How to get a Start Up Loan for your business

Acquiring funding can be a major roadblock for small businesses, especially those just getting off the ground. However, if you don’t meet the eligibility criteria for small business grants, or lack the trading history to secure a personal loan, it could be worth exploring government-backed Start Up Loans. 

Start Up Loans offers up to 12 months of free post loan support and mentoring, and allows you to borrow up to £25,000 over one to five years, with a fixed interest rate. 

Over the last 13 years, the government-backed scheme has lent over £1.2bn to UK small businesses, helping to launch major UK startups such as Castore, Pip & Nut, and Toddle Born Wild.

If you’re interested in becoming their latest success story, this guide dissects everything you need to know about Start Up Loans before getting started. We discuss its terms, eligibility criteria, and offer tips for nailing your application to help you hit the ground running. 

What is the Start Up Loans scheme?

The government backed Start Up Loans scheme was founded in 2012 and is administered by The Start-Up Loans Company, a subsidiary of the British Business Bank. In its 13-year history, it has supported nearly 125,000 firms to the tune of £1.2bn.

In 2025, the government injected an extra £1bn in lending capacity into the program to support job creation and further boost business growth. It’s now working towards a goal of issuing 69,000 new loans to businesses in the coming years, making now an excellent time to apply.

How does the Start Up Loans scheme work?

The scheme offers personal loans for individuals seeking to start or grow a business. Unlike many traditional bank business loans, this loan is unsecured, which means eligible entrepreneurs don’t need to put any assets forward as security.

The loan currently has a fixed interest rate of 6% which doesn’t change over the loan’s term, and you can repay the debt over a period of one to five years.

You can currently apply for loans of between £500 and £25,000 per person. For businesses with multiple founders and partners, each can apply for up to £25,000, raising the total to a maximum of £100,000 per business (assuming, of course, all partner applications are approved).

This flexible structure makes the scheme suitable for a wide range of ventures, from sole traders to fast-growing startups.

Beyond access to unsecured capital, the scheme also offers successful first loan applicants with one-on-one support from experienced business mentors. The free mentoring and support can cover a range of topics, from strategic planning to financial management, aiming to equip business owners with the tools they need to succeed in today’s climate.

What can I use a Start Up Loan for?

One of the best things about Start Up Loans is that their purpose isn’t restricted. Individuals can use Start Up Loans for just about any legitimate business purpose, from launching a new company to scaling an existing one.

While business projects vary wildly, common uses include:

• Investing in marketing and promotion
• Renting a physical business premises
• Buying stock, or components to manufacture new products
• Covering operational cash flow needs
• Purchasing equipment, technology

For example, father-and-son beer manufacturer Tavistock Brewery used a Start Up Loan to finance their bottling process and ramp up their market reach, which enabled them to start selling their products to off-licences, shops, and directly to consumers.

Alternatively, TJ Bouchada founded her private nail salon, Moody Cow Nails, using a Start Up Loan. Specifically, this money was used to secure a property, purchase professional equipment and stock, and promote the salon to new customers.

There are some use cases that are not permitted. Start Up Loans cannot be used for debt repayment, training courses, or investments not related to your business.

Do you have to pay back a Start Up Loan?

Yes, you must pay back your Start Up Loan. Unlike business grants, you are personally liable for repaying the full amount borrowed and associated interest plus a fixed interest rate of 6% a year.

Recipients are required to pay back the loan in monthly instalments over a set term, which can range from one to five years. You also have the option to repay these loans early, without paying any extra fees.

If you miss a payment for your loan, the loan provider will contact you to discuss your options based on your specific circumstances. This could include making changes to your repayment plan. That said, late payments may impact your credit score, potentially making it harder for you to secure funding in the future.

Am I eligible for a Start Up Loan?

You must meet several key criteria to be eligible for a Start Up Loan. You must:

• Be at least 18 years old
• Be a UK resident
• Be either starting a new venture, or have been trading for less than three years
• Be unable to secure finance from another source (self-declared).
• Be based, or planning to base, the business in the UK
• Have the legal right to work in the UK

You also cannot be based in an excluded industry. Ineligible business types include pornography, gambling, and weaponry. Crucially, the Start Up Loan cannot be used to start up businesses in the financial sectors such as banking, money transfer, or property investment.

While Start Up Loans are unsecured, applicants will have to undergo a credit check as part of the application process. This will typically involve a review of your personal credit history with a Credit Reference Agency (CRA).

You will also need to provide a business plan and cash flow forecast as part of your application to demonstrate that your business is viable and that you’ll be able to pay the money back.

Is it hard to get a Start Up Loan?

Getting a Start Up Loan can be a straightforward process, especially compared to securing loans from private lenders.

Start Up Loans are designed to support entrepreneurs who may otherwise struggle to secure funding as you won’t need a proven business financial history to secure a loan.

The unsecured nature of the loan also means that applicants aren’t required to put up any collateral as security, making it particularly well-suited to budding businesses with no existing assets.

