Short answer
Non-dilutive funding is money that doesn't require selling shares. For UK startups the main sources are innovation grants, R&D tax credits, and loans: venture debt, R&D tax credit and grant advances, revenue-based finance, invoice finance and export finance. Grants and tax credits don't need repaying; loans do. Most companies use non-dilutive funding alongside equity to reduce dilution.
Key facts
| Type | Repay? | Typical use |
|---|---|---|
| Innovation grants | No | Specific R&D projects |
| R&D tax credits | No | Rebate on R&D spend |
| R&D tax credit / grant advances | Yes, from the HMRC or grant payment | Bring forward money you're owed |
| Venture debt | Yes | Extend runway |
| Revenue-based finance | Yes, from revenue | Short-term growth spend |
| Invoice finance | Yes, as customers pay | Slow-paying customers |
| Export finance | Yes | Export working capital |
Grants and tax credits
Grants from Innovate UK, Horizon Europe and others fund part of specific R&D projects. R&D tax credits return part of what you spend on qualifying R&D. Neither is repaid, but both pay in arrears. See innovation grants explained and R&D tax credits explained.
Borrowing against what you're owed
Because grants and tax credits arrive late, specialist lenders advance part of them early, repaid when the money arrives. See how much you can borrow against an R&D claim and grants paid in arrears.
Debt for growth
Venture debt suits VC-backed companies extending runway; revenue-based finance suits predictable revenue and fast-payback spend; export finance suits exporters. See which funding is right for you.
The trade-off
Non-dilutive funding protects ownership but debt must be repaid, so it needs a clear repayment source. Use it where you can see the payback; use equity for the riskiest bets.
Related: Venture Debt →
Related questions
Is venture debt non-dilutive?
Without warrants, yes. Where the loan includes a warrant, it causes a small amount of dilution, far less than equity.
Are grants taxable?
Grants are generally treated as income for tax purposes; check with your accountant.