UK Launches Fifth Cycle of Defence Innovation Loans to Support SMEs

The UK government has announced the fifth cycle of its Defence Innovation Loans, a programme aimed at supporting small and medium-sized enterprises (SMEs) developing advanced defence technologies. Managed by the Defence and Security Accelerator (DASA) in partnership with Innovate UK, the loans range from £100,000 to £1 million, with a fixed annual interest rate of 7.4%.

Expanded Support for SMEs

Cycle 5 introduces broader eligibility for costs to help SMEs bridge the gap between research and development and full commercialisation. In addition to traditional R&D expenses, businesses can now apply for funding to cover:

• Labour for pre-commercial sales and marketing

• Capital equipment and tooling

• Materials for demonstrations

• Working capital to support cash flow before full market entry

These changes aim to provide comprehensive support, helping SMEs scale innovations, enhance competitiveness, and bring new technologies to the UK defence sector.

Proven Impact

Since the programme began in 2021, 11 companies have received a total of £9.9 million in loans. The initiative has helped create 137 new jobs and attracted £28.9 million in private investment. Funded technologies have ranged from advanced sensors and autonomous systems to space and satellite innovations, demonstrating the scheme’s role in fostering both economic growth and technological development in the UK defence industry.

Eligibility Criteria

Applicants must meet specific requirements to qualify for a Defence Innovation Loan:

• Be a UK-registered SME

• Have a technology at Technology Readiness Level (TRL) 6 or higher

• Demonstrate a clear defence need for their innovation

• Provide evidence of the ability to repay the loan

These criteria ensure that the programme targets viable projects with strong potential for strategic and commercial impact.

Application Details

The current cycle is open until 9 December 2025, with decisions expected by 3 February 2026. Applications are submitted through the DASA Submission Service. Alongside financial support, SMEs benefit from DASA’s expertise in technology development, testing, and commercialisation, increasing the likelihood that innovations successfully reach operational deployment.

Part of a Broader Defence Strategy

Defence Innovation Loans are part of the UK government’s wider effort to maintain a technological edge in defence and security. By targeting SMEs that may struggle to secure conventional financing but possess promising technologies, the programme strengthens the national industrial base while supporting strategic innovation.