Short answer
Innovation grants are non-repayable funding for research and development projects, awarded through competitions. In the UK, the main sources are Innovate UK, part of UK Research and Innovation, and the EU's Horizon Europe programme, which UK organisations have joined as full participants since 1 January 2024. Grants usually cover only part of a project's costs, and most pay in arrears: you spend first and claim the money back, so you need cash to fund the gap.
Key facts
- Awarded through competitions with set themes and deadlines
- Cover a share of eligible costs: the grant rate
- You fund the rest: match funding
- Most Innovate UK grants pay quarterly in arrears
- Horizon Europe pays a pre-financing advance, then interim and final payments
Who funds innovation grants?
| Funder | What it funds | How it pays |
|---|---|---|
| Innovate UK | Business-led R&D projects, feasibility studies, collaborations | Quarterly claims in arrears |
| Horizon Europe | Research and innovation projects, often in international consortia | Pre-financing, then interim and final payments |
| UKRI research councils, UK Space Agency, European Space Agency | Sector or mission-specific programmes | Often milestone-based |
| Regional and local bodies | Local growth and innovation programmes | Varies |
How much of a project does a grant cover?
The grant rate depends on the size of your business, the type of research and the competition rules. Innovate UK, for example, has typically funded a higher share for small businesses doing industrial research than for large businesses or work close to market. Always check the competition brief: the rate is set there, not in general guidance.
What is match funding?
The costs the grant doesn't cover are yours to fund. That is your match funding, usually from cash, equity or loans. See how to fund Innovate UK match funding.
How are grants paid?
Most Innovate UK grants pay quarterly in arrears: you spend, submit a claim with evidence, and are reimbursed after the claim is approved. Part of the grant may be held back until the final report. Horizon Europe pays a pre-financing advance at the start, then interim payments after each reporting period. See Innovate UK grants paid in arrears and Horizon Europe for UK companies.
The cash gap
Because you spend before you're paid, a grant creates a cash gap on every claim, on top of your match funding. A £500,000 grant can mean funding several hundred thousand pounds of spend before the first payment arrives. Companies cover the gap from reserves, equity or finance secured against the grant itself.
Can you claim R&D tax credits too?
Often yes, but grant-funded costs are treated differently depending on the R&D scheme. See claiming R&D tax credits on a grant-funded project.
Guides in this section
How Nighthawk does it
Nighthawk's Grants Advance lends up to 80% of your next six months of grant payments, from £30,000 per drawdown, against grants already awarded by bodies including Innovate UK, Horizon Europe, UKRI, the UK Space Agency and the European Space Agency. It is repaid as your claims are paid.
FAQs
Do grants have to be repaid?
No, as long as you meet the grant's terms and conditions. Breaching them can lead to clawback.
Can a startup get an Innovate UK grant?
Yes. Many competitions are open to small and early-stage companies, alone or in collaboration.
How long does it take to get a grant?
From application to award usually takes several months, and payments then follow the claim schedule.
Can I borrow against a grant?
Yes, once it is formally awarded. Lenders advance part of the upcoming grant payments and are repaid as claims are paid.