Defence Innovation Loans Cycle 5: Enhanced support for commercialising defence technology
Source: gov.uk (2025-10-28)

DASA's Defence Innovation Loans now offer expanded eligible costs to help SMEs bridge the gap from product development to commercial success.

- DASA’s Defence Innovation Loans offer UK SMEs between £100,000 and £1 million at 7.4% interest per annum to commercialise defence solutions at TRL 6 and above
- Cycle 5 introduces expanded eligible costs including labour costs for pre-commercial sales and marketing, capital equipment, tooling and materials for demonstrations, and working capital finance to support cashflow
- Since 2021, 11 companies have secured £9.9 million in loans, leveraging this into £28.9 million in further private investment and creating 137 new jobs across UK defence innovation
The UKDI-Defence and Security Accelerator (DASA), supported by Innovate UK Loans Ltd (Innovate UK), has opened Cycle 5 of Defence Innovation Loans (https://www.gov.uk/government/publications/competition-defence-innovation-loans-fy2526-cycle-5) with enhanced support for small and medium-sized enterprises (SMEs) developing defence solutions.

This service provides an opportunity for single SMEs with solutions to defence-themed problems to apply for a Defence Innovation Loan of between £100,000 and £1 million with a below-market interest rate of 7.4% per annum.

What’s new in Cycle 5?

Recognising that pre-commercial activity is often required before full commercial exploitation of research and development results, eligible costs have been expanded to provide greater support for businesses taking out loans.

The expanded eligible costs now include:
- Labour costs of staff involved in pre-commercial sales and marketing activities to exploit R&D project results
- Full costs of capital equipment used in exploiting R&D project results
- Full costs of tooling and materials for developing demonstrations or inventory to prove R&D results in a fully commercial setting
- An element of working capital finance to support cashflow prior to fully profitable exploitation of R&D project results
If Windsor Framework rules (https://www.gov.uk/government/publications/complying-with-the-uks-international-obligations-on-subsidy-control-guidance-for-public-authorities/guidance-on-the-scope-and-application-of-article-10-of-the-windsor-framework) apply to your organisation, you will be restricted to applying for only capital usage and material costs for any pre-commercialisation work. Full details are available in the competition document.

Interested in a loan to boost your small business? Read the Cycle 5 competition document here (https://www.gov.uk/government/publications/competition-defence-innovation-loans-fy2526-cycle-5).

Background

Defence Innovation Loans were first introduced in June 2021 as a mechanism to help smaller organisations “build the business behind the innovation”. Since then, 11 companies have successfully secured a total of £9.9 million. Nearly all of these companies have gone on to secure further private investment worth a total of £28.9 million, creating 137 new jobs in defence innovation across the UK.

Defence Innovation Loans Explained: From Application to Award

A video has been recorded to give you all the information you need to know about applying for a Defence Innovation Loan; you can watch the video below.

Defence Innovation Loans (https://youtu.be/BtYnzqQaT-E)

Success Stories

Sentinel Photonics

Sentinel Photonics, which developed a novel laser detection system with DASA funding, reached a critical point where they needed to grow their team to meet increasing demand and develop their technology further.

In 2022, DASA’s Defence Innovation Loans provided the perfect opportunity to take this next step. The loan helped transform the organisation from a founder-led startup into a growing enterprise with the capabilities to deliver advanced defence technology.

“Without the Defence Innovation Loan, we wouldn’t have been able to deliver our solutions, and we wouldn’t have had the resources to increase the size of our team,” noted Sean Tipper, Chief Technology Officer at Sentinel Photonics.

Read the full case study here (https://www.gov.uk/government/case-studies/laser-focus-dasa-and-dstl-funding-accelerates-novel-laser-detection-tech).

Oxford Space Systems

Building on a solid foundation of earlier DASA support to develop innovative deployable antenna technology, Oxford Space Systems received a Defence Innovation Loan in 2023 to support a crucial next step: getting their antenna hardware into space.

The loan enabled Oxford Space Systems to develop and launch their first in-orbit demonstration – a critical milestone in an industry where credibility depends on space launch experience.

The flight unit has passed its rigorous test programme, including vibration testing to simulate launch conditions, and been delivered to Surrey Satellite Technology Ltd (SSTL), who will shortly ship to SpaceX in the United States for launch.

Read the full case study here (https://www.gov.uk/government/case-studies/from-startup-to-space-oxford-space-systems-journey-to-oberon).

Eligibility

To take on a Defence Innovation Loan for a project you must:
- be a UK registered SME
- intend to exploit the results in the UK or overseas to make a significant and positive impact on the UK economy and/or productivity
- give evidence that your business is suitable to take on a loan
- Only SMEs are eligible to apply for Defence Innovation Loans; individuals, academic institutions, research organisations and large companies are not eligible.
- Innovations must be fairly mature at TRL 6 and above to ensure that the solution can be commercialised within the time scale of the innovation loan.
When can I apply?

Cycle 5 opens on 16:00 (GMT) on 28 October 2025 and closes on 12:00 midday (GMT) on 9 December 2025. To find the full schedule of cycles and dates, head to this link (https://www.gov.uk/government/collections/apply-for-funding#defence-Innovation-Loans:~:text=For%20the%20current%20cycle%20closing%20date%20please%20see%20below%2C%20also%20for%20a%20full%20list%20of%20the%20planned%20cycle%20dates%2C%20please%20click%20here.).

Queries

We have made every effort to provide as much information as possible to ensure you have a full understanding of the Defence Innovation Loans that we offer. Please do find which cycle is currently open and read through the comprehensive competition document (https://www.gov.uk/government/collections/apply-for-funding#defence-Innovation-Loans) for full details. If you still have questions, don’t hesitate to get in touch with our helpful team. Please see Points of Contact (https://www.gov.uk/government/publications/competition-defence-innovation-loans-fy2526-cycle-5/competition-document-defence-innovation-loan-fy2526-cycle-5#points-of-contact).