Start Up Loan Scheme: getting your business off the ground

Having adequate access to adequate funding is fundamental for any startup.

In the early stages of getting your enterprise off the ground, you need working capital to reach the all-important minimum viable product (MVP) stage, rent premises and hire staff. But where does this initial funding come from?

Let’s look at the UK Government's Start Up Loan scheme and the funding options it offers.

What is the Start Up Loan scheme?

Start Up Loans are government-backed loans aimed at UK entrepreneurs who’ve been unable to secure funding through traditional lending channels, such as the Big Four banks.

These loans are different to some kinds of business finance in that they are personal loans offered to individual directors, not to the company itself.

How much can you borrow?

As an individual director, you can borrow from £500 up to an upper limit of £25,000. The loan must be repaid over one to five years, at a fixed interest rate of 6% per annum.

Because these are personal loans, rather than company loans, each of your directors can apply for funds of up to £25,000 each, up to a maximum limit of £100,000 for the company.

What are the key benefits of a Start Up Loan?

Having enough capital to get the business off the ground is a vital step in your startup journey. Being well capitalised gives you the funds to start operating, finding customers and making the revenues needed to sustain your business idea.

Here are some key benefits of applying for a Start Up Loan:

→ The loan is unsecured: Because this is an unsecured loan, you won’t have to use your personal assets – like your home or car – as collateral to secure the funding.

→ Fixed interest rate of 6% per annum: The rate is locked in for the entire loan term, meaning any future increases in the Bank of England's base rate won’t lead to an increase in your repayments.

→ Flexible repayment terms: Repayment periods can be tailored from one to five years, allowing you to manage your cashflow effectively by choosing a schedule that aligns with your forecasted revenue.

→ Support during the application process: You can get assistance with creating a business plan and completing cashflow forecasts, which improves your chances of the loan application being approved.

→ Free one-to-one mentoring for 12 months: Being connected with an experienced adviser gives you valuable guidance on strategy, operations and scaling, dramatically improving your chances of long-term success.