving up equity, typically grants, R&D tax credit advances, innovation loans, and revenue‑based facilities. If the roadmap slips, acquisition costs compound and the next round gets harder; the right non‑dilutive facility prevents that slide.

This guide shows how to finance the next 90–180 days with UK options: grants and grant advances, R&D tax credit advances, revenue‑based facilities, and Innovate UK innovation loans. We explain fit, sizing, and what to prepare so underwriting is quick. This guide to non dilutive funding covers the UK options founders use.

SPRK Capital is institutionally backed, including a £20 million facility with British Business Investments, which gives us the capacity and reliability high‑growth teams expect when timing matters. If you’re actively exploring non dilutive funding to hit your next milestone, you’re in the right place.

What problem are you solving right now?

Strong funding decisions start with a single sentence you can defend in front of your board. Are you bridging a timing gap while you wait for HMRC or a grant payment? Are you scaling what already converts, such as new hires, parts, and go‑to‑market, without slowing the roadmap? Or are you buying time to reach a stronger valuation before the next equity round? When we advise teams, we won’t discuss products until that job is clear. Once it is, the instrument usually picks itself.

Here’s how the main options map to real situations, with the operational context we look for when we underwrite.

Are grants (and grant advances) right for milestone‑driven projects?

Grants work when your programme has clear scope, milestones, and defrayal rules. As a form of non dilutive funding, a grant advance brings cash forward, so suppliers start on time. Most issues are timing, not eligibility.

Do it well:

  • Lock milestones and evidence before you draw.
  • Reconcile invoices and bank statements without manual fixes.
  • Draw close to when you place POs to avoid drift.

Smart & Horizon: Innovate UK paused Smart Grants in Jan 2025 and is running targeted pilots; check call‑specific competitions. UK applicants remain eligible for Horizon Europe calls through association, with opportunities to 2027.

How this helps your business: you keep suppliers moving on milestone dates and cut the true cash cost of R&D.

R&D advance vs. Innovation Term Loan: an R&D advance funds against an expected claim; the SPRK Innovation Term Loan is a 36‑month facility sized up to 150% of your latest R&D tax credit, with fixed repayments that HMRC prepayments can reduce.

Prefer to talk it through? Contact the SPRK team for a quick sense‑check.

How do R&D tax credit advances work in practice?

With a well‑evidenced claim, an R&D advance turns future relief into working capital. This non dilutive funding route keeps hiring and POs on schedule while HMRC processes the claim. From April 2024, claims sit under the merged RDEC scheme with a 20% expenditure credit. If you are loss‑making and R&D‑intensive (≥30%), ERIS can increase the net benefit (with a grace period if you met the threshold in the previous year). Keep the PAYE/NIC cap in mind (£20,000 + 3× relevant PAYE/NIC).

Size it safely: model base/high/low outcomes and anchor to the low case; confirm PAYE/NIC headroom; keep the AIF tight (uncertainty, advance over baseline, mapping from costs to activities).

How this helps your business: you convert a defensible claim into cash now, so delivery stays on track.

Is revenue‑based financing a fit for our cash cycle?

RBF suits predictable revenue and healthy margins. It is another non dilutive funding option for teams with repeatable sales. Repay a % of monthly revenue until a fixed total is reached. Underwrite to your trough month and compare on all‑in cost to maturity.

When it works: use it for paid acquisition with payback inside term, short cash conversion inventory, and repeatable channel spend.

When not to use it: if payback sits beyond the term or margins are thin, RBF strains cash flow.

Example: Facility £250k × 5% of revenue; trough month £300k ⇒ worst‑case repayment £15k.

How this helps your business: fund near‑term payback while protecting working capital in slower months.

When should we choose an Innovate UK innovation loan?

Choose an innovation loan for late‑stage R&D with a route to customers. This non dilutive funding option supports larger programmes over multiple years. Rates and terms vary by competition; UKRI examples show fixed rates (e.g., 7.4% p.a.) with part payable and part deferred interest during the project phase, then repayments later. When HMRC pays your R&D credit, you can apply that prepayment to reduce remaining instalments on the 36‑month SPRK Innovation Term Loan.

