Innovation Credit Update 2022

February 9, 2022

A new interest structure and the implications for the application and reporting

Innovation credit is a co-financing loan instrument provided by the Dutch government for the development of innovations. The total budget of Innovation Credit for 2022 amounts to €60 Million, of which €40 Million is reserved for technical development projects and €20 Million for clinical development projects.

The maximum credit for projects relies on several factors. The credit percentage ranges between 25% to 50% of the total project budget and should not be higher than the maximum credit for the specific industry that applies for the applicant. For technical development projects this is €10 Million and for clinical development projects this is €5 Million.

What’s new?

Originally, for this loan instrument a fixed interest rate (between 7-10%) was applicable with a compounding nature (interest-over-interest). One of the main drawbacks of this format was the discrepancy between on the one hand successful projects, that were able to rapidly payback the loan and hence contributed very little to the revolving nature of the fund. And, on the other hand projects with a longer commercialization horizon that kept accumulating interest year after year. Especially the latter category suffered from reduced investor appetite as the growing loan obligation affected future cash proceeds.

To solve this issue, per 1 January 2022, the RVO (The Netherlands Enterprise Agency) has implemented a new interest structure for the Innovation Credit loans. The interest consists of a fixed compound interest and a success fee.

  • The compound interest is per 2022 reduced from 7-10% to 3%
  • There is a (newly introduced) success fee of 15% for Technical and 25% for Clinical projects which will be added based on the provided loan amounts per year-end and is non-interest-bearing

This new structure provides thus better conditions for projects with a long(er) payback period, and less attractive for projects where a short payback period is projected. Given the financial implications, this new structure requires extra attention on the financial documentation when filing the application, but also during the reporting phase.

The application process

For the application, the project has to comply with the eligibility requirements stated by RVO. The QuickScan helps entrepreneurs with determining if their project is suitable for Innovation Credit.

The required documents for the application consist of:

  1. The Business Plan describing the market, the competitive environment, the value proposition and the company’s business model.
  2. The Project Plan containing detailed information about the innovation; its status, feasibility, novelty and value. The plan clearly describes the project activities and its milestones in a measurable way.
  3. The Financial Plan covers the budget, cashflow and balance sheet during the project phase and years following after finalization of the project.

Although the financial format is free of choice, experience learns that following the provided template by RVO is usually the best option. Furthermore, in the financial plan there are certain details that require experience to be successful such as hourly rates, depreciation, third party expenses, co-financing and projected revenue.

The reporting process

The reporting process starts right after the Innovation Credit project is granted. It is essential to set up the project administration in such a way that all requirements of RVO are met. 

In the granting letter the total project budget is divided into reporting periods which are linked to milestones. After a milestone is achieved, an extensive progress report consisting of a technical and financial part is required by RVO. Progress reports serve a dual purpose:

  1. To look back on the achieved milestones:
    What went according to the project plan, what not and why.
  2. To look forward to the milestones still to be achieved:
    Is the project plan still realistic or should it be updated? Is the company still financially capable to execute the project?

Last but not least, after completion of the project a final report audited by an independent auditor is required.  

F.INSTITUTE has ample experience and knows about the do’s and don’ts in applying and reporting for Innovation Credit. Are your applying for Innovation Credit and do you have questions about the financials, please feel free reach out to us for expert advice.

Definition project type:
> Clinical development projects: Activities in an experimental phase aimed to develop new products or services which have clinical risks (human testing is involved).
> Technical Development projects: Activities in an experimental phase aimed to develop new products or services which have substantial technical risks, excluding clinical risks.

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