Research, development and piloting

Ongoing call: Applications are processed continuously. 

Research, development and piloting funding (subsequently referred to as R&D funding) enables companies to implement higher-risk projects faster and on a larger scale, encourages investment in research and development, and helps improve productivity and create new international competitive advantages. The funding aims to have a significant impact on business growth, renewal and network effects, and the Innovation Funding Agency Business Finland (subsequently Funding Agency) shares the risk associated with ambitious research and development work.

The Funding Agency focuses its funding on companies’ R&D projects that will generate a record level of productivity-enhancing private R&D investment and stimulate other high-productivity intangible and tangible investment. The funding aims to increase the number of rapidly growing innovative companies, national and international cooperation, companies’ efforts to understand the needs of end customers, and preparations for internationalisation and utilisation.

Intangible investments account for a significant share of companies’ productivity and growth, and they often scale without significant additional costs. The Funding Agency’s R&D funding is not limited to tangible or technological solutions but encourages companies to strengthen customer understanding and create intangible value for customers (see the guide titled Competitive Advantage from Intangible Investments).

The Funding Agency’s R&D funding is intended for forerunner companies pursuing significant international growth and competitive advantage who are conducting ambitious R&D work, as well as for forerunner companies aiming for a major productivity leap in domestic markets with international competition. Funding is granted to ambitious R&D projects that result in new solutions that give the company an international competitive advantage. For large companies, an additional objective is to encourage cooperation with research organisations and SMEs. In contrast, the implementation of a ready-made solution, minor improvements, and measures related to sales, marketing, or operations are not eligible for funding.

In addition to tangible and technological solutions, funding may also be provided for the development of services, business models, management, work organisation and other intangible elements, provided that the work qualifies as research and development. Intangible solutions can be part of the project or its main or sole focus (see the guide titled ‘Leadership, change of work and developing organisations in RDI funding’).

Funding from the Funding Agency is competitive and discretionary. Funding is granted in accordance with the Act on Discretionary Government Grants (688/2001), the Act on Central Government Lending and Central Government Guarantees (449/1988), the Act on General Conditions for Aid Granted to Economic Activities (429/2016), and the Government Decree on Funding for Research, Development, and Innovation Activities (1444/2014).

The typical duration of a funded project is 1–2 years, but there is no absolute minimum or maximum duration. For valid reasons, project funding may also be divided into two or more phases (Agile funding model). If the objectives set out in the project plan for the first phase are met, the Funding Agency may grant additional funding for the next phase of the project as a project amendment without requiring a new funding application. 

Companies registered in Finland can apply for funding. ‘Company’ refers to all entities, regardless of their legal form, that engage in economic activity, but does not include natural persons. 

Funding is not granted to self-employed individuals or sole traders, or to companies considered to be in difficulty under EU State aid rules.

Specific conditions for granting funding are described in the sections on the conditions for granting funding, barriers to funding and evaluation criteria.

Funding is provided as a grant or loan.

The level of funding depends on the content of the project being funded as well as the size of the company (See definitions). Typically, innovative research is funded through grants, while development work (including pilot projects) is funded through loans. 

Grants are awarded to small and medium-sized enterprises (SMEs) for research projects for up to 50% of the project’s eligible costs, and to mid-cap and large companies for up to 40% of the project’s eligible costs. When the project consists entirely of industrial research, the grant amount may be increased by up to 10%. 

Loans are granted for development projects (including pilot projects) at 50% of the project’s eligible costs. Where justified, loans to small and medium-sized enterprises (SMEs) and mid-cap companies may cover 70% of the project’s eligible costs. A company may receive 30% of the loan granted for the project as an advance at the start of the project, and the remainder will be paid based on actual costs incurred. 

• The interest rate on the loan will be three percentage points lower than the base rate in effect at any given time, but not less than one per cent. The current base rate is available on the Ministry of Finance's website. 
• Loans are generally granted without collateral. 
• The loan term is typically seven or ten years, of which three or five years are repayment-free. A ten-year loan term and a five-year repayment-free period may be considered if there is evidence that the development work will take longer than normal.
• If the project does not achieve the intended results or its results cannot be utilised in the company's business, the loan may, in exceptional cases, be partially or fully converted into a grant if the criteria are met.