Plan for decision timelines and run a parallel path by lining up a grant or an R&D advance so work keeps moving. Sequence the instruments to reduce timing risk without dilution.

When not to use it: If you can’t evidence late‑stage development with a route to customers, apply later or use shorter‑term facilities first.

How this helps your business: you fund late‑stage development on a multi‑year schedule and lower monthly outflows when HMRC prepayments arrive.

Two quick scenarios

SaaS (MRR ~£150k): Use a compact RBF line for paid channels and an R&D advance for 2–3 months of product salaries to hold release dates.

Hardware/Deep Tech: Fund late‑stage development with an innovation loan and draw grant advances at milestone windows; use an R&D advance if lead times slip.

With the options on the table, choose based on speed, total cost to maturity, friction, and control. Here’s how that plays out.

Which non dilutive funding option should I choose?

Quick chooser:

  • Pick a grant advance if your work is milestone‑based and you need suppliers moving before reimbursement.
  • Pick an R&D advance if your evidence is complete and you’re bridging to HMRC payment while keeping the build on schedule.
  • Pick RBF if payback is inside the facility term and revenue is predictable enough to underwrite to the trough month.
  • Pick the SPRK Innovation Term Loan when you want multi‑year predictability sized to your latest R&D claim (with instalments that can fall as HMRC pays).

Want details on our 36‑month Innovation Term Loan? See our non dilutive funding page.

Still between options? Share your milestone and latest R&D claim; we’ll price an R&D advance and a 36‑month Innovation Term Loan side by side so you can pick the cleanest path.

What will a lender ask for to move fast?

For non dilutive funding decisions, bring a clean pack so we can move quickly:

  • Management accounts and a 12‑month forecast
  • 3–6 months of bank statements and AR/AP ageing
  • R&D pack (AIF, narratives, cost summaries, apportionment, PAYE/NIC)
  • Relevant grant letters and milestone schedules

Add months of runway without selling a share

We size to your low case and show the impact on cash in the next 90 days. If you want non dilutive funding that preserves ownership and momentum, follow the steps below.

Here is the fastest route:

  1. Share four numbers: your latest R&D tax credit estimate, cash at bank, average monthly net burn, and any overdue PAYE/NIC. If you’re exploring the Innovation Term Loan, include your latest filed R&D claim.
  2. Flag constraints: tell us about any existing charges or debentures so we can size and structure correctly.
  3. Upload evidence: your AIF (if drafted) or a claim‑pack summary, plus grant award letters and milestone schedules if you plan to combine products.
  4. Pick the product: we will price an R&D advance and a 36‑month Innovation Term Loan side by side so you can choose the cleanest non‑dilutive path.

If you prefer a quick sense‑check first, send these details by reply and we’ll confirm fit before paperwork.

 

Power Your Startup Journey with Innovation Grants

Power Your Startup Journey with Innovation Grants

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For UK startups in incubators: how to turn innovation grants into on-time delivery with SPRK’s non‑dilutive funding.

Incubators bring mentors and lab access. They expect progress against a plan. Innovation grants can underwrite that plan, but grant claims pay out after you’ve incurred and paid the costs. Use SPRK’s grant advance to fund deposits and early milestones, or an R&D advance for qualifying work, to keep your schedule on track and your equity unchanged.

How do incubator startups use innovation grants without giving up equity?

Use innovation grants to fund R&D and pilots. Pair the award with SPRK’s grant advance to cover deposits and milestone gaps. If you run qualifying development, consider an R&D advance. For cloud, cybersecurity or SaaS rollouts with clear savings, use innovation term loans. That way you protect cash flow and avoid dilution as you ship. This pairing lets incubator teams accelerate growth without dilution, even when grant cash arrives after milestones.

What is a business incubator, and how does it help startups?

An incubator supports early‑stage businesses with workspace and mentors, plus a trusted network and practical delivery support inside the programme. Many programmes introduce investors and partners. Selection is competitive, and programmes set their own terms. Ask your manager how companies in your cohort fund deposits, meet milestones, and prepare for follow‑on capital.

Do incubators take equity, and what do they expect in return?

