Start Up Loans: Full Guide

To be eligible for a Start Up Loan you must be aged 18 or over, based in the UK, and have a business idea or existing business that has been trading for fewer than three years. The loan is a personal loan, not a business loan, so it is assessed against your personal credit history. A poor credit history does not automatically disqualify you, but you must demonstrate that you can repay the loan from your business income.

Loans are offered at a fixed rate of 6% per annum with repayment terms of one to five years. There are no arrangement fees and no early repayment charges. Multiple people in the same business can each apply individually, meaning a business with two co-founders could access up to £50,000 in total. The average loan approved is around £7,500, though the full £25,000 is available for well-evidenced projects.

Applications are made through accredited delivery partners listed on the Start Up Loans website — not directly through the British Business Bank. Delivery partners are organisations experienced in supporting new businesses, such as enterprise agencies, incubators, and support organisations. They provide free help with your application including business planning and cash flow forecasting.

The application involves completing an online form, submitting a business plan and 12-month cash flow forecast, and a personal financial statement. The delivery partner reviews your application, provides feedback, and may ask for revisions before submitting it to the British Business Bank for final credit assessment. Most decisions take 4–8 weeks from a complete application. You will be notified by email and, if approved, receive your loan agreement to sign electronically.

One of the most valuable elements of the Start Up Loans scheme is the inclusion of 12 months of free business mentoring with every approved loan. You are matched with a mentor from a network managed by the delivery partner or the British Business Bank. Mentors are experienced business people who provide practical advice, accountability, and support as you start trading.

After the mentoring period, you remain a Start Up Loans borrower and can access the broader British Business Bank ecosystem of resources, events, and support. Borrowers also receive exclusive discounts from partner organisations covering business services, software, and professional development. If your business grows significantly, you may later be eligible for British Business Bank-backed growth finance through the Enterprise Finance Guarantee or the Recovery Loan Scheme for larger lending needs.

Start Up Loans are offered at a fixed interest rate of 6% per annum with repayment terms of one to five years. There are no arrangement fees and no early repayment penalties — if your business generates cash faster than expected, you can pay off the loan ahead of schedule without financial penalty. Monthly repayments are fixed, which makes cash flow planning straightforward. The total interest payable on a £7,500 loan over three years at 6% is around £720 — a significantly lower cost than most commercial alternatives available to early-stage businesses.

The 12 months of free mentoring included with every loan is a substantial benefit in its own right. Mentors are matched to borrowers based on sector and business stage, and sessions are typically monthly. Research published by the British Business Bank has consistently shown that Start Up Loan recipients who engage actively with their mentor are significantly less likely to default and more likely to achieve sustained trading. After the mentoring period ends, many recipients maintain an informal mentoring relationship if both parties choose to continue.

If you default on a Start Up Loan — defined as failing to make two or more consecutive monthly repayments — the British Business Bank or its delivery partners will contact you. Initial steps include offering a revised payment plan, a temporary payment holiday, or a deferral period. If the business has failed and repayment is genuinely impossible, the debt does not simply disappear: it is a personal liability and can be pursued through the courts. In serious cases, default can lead to a County Court Judgment (CCJ) being registered against you, affecting your personal credit rating and ability to borrow for years afterwards. If you are struggling, contact your delivery partner immediately — early communication significantly increases the chances of finding a workable solution. As a last resort, personal insolvency options (Individual Voluntary Arrangement or bankruptcy) can address the debt, but both carry serious long-term consequences for your financial life.