Start up loans: what options are available for you?

Looking to start your own business? A start up business loan could be an option for you. 

What is a start up loan?

A start up loan aims to help businesses who’ve been trading for less than two years. The boost in capital can help new businesses get their company off the ground.

It can also cover costs like buying new stock or premises, hiring more employees, building a website or marketing.

Maybe you’re after a cash flow boost - a start up loan could help with all of these. 

You can get unsecured versions of this loan, so you don’t have to worry about having a guarantor or any assets to support your application. 

 

We don't compare start up loans - this guide is for informational purposes. But if you're looking for a personal loan, we could help.

 

How can I get a start up loan ?

There are a few ways you can get a start-up loan:

• The government 
• SME brokers 
• Banks
• Lenders

The government has a scheme called ‘Start Up Loan’, which is available to those looking to start or expand their business.

With this loan, you can get between £25,000 individually or up to £100,000 per business.

There’s a fixed interest rate of 6% and you can choose a repayment term of one to five years. This scheme also comes with mentoring for the first year.

The scheme can be applied for directly, or through their delivery partners Transmit Startups or Virgin Start Up. 

SME loans can lend finance for £1,000 - £500,000. Repayment terms on these tend to be shorter term, from one to three years.

SME loans tend to have quicker approvals, so if your application is successful you could get the money faster than with other methods. 

Banks are the most traditional way to get a start up loan. Many high street banks offering loans up to £100,000 with fixed interest rates and varying repayment terms of up to 10 years.

But new businesses could be considered ‘high risk’. This means lenders would likely provide secured loans, so you'd usually need assets or a guarantor.

You’ll need to show how you’ll pay it back and prove there’s a demand for your company. 

READ MORE: Small business loans

 

How hard it is to get a start-up loan?

An online application could be speedy if you’re prepared. But, it could take a lot longer and if you don’t have:

• A good business credit rating 
• A business plan
• Evidence to show how you can pay back the loan

There are also some types of business that are excluded from getting a start up loan, so it’s best to research first to avoid any disappointment.   

 

How much money can I get?

You can apply for a start up loan between £500 and £1,500,000 – depending on the provider.  

 

Pros and cons

Pros 

You don’t always need assets to secure the loan. But you still have to make the payments on time.

Keep your profit. As the money is a loan and not directly from investors, you don’t have to worry about giving up any of your profit.

Grow your business and use this money on things like hiring new staff, building a website, or buying a new place for you and your staff to work in. Or you can use it to boost your cash flow.

There are manageable repayment plans as the interest rates are fixed and there are options with how many years you want to repay it.

Mentoring is available with some of the start up loans. This independent advice can give you the confidence you need when making decisions to help your business succeed.

Start up loans usually don’t require a legal, application or set up fee. 

 

Cons

Your business may not qualify for a start up loan. Some industries are excluded from applying, so be sure to research first to avoid disappointment. 

Despite being able to apply for large amounts you may only be able to get a smaller amount.

Minimum turnover requirements can be attached to your start up loan. 

Some lenders ask for a minimum trading time, which can be from one to three years.

 

What alternatives are available?

A start up loan isn’t the only way to get your new business funding. Other finance options include:

• Crowdfunding
• Short term loans
• Grant schemes like Business Growth Grant and BCRS Business Loans
• Peer to Peer Finance
• Angel investors 
• Venture and Equity Finance 
• Business Loans for Women