Some programmes take a small equity stake; others charge fees or ask for time‑boxed commitments. Most expect progress against a plan, active participation in workshops, and regular updates. Confirm the terms before you join and weigh them against the support on offer.

Which innovation grants can incubator startups pursue?

Innovation grants usually arrive through competitive calls. A call sets objectives, eligibility, and dates. Awards often use milestone drawdowns. Some calls ask for match funding or exclude certain costs. Your incubator team will know which competitions fit your stage.

Funding intensities and match funding vary by competition and research category (feasibility, industrial research, experimental development). Some calls fund up to around 70% of eligible costs and require aligned investment. Read the competition brief to confirm rates, co‑funding, and timelines.

Ask your manager for 2–3 past successful bids in your sector and the competition ID to track. Copy their structure, not their words, and map your milestones to the same level of evidence.

Where to find calls

  • Innovation Funding Service (IFS): official competition pages and project setup.
  • Innovate UK Business Connect: opportunity listings, partner search, and events.

How are Innovate UK innovation grants paid?

When you win an Innovate UK award, you complete project setup on the Innovation Funding Service. Most programmes pay claims quarterly in arrears. You can claim only eligible costs you have incurred and paid in the claim period. That’s why teams often bridge supplier deposits and early milestone costs with a grant advance, then reconcile when the claim pays out.

Eligible costs at a glance: budget against labour and overheads, materials, capital usage, subcontracting, travel, and other costs. Build your budget against these headings and keep proofs tidy from day one.

Are my costs eligible for Innovate UK?

Check your budget against the headings above and keep proofs (invoices, timesheets, bank statements). If a cost does not fit a heading, assume it needs revisiting before you spend it.

What mistakes delay Innovate UK claims (and how do I avoid them)?

  • Missing defrayal evidence: keep invoices plus bank statements showing payment for the claim period.
  • Weak time records: keep timesheets for staff time you include in labour.
  • Misclassified subcontracting: check the eligible cost headings; fix before you spend.
  • Late milestone proofs: log deliverables monthly so IFS claims move at pace.

Your finance lead uploads invoices on Thursday; the bank statement posts on Monday. Claims stall if that line is missing. Export the PDF the same day you pay.

How do I combine innovation grants with non‑dilutive funding?

  • Grant awarded; deposits due: use a grant advance to bring cash forward, book deposits, and lock supplier dates.
  • Active R&D; claim pending: use an R&D advance to keep sprints moving while the claim completes.
  • Cloud/cyber/SaaS with measurable savings: use innovation term loans for fixed instalments and speed. Example: if savings are £1,050 per month and repayments are £820 per month, coverage is 1.28×. Illustrative only.

Ask your incubator manager which suppliers need deposits upfront and by what date. Plan the bridge before the PO. Time your drawdowns to the invoice schedule, not the other way round.

Your lab slot is booked in four weeks. Suppliers want 40% upfront. A grant advance covers deposits so the schedule holds and equity stays unchanged.

Got timing or document questions? Send your award letter and milestone dates, and we’ll walk through options together.

What documents will an incubator and a lender want to see?

Have your documents ready so approvals move at pace:

  • Grant award letter and milestone schedule
  • Project plan/Gantt with dates and owners
  • Signed SOWs and supplier quotes
  • 13‑week cash flow with key assumptions
  • Lightweight engineering log (tickets, commits, time)

Innovate UK operates under UK Subsidy Control and may audit claims. Keep a clear trail: invoices, bank statements showing payment (defrayal), and timesheets.

Capture baseline metrics before you start. At month three, measure again and show the change in your board pack.

How to secure and deliver an innovation grant (4 steps)

  1. Pick the right call with your incubator. Confirm eligibility and scope on the Innovation Funding Service (IFS), and note the submission date. Note the evidence you’ll gather each month.
  2. Plan delivery in detail. Map milestones and deposits, and plan time for hiring or training. Assign owners for each task.
  3. Choose the funding mix. Use the cues above to pair the grant with a grant advance or an R&D advance, or choose an innovation term loan where savings are clear. Write the savings-to-repayments ratio (savings ÷ repayments) in your board pack. Aim for >1.2× as a simple rule of thumb. Illustrative only.
  4. Apply and prepare evidence. Package award docs and supplier quotes and attach a 13‑week cash flow (CSV is fine). Reconcile actuals to plan each month.

