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What Is A Start Up Loan Scheme?

    A start up loan scheme is a UK government-backed loan program that helps startup businesses to get going. The start-up loan scheme is one of several government finance schemes designed to help new companies and make life easier for entrepreneurs.

    The UK government launched the scheme in 2012 with £151 million in initial funding. The government wanted to help 30,000 businesses by 2016. The program was so successful that it continues to this day.

    Should I consider a start up loan scheme?

    Yes. A new company will often struggle to get financing from banks or investors. The start up loan scheme can help your company to get going and subsequently to grow. The start up loan scheme has two parts. The first loan helps the company to get going. The second loan helps the company to grow if they got to a flying start with the first loan.

    If you have not registered your company yet, check out‘s easy app – you can register  your company in a few minutes and get a current account.

    How does the start up loan scheme work?

    The British business bank operates the start up scheme through partners. These partners are banks and financial companies that lend money to businesses. The partners are called ‘Delivery Partners’.

    The loans are for one to five years. The loans have to be paid back just like any other bank loan. Please note that the individual is the borrower rather than the company. That means that the loan repayment is the individual’s responsibility. If you don’t repay the loan, it will have a very negative consequence for your personal credit history.

    What is the interest rate for a start up loan?

    The interest rate for a startup loan is 6% per year. This interest rate is set by the British Business Bank and applies only to the government backed start up loan scheme.

    How much can I borrow with a start up loan scheme?

    You may borrow between £500 and £25,000. The first loan may be up to £10,000. If you have a number of business partners, each business partner may borrow the money under the start up loan scheme. However, the maximum amount per business is limited to £100,000. You will have monthly payment to pay back the loan amount (just like any other loan).

    In addition to the money you will also receive free business support and advice. This support may include one-to-one mentoring.

    The other great bonus is that you may get support to write your business plan during the application process. A well written and thought out business plan is great for your business as it grows. It will help you meet unexpected challenges and set up business and financial objectives.

    Start Up Loans website has a very handy calculator that can help you figure out how you can use the loan program.

    How can I spend the money from the start up loan?

    You can spend the money from the start up loan for many business purposes. The purpose of the loan is to help you start a business or accelerate your business’ growth. You will need to write in your business plan how you intend to spend the loan money. The most important point – demonstrate why a specific spending plan will help your business grow.

    Please note that you can use the money to repay other debts. Sadly you can not use the loan to fund training or further education. There are other funding schemes available for those needs. If you intend to invest the money, for example buy a warehouse or plant & equipment, you must have a clear justification why these purchases will help your business develop.

    Please keep in mind that financial service companies and banks administer these loans. Despite the government guarantee, everyone wants you to be able to pay the loan back. So these rules and regulations are designed to ensure the greatest probability for loan repayment.

    How can I get a start up loan?

    You can get a startup loan if: (1) you are over 18 years old, (2) a UK resident, have the right, (3) have the right to work in the UK; (4) have a good personal credit history; (5) can demonstrate that you can afford to repay the loan; (6) have a UK registered business that has been trading for less than 24 months or intend to start a UK registered business.

    What businesses are eligible for a start up loan?

    Most UK registered businesses and business types are eligible for a start up loan. However, there are a number of exclusions. These exclusions are: (1) weapons; (2) chemical manufacture; (3) drugs, pornography or illegal activities; (4) banking and money transfer services; (5) private investigators that do not hold the appropriate licence; (6) gambling or betting activities; (7) property investment; (8) agents for thirds parties, where a third party earns the majority of the revenue, your business earns a commission (this rule excludes franchise businesses).

    How do I apply for a Start Up loan?

    You apply for a Start Up Loan by visiting the Start Up Loans website. You can start the application in no time.

    How do I complete a Start Up loan application?

    There are 5 steps in completing a Start Up loan application: (1) Registration; (2) Application Form; (3) Supporting documents; (4) Assessment and (5) Sign Documents and receive the loan.

    1) How do I register for a Start Up Loan Application?

    Registration is easy. All you need to do is fill out an online registration form. If you already know which financial institution (or Delivery Partner) you want to borrow from, you pick them. If you don’t, then Start Up Loans will assign a Delivery Partner to you after they review your application.

    As soon as the Delivery Partner (or financial service company) gets your application they will assign a Business Adviser to help you with the Start Up loan application. They will help you complete the application and review it before submission.

    2) What application form do I need to fill out to support a Start Up Loan Application?

    The application form is straight forward, but for many it can prove challenging (particularly if you hate filling out forms). That is where the Business Adviser is so helpful.  Broadly, you need to describe your business (or ideas) in the application and provide personal information. As the loan is a personal credit to you, the financial service company needs to figure out how much money they can lend to you. To do this, the application will ask you for consent to perform credit reference checks with a Credit Reference Agency.

    If you have a poor or average credit rating, you may not be able to get the maximum possible loan. It is always a good idea to know your credit scores before you start any loan applications.

    3) What documents do I need to support a Start Up Loan Application?

    As for any other business loan, you will need to provide supporting business documents. These may include your business plan, cash flow forecasts and any personal budget plans that may impact your ability to repay the loan. The Start Up Loan’s business plan template, cash flow template, and personal survival planning template are quite handy. Your Business Adviser will be in a good position to help you with these.

    4) How does the Start Up Loan Assessment work?

    The Start Up Loan Assessment is carried out by the financial service company. They do the assessment by reviewing your loan application together with the submitted documents. The financial service company may accept or reject your application. The loan is not guaranteed.

    5) When do I sign the Start Up Loan Agreement?

    You sign the Start Up Loan Agreement after your application has been approved. You will receive all the loan documents. You need to sign the loan documents and return them to the financial service provider. You will get the money in days and can start with the 12-month free business mentoring.

    In summary, the Start Up Loan Scheme is a great way to get early financing for your busienss. It may take a bit of time, but if you are seeking finance, this is a good place to start.


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