However, while Start Up Loans are more accessible than many other funding options, your approval can’t be guaranteed. You still need to establish that you’re able to repay the loan fully, meaning applicants with poor credit history, types of debt like IVA, or unrealistic cash flow forecasts are unlikely to be approved.

Should I apply for a Start Up Loan?

A Start Up Loan can be an ideal way to kick-start your entrepreneurial journey. However, it may not be  suitable for everyone.

You might want to consider getting a Start Up Loan if:

• You don’t have a proven business financial history or collateral – Start Up Loans’ low barrier to entry makes them ideal for budding businesses that require funding but don’t have the experience or assets to back it up.
• You’re likely to pay back your loan early – The loan doesn’t incur early repayment fees. So, if you want to avoid interest by paying back the loan early, you’re able to do so for free.
• You’re interested in stable borrowing costs – You’ll get to benefit from a fixed interest rate of 6%, making it easier to budget your repayments, without accounting for market changes.
• You’d benefit from small business guidance – The scheme should be a no-brainer for entrepreneurs interested in gaining valuable insights from experienced professionals.
• You want control over your repayment terms – You can choose a repayment window of one to five years, based on the unique needs of your business.

A Start Up Loan might not be for you if:

• You have a poor credit score – If you have a poor personal credit history, or outstanding debts like an IVA, it’s unlikely your application will be approved.
• You think you may not be able to repay the full amount – You will be fully liable for repayment if your business fails. If you default, your personal credit score could be seriously damaged.
• You’re an established business –Currently a first Start Up Loan is exclusively for businesses that have been trading for three years or younger. The second loan can be given to businesses that are up to five years old.
• You need to unlock large amounts of funding – The maximum loan limit is £25,000 per person. If you require more capital to get your business started, and you are a sole trader you may need to consider pursuing other options.

Tips for applying for a Start Up Loan

Interested in throwing your hat in the ring and applying for a Start Up Loan? We offer some useful pointers to help you nail a successful application.

• Create a strong business plan – Your business plan will make or break your application. Ensure it comprehensively outlines your business idea and how you expect to generate revenue, make it as realistic as possible. Daunted by a blank page? Get the ball rolling by using a free business plan template.
• Prepare an extensive cash flow forecast – Back up your business plan with an in-depth 12-month financial forecast. Carefully break down your cash inflows (like sales revenue, Start Up Loan, and side hustles) and cash outflows (like running costs, fixed costs, wages, and loan repayments).
• Prepare yourself for a credit check – To prevent yourself from the unexpected, you should be aware of your credit history beforehand so you’re able to address any issues lenders could have with your application.
• Consider registering as a Limited Company – Setting up as a Limited Company isn’t necessary for your application, but it helps add a layer of credibility and professionalism.

Learn more about how to apply for a Start Up Loan in our detailed, step-by-step explainer.

What other support is available?

Not everyone will be eligible for a Start Up Loan, and even if you are, it may not be the right funding option for you. Here are some alternative funding options to consider beyond Start Up Loans.

Angel investing

Angel investing involves wealthy individuals using their personal funds to invest in early-stage startups, in exchange for partial equity. Like Start Up Loans, this financing option also provides valuable mentorship and advice to guide your business in its early stages, while providing key industry connections.

Angel investing is also debt-free, so you aren’t expected to pay back the capital in regular repayments. Instead, you give up a portion of your company, and some investors may demand substantial involvement in the business as a result.

Seed funding

Seed funding is the earliest stage of investment in a startup and often comes from professional investors like venture capital firms or angel investors.

Like traditional angel investing, this type of financing is debt-free, and instead, you’re required to give up an equity stake in your business. This funding is typically used to help startups develop a product or expand initial teams.

Learn more about seed funding and how it differs from pre-seed funding in our detailed guide.

Venture capital

Venture capital (VC) is a type of equity financing that is issued by venture capital firms. Unlike with seed funding, VC rounds typically involve much larger sums of money and are used for major scaling efforts, such as launching a large-scale product or entering new markets. VC is a debt-free funding option, but providers will demand a major say in the company’s direction and may even take a seat on the board.

Crowdfunding

Crowdfunding is a financing method where a project or venture is funded by a large number of people. It’s a form of crowdsourcing, and can either be donation-based (where donors receive a reward) or debt-based (where donors receive a small ownership stake).

Unlike Start Up Loans, crowdfunding relies on small contributions from a community of people, offering you a unique way to generate a buzz around your brand.

Small business grants

Small business grants are non-repayable cash injections provided to businesses by governments, private organisations, or charities.

Unlike the majority of other debt-free options, successful applicants aren’t required to give up a stake in their business. However, grants tend to have very strict eligibility criteria and have long application processes, making it harder for startups without a USP to secure funding through this method.

Interested in pursuing this form of debt-free funding? Learn more about the best small business grants here.