Submission checklist (pin this): IFS project setup complete; award letter uploaded; milestone dates confirmed; supplier quotes attached; 13‑week cash flow linked; timesheets template ready.

If dates shift, submit a project change request in IFS and note the impact in your board pack before you file.

Illustrative micro‑math: If savings are £1,200 per month and repayments are £850 per month, your coverage is 1.41×. Boards care about that ratio more than labels. Illustrative only. Your figures will vary by project and terms.

Why choose SPRK to keep your grant timeline on track?

British Business Investments has committed £20m to SPRK. That backing means we can support founders and finance teams through grant and R&D timelines. We review evidence up front, agree the drawdown plan, and keep communication simple: one point of contact until the project closes. Read the announcement and see how we’re working with BBI:

How do I make innovation grants work inside my incubator?

If you already hold an award letter and milestone schedule, share them and we’ll outline route options. If you’re scoping a bid from inside your incubator, ask for a quick eligibility review and we’ll help you plan the funding mix. If you want to move faster with innovation grants inside your incubator, we’ll suggest a route that keeps delivery on time.

This article is for general information only and does not constitute financial, legal or tax advice.

 

How to Raise Money Without Selling a Piece of Your Business

How to Raise Money Without Selling a Piece of Your Business

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For UK founders and finance leaders who want growth capital without dilution
You can compare angel investment with non‑dilutive funding and choose the route that fits your plan and preserves control. This guide explains how angels work and sets out SPRK’s equity-free options, so you can fund growth and keep your cap table clean.

How can I raise capital and keep 100% ownership?

Use non‑dilutive funding. Finance qualifying development with an R&D tax credit advance, bridge awarded grant cash with a grant advance, or deploy proven solutions with innovation term loans with fixed repayments so you can move at pace. Choose the path that fits your stage and cash flow plan.

What does “non-dilutive” cover?

Non‑dilutive funding lets you raise money without issuing shares. You keep ownership and repay from future cash flows or from confirmed sources such as HMRC R&D credits or grant drawdowns. At SPRK, most situations fit one of three routes: R&D tax credit advances, grant advances, and innovation term loans.

How does angel investment work and what do you trade?

Angel investors provide capital in exchange for a minority stake. Many bring experience and mentoring. The trade‑off is dilution and another voice at the table. You prepare a pitch, then negotiate valuation and due diligence, and you live with the terms you agree. Angels can be a strong fit when you want sector guidance or when you can use their network to unlock key customers. They are less attractive if control and ownership matter more to you than advisory support.

Angels often ask for a short monthly update and a quarterly review pack.

Dilution changes control: you add a voice to key decisions and share more of the future upside.

Decision frame: If you want capital plus mentoring and you accept dilution, evaluate angels. If you want capital without dilution and a predictable repayment profile, evaluate non‑dilutive routes.

Your grant letter lands on Monday; your vendor deposit is due Friday. A grant advance covers the gap so delivery starts on time and your equity plan stays intact.

Which non‑dilutive funding option fits my plan?

When should I use an R&D tax credit advance?

Use this for in‑house development or qualifying automation/AI work. You unlock a portion of your expected HMRC R&D credit so your team can keep shipping while the claim completes. Align drawdowns to sprint plans and documentation. Keep an engineering log (tickets, commits, time). It speeds claim prep and underwriting.

Illustrative example: A team saves £1,050 per month in productivity while repayments are £700 per month. Net +£350 per month. Illustrative only. Your figures will vary by project, savings and terms.

Learn more: Fuel Your Scale‑up Strategy with R&D Advance Funding.

When should I use a grant advance?

Use this when you have an Innovate UK grant or a similar award and milestone timing creates cash gaps. A grant advance brings forward part of the award so you can fund deposits and hit deliverables on time. Keep evidence tight and maintain your reporting cadence. Attach the award letter ID and the milestone schedule to your request. Vendors respond faster when deposits are funded.

