Start Up Loan

The Start Up Loan scheme is open to individuals aged 18 or over who want to start or grow a UK-based business that has been trading for up to 36 months. Each applicant can borrow up to £25,000 (the average loan is around £7,500), and multiple co-founders in the same business can each apply. There are no arrangement fees and the interest rate is fixed at 6% per annum. Repayment terms are one to five years. The loan is unsecured and does not require a personal guarantee, but applicants must submit a business plan and cash-flow forecast. Each successful borrower receives 12 months of free mentoring. The scheme is funded by the Government and delivered by the British Business Bank through delivery partners such as Virgin StartUp and the Prince's Trust.

In practice, the Start Up Loan is a personal loan in the borrower's own name, even though the money is used in the business. That single fact drives most of the decisions you need to make. You are personally liable for repayment whether or not the business succeeds, missed payments appear on your personal credit file, and if you incorporate later the debt does not transfer to the company unless you arrange that separately.

Worked example: Chris and Amara are co-founders of a catering start-up. Each applies individually, so between them they can raise more than a single applicant could. Chris asks for £12,000 over five years to buy equipment; Amara asks for £8,000 over three years for van conversion and working capital. Both must submit a business plan, a cash-flow forecast and a personal survival budget showing they can meet the repayments from household income while the business builds up. Their delivery partner assigns each of them a mentor for the first twelve months, which is often worth more than the money.

The misconceptions are worth naming. It is not a grant and does not have to be matched, but it also cannot be written off if the business closes. It is not free money at a subsidised rate either — the fixed rate applies for the whole term. Applications are declined most often for affordability rather than for a weak idea, so a realistic personal budget matters as much as the plan. And you cannot use it to repay existing debt, buy a lifestyle asset, or fund a business that is not UK-based.

A Start Up Loan often sits alongside other routes: match funding for capital projects, or equity under SEIS and later EIS if you plan to raise from investors. Before applying, read our guides to Start Up Loans and writing a business plan for funding, and beware of anyone charging a fee to make the application for you.