1. What Are Start Up Loans?
Start up loans are financial products designed specifically for new businesses with little or no trading history. They help cover initial costs such as:
- Equipment or inventory
- Website and branding
- Working capital
- Premises setup
They can be unsecured or backed by government schemes, making them more accessible to new entrepreneurs.
2. Government Start Up Loan Scheme (UK)
The UK Government-backed Start Up Loans Company offers:
- Loans from £500 to £25,000 per individual
- Fixed interest rate of 6%
- 1–5 year repayment terms
- Free mentoring for 12 months
No prior trading history is required. This is one of the most trusted and accessible options for startups in the UK.
3. Bank Loans for Startups
Some traditional banks offer start up loans with:
- Larger loan amounts
- Interest rates based on credit risk
- Longer repayment terms
However, banks usually require a robust business plan, personal guarantees, and credit checks.
4. Microloans
Microfinance institutions offer smaller loans—typically under £10,000—ideal for:
- Home-based businesses
- Solo entrepreneurs
- Low-risk ventures
These are often faster to access and involve less paperwork.
5. Peer-to-Peer Lending Platforms
Peer-to-peer platforms like Funding Circle and Zopa connect startups with private investors. Benefits include:
- Competitive interest rates
- Faster decisions
- Flexible loan amounts
However, you may need some initial traction or assets to qualify.
6. Asset-Backed Startup Loans
These loans use your business assets (or personal assets) as collateral. They’re useful if:
- You’re buying vehicles or machinery
- You have assets but little cash flow
Be aware of the risk—assets may be repossessed if you default.
7. Credit Union Business Loans
Credit unions offer community-based finance with lower interest rates and flexible repayment terms. They support local entrepreneurs and are more inclusive of low-credit applicants.
8. Start Up Loans for Specific Groups
There are special schemes for:
- Young entrepreneurs (18–30) through The Prince’s Trust
- Women-led businesses via various funding networks
- Ethnic minority and underrepresented founders through social enterprise schemes
These often combine loans with mentoring and business support.
9. Online Lenders and Fintech Platforms
Digital lenders like Iwoca, Capify, or Liberis offer:
- Quick online applications
- No collateral required
- Fast funding within 48 hours
They often assess real-time business data instead of credit history.
10. Blended Finance: Combining Loans with Grants or Equity
Some startups fund their business using a mix of:
- Start up loans
- Government or local grants
- Angel investment or crowdfunding
This reduces reliance on debt and spreads financial risk.
Frequently Asked Questions
Q1: Can I get a start up loan with no business history?
Yes. Government Start Up Loans are tailored for businesses with no prior trading experience.
Q2: How much can I borrow as a start up?
Most schemes offer between £500 and £25,000. Multiple founders can apply separately.
Q3: What documents are needed for a start up loan?
Business plan, cash flow forecast, ID and address proof, and sometimes personal financials.
Q4: Are startup loans secured or unsecured?
Most start up loans are unsecured, though some lenders may require a personal guarantee.
Q5: Can I use a loan to pay myself?
Yes, if it’s part of your business costs (e.g., wages or director salary). Just ensure it’s within your forecast.
Q6: How long do start up loan applications take?
It can take anywhere from 5 days to 4 weeks, depending on the lender and completeness of documents.
Conclusion
Loans start up businesses access in their early days can be the difference between thriving and failing. Whether you choose a government-backed loan or peer-to-peer funding, the key is to apply smartly with a clear business plan and strong financial projections.