Illustrative example: A project has a £150k award with 40% due to suppliers before the first drawdown. An advance covers deposits so the schedule holds. Example figures. Your numbers will depend on the programme and terms.

Learn more: Why Grant Advance Funding is Important for Early‑Stage Innovations.

When should I use an innovation term loan?

Use this when you want fixed instalments and quick deployment for cloud migrations, cybersecurity, or SaaS tooling. Set the term to your expected savings and adoption. This route works well if grants don’t fit and R&D scope is limited. Baseline unit cost today and again at month three. Show the delta in your board pack.

Illustrative example: A company expects £1,400 per month in hosting and admin savings and repays £1,000 per month. Net +£400 per month; coverage 1.4×. Illustrative example. Actual savings and terms will differ.

Learn more: Innovation Term Loans.

Angel or non‑dilutive: which fits my situation?

Start with the outcome you want: guidance or control.

You want your angel’s sector intros to land this quarter. You also have a grant milestone in six weeks. Blend the two: use a grant advance to hold delivery dates while you close the round. If you need sector mentoring or early customer introductions, angel investment can help. If you hold a grant award or you are preparing an R&D claim, non‑dilutive funding often delivers capital faster and keeps equity unchanged. If your savings cover repayments with room to spare, an innovation term loan keeps delivery simple.

Example: £800 in monthly repayments vs £1,180 in monthly savings gives 1.48× coverage. Boards care more about that ratio than the label on the funding.

For advanced questions, reach out to an SPRK consultant and we’ll talk it through.

What’s the step-by-step to secure non-dilutive capital?

  1. Check what’s eligible and when cash arrives. Gather your grant letter (if relevant), your R&D status, and a delivery plan with dates.
  2. Select the route. Use the cues above to choose an R&D advance, a grant advance, or a term loan.
  3. Stress-test cash flow and coverage. Compare projected savings or receipts to repayments. Aim for net‑positive within a quarter, if your forecast supports it.
  4. Package your evidence and apply. Line up a project plan, supplier quotes, and a 13‑week cash flow view. That helps underwriting progress quickly. Include statements of work (SOWs) and your grant letter ID if applicable.

Capture three numbers for your board: breakeven month, repayment coverage (savings/repayments), and runway change.

Why pick SPRK for equity-free capital?

British Business Investments has committed £20m to SPRK. That backing helps us support founders and finance teams through delivery. Read the announcement and learn how we are working with BBI.

Raise without selling equity: what to do now

If you want capital without selling a piece of your business, start with non‑dilutive funding and map the route that fits your plan. If you already have milestones and budgets, contact us and we’ll match your plan to an R&D advance, a grant advance, or an innovation term loan.

Want a second pair of eyes on your plan? Share your three numbers, breakeven month, coverage ratio, runway change, and we’ll connect you with experienced consultant.

This article is for general information only and does not constitute financial, legal or tax advice.

FAQs

How much equity do angels usually take?
It varies by deal and stage; angels typically take a minority stake in exchange for capital and support.

What is non‑dilutive funding?
It raises capital without issuing shares. You repay from cash flow or from confirmed sources such as R&D credits or grants.

Will a term loan affect a future equity round?
A sensible facility can extend runway and support growth metrics. Investors focus on traction and debt coverage rather than the presence of a well‑structured loan.

How fast can I access non‑dilutive funding?
Timelines vary by route and documentation; good prep shortens the path to drawdown.

Can I combine angels with non‑dilutive funding?
Yes, many teams blend routes. You can use non‑dilutive capital to de‑risk delivery while you finalise an equity round.

Is grant advance only for Innovate UK awards?
Innovate UK is a common use case, and the approach can work with other awarded programmes that use milestone drawdowns.

Does an R&D advance reduce my HMRC claim?
No. The advance bridges timing. Keep records tight and align with your adviser’s claim process.

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Borrower Spotlight: EnSilica and the Threat of Quantum Decoding

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Post-Quantum Cryptography is a growing market as the quantum computer approaches. Despite the fact that a quantum computer doesn’t exist yet, governments and businesses are already investing in cryptography methods that will protect today’s data from hackers in the future.