The amount of funding to be granted is set in the Government’s annual budget.

The funding must be used for research and development activities as defined in Section 2 of the Government Decree on Funding for Research, Development and Innovation Activities (1444/2014).

The grant is intended for projects whose primary focus is research that aims, at a minimum, to generate new knowledge for the sector and to build capacity for future development work, but which will not yet result in a finished product or service. 

The loan is intended for projects whose main content is development or piloting. For example, loan financing can be used to verify the effectiveness of solutions in cooperation with customers, develop new products or services or accelerate time to market. 

In practice, project content often combines research, development, and piloting, so the funding form depends on which type of work makes up the largest share of the project’s eligible costs.

Here are some examples of the types of research and development activities for which a company can use funding from the Funding Agency:

Eligible costs are described in the Standard Terms and Conditions for Business Research and Development Funding. 

Only purchases and work covered by a written contract or purchase order made after the funding application became pending may be approved for the project. A binding purchase agreement should not be entered into before the application is submitted. In exceptional cases, a purchase order placed for carrying out a project before the funding application becomes pending may be approved only if the order or contract includes a provision stating that the purchase will be cancelled if the funding decision is negative. Even in this case, costs are eligible only from the project start date at the earliest.

The Funding Agency may approve expenses for a project no earlier than when the funding application becomes pending and the Agency has obtained the basic information necessary to begin processing the application.

The following conditions must be met at the time the funding application becomes pending: 

• The applicant must be a company conducting business from a permanent place of business in Finland and have a Finnish business ID.
• The company has a credible total funding plan for the duration of the project. In addition to the company’s self-funded share of the development project, it must be able to cover the costs incurred by the project before receiving a grant or loan from the Funding Agency. The company must also be able to finance its other business activities during the development project. Funding from the Funding Agency is disbursed retrospectively based on reports and expense statements, with the exception of a first advance payment in cases of loan funding. At least 10% of the awarded grant and 20% of the principal amount of the granted loan will only be paid after the final report has been approved and if the project has incurred sufficient eligible costs. The company must have the financial capacity to commercially exploit the results of the project and continue operations after the project ends.
• The applicant must have sufficient human resources to implement the project.
  • The minimum requirement is a committed team of two people working in Finland. 
  • At least one team member must work full-time in the applicant company. The other person’s contribution may also consist of the part-time contributions of more than one person (for example, two people who each devote 50% of their working time to the company).
  • Meeting the minimum requirement is a prerequisite for an application to be considered; it does not mean that the team’s expertise, experience or resources are sufficient. These will be assessed as part of the overall evaluation of the application (see ‘Criteria for granting funding’).
  • A person is considered to be working full-time if they devote all their working hours to the applicant company and therefore cannot have responsibilities or duties that require working hours at other organisations.
  • Credibly committed team members include people who have significant ownership in the company or who are demonstrably employed by the company.
  • An entrepreneur’s own work may also be included in human resources, even if they do not draw a salary from the company or do not report their salary as a project cost
• A large enterprise (See definitions) must spend at least 40% of the project costs in a grant-funded project and at least 15% of the project costs in a loan-funded project on services purchased from small and medium-sized enterprises or research organisations. Alternatively, the encouraging effect of the funding on cooperation and networking can be assessed through the network cooperation implemented in the Co-Innovation project.

General obstacles to granting and payment of funding: Funding obstacles

Funding will also not be granted if:

• The applicant is a self-employed individual or sole trader. 
• The applicant is a company registered in the Åland Islands with no fixed place of business or operations in mainland Finland, and the project results will not be utilised in the operations of any place of business in mainland Finland. The existence of a fixed place of business requires sufficient geographical and temporal permanence.

Funding granted by the Funding Agency is discretionary, and the evaluation takes into account not only the company’s financial situation and the content of the project but also the company’s resources for carrying out the R&D project alongside its other business operations, the share of public funding in the company’s R&D investments in previous years, the implementation of past projects and project obligations, the achievement of the objectives of past projects, and the utilisation of their results. 

Applications will be evaluated based on the following criteria:

The standard terms and conditions for funding for companies´ R&D activities