Start Up Loan

Start Up Loans are government-backed, personal loans for business purposes, specifically designed to help new businesses start trading and grow. They aim to help aspiring entrepreneurs who may have faced challenges securing funding through traditional lenders.

How does a Start Up Loan Work?

Start Up Loans differ from small-business bank loans in that they are personal loans designed for business purposes. The loan is unsecured, which means you don’t need to use your home or any other asset as collateral to access the funds.

You can borrow amounts between £500 and £25,000, repayable over a term of one to five years, with a fixed annual interest rate of 6%. If there are multiple partners in the business, each partner can apply for a loan up to £25,000. The maximum a single business can receive is £100,000.

What are the benefits?

There are a number of possible advantages for smaller businesses that take out a Start Up Loan:

• No need for collateral: A Start Up Loan is unsecured, meaning you won’t need to offer up a business or personal asset as collateral
• Cost certainty: Fixed interest rate of 6% for the duration of the loan
• Flexibility: A Start Up Loan is offered with flexible repayment terms of anywhere from 1 to 5 years.
• Support: Application support from experienced business advisors
• Mentoring: Free one-to-one business mentoring for 12 months

What are the potential drawbacks?

As with all finance types, there are some potential drawbacks that business owners need to be aware of:

• Small loan amount: As a Start Up Loan is designed for new and early-stage businesses so applicants can only borrow a maximum of £25,000 per business owner (up to a maximum of £100,000 for one business) 
• Credit checks: As a Start Up Loan is a personal loan, a credit check will be carried out as part of the application process. This could  impact your personal credit report
• Consequences of default: If you fail to make your loan repayments, it could affect your personal credit report. The finance provider might also issue charges that you would be personally liable for. Failing to make your loan repayments could also result in a County Court Judgement (CCJ) or your case being referred to an approved debt collection agent.

How do I get a Start Up Loan?

To apply for a Start Up Loan you complete an initial application online. On completion of the initial application you are assigned a business advisor to help you complete the full application.

The application process includes a personal credit check and the assessment of key business documentation, including your business plan and cashflow forecast.

You can apply via the Start Up Loans website.