There is growing fear about hackers applying a ‘Harvest Now, Decrypt Later’ (HNDL) approach. This quiet method of hacking involves collecting encrypted data from highly secure sources such as governments and medical agencies. While the data is secured through modern encryption for now, the hackers plan to hold onto the valuable data until they are able to decode it – once quantum computing is possible.

The main targets of these attacks are agencies that hold secure but valuable data for long periods of time. Security, banking, critical infrastructure, and medical agencies are the most high-risk, but anyone with an online banking account, IOT devices, or medical implants should be paying attention to their security as quantum technology develops.

In 2024, the US National Institute of Standards and Technology (NIST) defined the security standards a device must meet to qualify as Post-Quantum Cryptography (PQC compliant), which are:

  1. Kyber – for encrypting messages.
  2. Dilithium – for verifying identities and digital signatures.
  3. SHA-3 – a modern cryptographic ‘hash function’ that adds extra security.

These three systems use different technology to enable their features. Kyber and Dilithium are built on ‘lattice-based cryptography’, but they have different structures and performance needs, whereas SHA-3 is a ‘hash function’ – a completely different class of algorithm. Until now, companies have had to include combinations of the three pieces of hardware to protect their devices.

EnSilica, a world-leading Oxford-based chipmaker, has now created eSi‑CRYSTALS: the first unified PQC accelerator IP block that runs all three PQC standards – Kyber, Dilithium, and SHA‑3 within one optimised hardware core. This single piece of hardware provides complete post-quantum security in one package—cutting down on size, energy use, and costs compared to older, multi-component solutions. It is likely that the eSi‑CRYSTALS will be implemented in satellites soon, following an extended agreement worth up to US$28m between EnSilica and a satellite service provider, as well as being awarded £10.38m by the UKSA for satellite broadband terminal chips.

Ian Lankshear, CEO of EnSilica, commented: “The emerging PQC threat is not just theoretical. The implications are profound for those relying on today’s cryptographic schemes, which is why EnSilica’s PQC offering delivers future-proof hardware protection at the silicon level with minimal silicon area for mature and advanced technology nodes.”

Sprk Capital provided short term bridging funds to EnSilica in 2023 and 2024, giving the company the financial flexibility to accelerate the development and commercialisation of its eSi‑CRYSTALS. That early support helped EnSilica move faster than traditional timelines would allow, securing high-profile satellite contracts and further government funding at a critical stage in their growth.

Non-dilutive capital can empower deep tech companies to lead in emerging global markets long before mainstream investment catches up. With quantum threats on the horizon and global demand for post-quantum security rising fast, EnSilica’s unified hardware IP is well positioned to become a foundational part of secure digital infrastructure for years to come.

SPRK a strategic conversation – Get in touch with our team today, and access your money now.

Biotech company using venture debt to grow their smart farm facility

The Rising Need for Venture Debt in Biotech

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The biotech industry stands at the forefront of scientific innovation, driving advancements that promise to revolutionise healthcare, agriculture, and environmental sustainability. However, the path from groundbreaking research to market-ready solutions is full of challenges. The core of these challenges is typically securing adequate funding. Delve into why venture funding, including venture debt, has become increasingly vital for fuelling the biotech sector’s growth and how it’s shaping the future of innovations.

The Changes in Biotech Funding

The biotechnology sector has encountered significant changes in its funding, particularly during the bull market of the late 2010s and early 2020s. This period was marked by record funding levels, a thriving IPO market, and the emergence of Special Purpose Acquisition Companies (SPACs) as crucial avenues for entering the public market. However, this growth was abruptly disrupted by rising interest rates and increased market volatility. This led to a downturn in IPOs and a decreased interest in SPACs, resulting in a 24% reduction in capital raised by biotech firms in 2022. This pullback underlines the broader market instability, impacting investor confidence and forcing a re-evaluation of capital allocation strategies.

In response, biotech companies are now compelled to diversify their financial strategies beyond traditional equity funding, increasingly turning to the likes of venture debt and other alternative mechanisms to secure essential capital for R&D and commercialisation. This shift towards a more strategic funding approach, balancing venture capital with venture debt, aims to effectively manage equity dilution and extend financial runways. Facing these challenges, the sector needs to be flexible and consider different funding options. This flexibility helps keep innovation and progress alive, ensuring that new breakthroughs keep coming despite economic difficulties.

The Growing Role of Venture Debt in Biotech

As the biotechnology sector continues to mature, the role of venture debt has become increasingly significant, offering an alternative to the traditional venture capital route. This form of debt financing stands out as an appealing option for:

  • Biotech companies looking to extend their financial runway without immediately seeking more equity financing.
  • Funding critical development milestones, supporting ongoing operations, or bridging financial gaps to commercialisation. This strategic tool provides essential capital at crucial times without surrendering more company ownership.
  • As a source of non-dilutive funding with flexibility, it serves as a perfect way to meet the needs of a business’ innovation fund.
  • Being customised to specific financial requirements, potentially offering lower costs over time due to reduced equity dilution.
  • Including manageable covenants and repayment terms that align with the growth path of promising biotech firms.

By strategically utilising venture debt built for innovation, biotech companies can secure the funding they need for critical research and development whilst maintaining greater control over their company’s future and equity structure. This approach to financing supports sustained growth and innovation in the biotech sector, enabling companies to navigate the path from research breakthroughs to market-ready products more efficiently.

The Future of Venture Funding in Biotech

As the biotech industry continues to evolve, its dependence on venture funding is predicted to intensify, propelled by rapid innovation and the broadening range of biotech applications. The future of venture funding in biotech is likely to see:

  • A shift towards prioritising sustainability and social impact in investment decisions, reflecting a global trend across industries.
  • The advent of emerging technologies within the biotech space is expected to draw even more attention from venture debt investors.
  • The European market, with its robust R&D activity, remains a critical catalyst for biotech advancement despite the more attractive valuations in American markets. This trend highlights the global nature of biotech funding, where geographical diversity can complement and enhance the sector’s overall growth and innovation capacity.

However, biotech companies are adjusting their funding strategies in response to a more competitive and selective investment environment. The downturn in global stock markets, particularly the NASDAQ, has narrowed the IPO path that once offered a lucrative exit strategy. In this tighter funding climate, private investments demand clearer demonstrations of value and utility, pushing biotech firms towards alternatives like acquisitions by larger pharma companies or strategic partnership deals.

These larger entities have historically relied on biotech for pipeline enrichment, favouring assets further along in the development process and presenting a lower risk. Early economic evaluations and strategic planning are becoming increasingly important for biotech firms aiming to secure Series A investments. This highlights the need for innovative science and savvy business strategies to attract critical funding.

Non-Dilutive Funding Solutions with SPRK Capital

Our latest product – the Innovation Term Loan – can provide the smart, non-dilutive funding solution your SME needs to grow without sacrificing equity. It has been designed to address the gap between R&D lending and venture debt to create a new type of innovation finance. Contact us for more information and secure the funding you need.

Solar panel installation to achieve net-zero, done with innovation-funding

Understanding Net-Zero and how Innovation Funding Will Help

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Whether you’re already working towards ‘net-zero’, or only just hearing about it, it’s important to understand it. After the COP26 summit in Glasgow, it’s become a large focus for many innovative companies. So – what does it really mean for businesses across the UK? Let’s unpack net-zero and see how getting creative with funding can make a big difference.

What Does Net-Zero Really Mean?

In simple terms, net-zero is about achieving balance. Not making zero emissions but making sure we add no more to the air than we take away. It’s crucial for tackling climate issues worldwide.

The UK has set a bold deadline – net-zero by 2050, and it’s not just talk; it’s law. This target puts us in the lead, but it’s a huge challenge that needs every sector to pull its weight. It’s important to stress this, as we typically think of something generic such as energy but in truth sectors such as agriculture, construction, manufacturing also play a large part.

Why R&D Matters for Net-Zero

Reaching net-zero demands innovation across all sectors, not just from the big tech companies or labs. It’s about making products and processes greener, a challenge that calls for creative thinking and Research and Development (R&D). This push towards sustainability has made R&D essential, and it’s being supported by innovation funding to ease financial pressures on businesses eager to adapt. As a result, R&D is a great contributor to any environmental strategy. Its role in driving sustainable growth and helping achieve net-zero targets cannot be understated.

Even projects not directly focused on sustainability can qualify for R&D if they tackle environmental challenges, like adapting to regulatory changes. This broad view of R&D highlights its importance in meeting the UK’s carbon ambitions, offering financial incentives for businesses innovating towards a more sustainable future. Essentially, R&D fills the gap between current practices and the more sustainable processes necessary for a net-zero future.

Innovation Funding for Net-Zero Businesses

Innovative finance solutions, like R&D tax credits, is a game-changer. It gives businesses a nudge to explore new, eco-friendly ideas without fretting over the financials. Further to this, our SPRK Innovation Term Loan is perfect for businesses pushing towards net-zero. Benefit from a non-dilutive funding source which can accelerate your innovation fund. We’ve built this product to bridge the gap between R&D lending and venture debt. This makes it a perfect solution for businesses working towards net-zero.

Boost your Innovation Fund

Combining net-zero ambitions with R&D is vital for UK companies, and our innovation funding solutions provide a tangible way to make a difference. It encourages companies to adopt innovative approaches without hesitation. Our Innovation Term Loan supports projects that aim for a greener future. Start exploring how this funding can help your business contribute. Get in touch to learn more.

Growth company discussing innovation fund following investment from a venture debt alternative

Why Venture Debt Works for Tech Start-ups and Growth Companies

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Looking for funding without losing equity? Tech start-ups and growth companies are turning to venture debt as a smart option. It’s a great way to get extra funds without giving up a piece of your company. Let’s explore how venture debt works and introduce an alternative for innovation funding.

What Is Venture Debt?

Venture debt is essentially a loan aimed at companies with high growth potential but not enough assets for traditional debt financing. It’s a smart choice for those looking to extend their cash runway without giving away equity. This type of loan is typically secured against future revenue or intellectual property, making it particularly suitable for tech and life sciences sectors.

Structure and Characteristics

The structure of venture debt varies but generally involves short to medium-term loans, which can be secured or unsecured. They often come with warrants, giving lenders a potential equity upside. This arrangement makes it an attractive proposition for both lenders, who get a safety net, and borrowers, who avoid diluting their ownership.

Why Venture Debt is Becoming a Popular Option

With the current economic uncertainty, companies find themselves navigating through tight financial straits. Due to being a source of non-dilutive funding, venture debt stands out for those looking to avoid dilutive funding rounds. It’s a strategic tool to bridge financial gaps, allowing companies to continue their growth trajectory even in less than ideal economic conditions.

Benefits of Venture Debt

There are many advantages to this type of funding. It extends the financial runway, provides a safety net during economic downturns, and allows companies to grow without diluting equity. It’s a win-win, offering companies breathing room to achieve milestones and potentially increase their valuation for future funding rounds.

Introducing our Innovation Term Loan

The Innovation Term Loan stands out by bridging the gap between R&D lending and venture debt. Designed for companies leveraging their R&D tax credits, it offers access to capital over 36 months. This novel financing solution supports your growth with up to 150% of your latest R&D claim available upfront.

What sets the Innovation Term Loan apart are its straightforward fees, fixed payments, and the option for early repayment without penalties. It’s a practical choice for companies looking for predictable financial planning and the flexibility to use R&D tax credits to reduce monthly payments.

Why Choose Non-Dilutive Funding?

Opting for non-dilutive funding like our Innovation Term Loan is a strategic move for preserving equity. It allows companies to fuel growth and navigate financial challenges without compromising on ownership. This approach not only safeguards equity but also establishes a solid foundation for future financing rounds.

SPRK Your Innovation Fund

Consider the Innovation Term Loan as a smart alternative to venture debt for your innovation funding needs. Tailored for tech start-ups and growth companies, it offers a strategic way to access capital while preserving your equity. Get in touch to explore how the Innovation Term Loan can support your business’s growth today.