Start Up Loans: How to apply

A government-backed start up loan is a great way to kickstart your business. Discover the benefits here, and get all the info on how to apply

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Are you ready to fund a great business idea or do you have a startup in its early stages? Then you need to consider a loan from Start Up Loans, the government-backed scheme that has already lent over £540m to UK small businesses.

Start Up Loans allows you to borrow up to £25,000 over one to five years, with a fixed interest rate of 6% and no early repayment fees. You’ll also get 12 months of mentoring.

Over the last eight years, the scheme has helped major UK startups like Cornerstone, Bird & Blend Tea Co., and City Pantry to get off the ground.

This guide will tell you exactly how to apply for a loan, and explain what to do to stand the best chance of success, and offer tips from those who have been there and done it.

What is a Start Up Loan?

The government-backed Start Up Loans scheme started in 2012, and has already had a huge impact – with nearly 68,000 businesses supported to the tune of £543.8m at the time of writing.

Part of the British Business Bank, Start Up Loans backs an average of 31 businesses each day, with an average loan amount of just over £8,000. The programme operates across a wide range of sectors, and has kickstarted everything from a mermaid academy to a true crime museum.

It also prides itself on helping those who may find it challenging to get finance elsewhere, with 35% of loans going to people who were previously unemployed, and 20% going to BAME applicants.

It’s not surprising that the scheme is so popular – after all, it’s explicitly aimed at helping new businesses succeed. The benefits include:

  • An easy-to-understand fixed interest rate of 6%
  • Borrow up to £25,000
  • No early repayment fees
  • Flexible repayment terms of one to five years
  • 12 months of free one-to-one mentoring for those accepted

How to apply for a Start Up Loan

Unlike some other finance routes, applying for a Start Up Loan is clear and straightforward – but there are a few things that you should keep at your fingertips to speed up the process.

What you need before you start your application

The things you need to apply for a start up loan can be easily split into two categories – personal information, and documents related to your business (or proposed business).

In terms of personal information, you’ll need:

  • Your National Insurance number
  • Details of your accommodation history (i.e. the addresses of the places you’ve lived) for the last three years
  • Your bank account number and sort code (for a credit check)
  • Accurate details of your pre-tax income (including benefits) and employment status

For your business/proposed business, you’ll need:

  • A business plan (check out our great business plan template)
  • A cash flow forecast (find a helpful cash flow template on the Start Up Loans site)
  • A personal survival budget (you can use the Start Up Loans personal survival budget template to help you)

Got all that? Then let’s get started.

Apply for a Start Up Loan

Step 1: Confirm eligibility

Start Up Loans Screen grab 1 (1)

To start, all you need to do is click a few boxes to confirm that your business is (or will be) based in the UK, you are a UK resident, you have the right to work in the UK, and that your business has been trading for less than two years.

If you’re confused about this last bit, Start Up Loans are aimed at businesses in their early stages, so if you’ve been trading for two years or more, you won’t be eligible.

The exact definition of ‘trading’ can vary, but HMRC cites the following activities as examples of trading:

  • Carrying on a business activity, such as a trade or professional activity
  • Buying and selling goods with the aim of making a profit or building up a surplus
  • Providing services
  • Earning interest
  • Managing investments
  • Receiving any other income

Step 2: Personal details

Start Up Loans Screen grab 2

Nothing too taxing here – just enter your title, name, date of birth, personal email, and mobile number. One thing to note is that your name must be the name on your passport/driving licence, so if you’re not sure, make sure you dig those out to check you’re entering the correct information.

Once you’ve done this, you’ll be sent a link to confirm your email address. Log into your personal email, click the link, and set up a password.

Once you’ve done that, you’ll be ready for the next step.

Step 3: Contact information

Start Up Loans Screen grab 3

Now that you’ve registered, you can start the application proper. First, enter your title, name (make sure it matches your passport/driving licence again), personal email, and mobile number (these fields should be pre-filled for you, so just check that they’re correct). If you’ve ever been known by another name, then fill in those details too.

Step 4: General information

Start Up Loans Step 4

A bit more info needed here, but nothing too complicated.

Here’s everything you’ll need to fill in for this step:

  • Date of birth
  • Gender (“Non-binary” and “prefer not to say” are available options)
  • Marital status
  • Ethnic background
  • National Insurance number (This will be on your National Insurance number card, any communication from the Department of Work and Pensions, or certain official work documents, such as a P45)
  • Current employment status
  • Nationality (as shown on passport)
  • Highest academic qualification
  • Gross (pre-tax) annual income, including benefits
  • Whether you have any unspent criminal convictions

Step 5: Residential information

Start Up Loans Step 5

Now, fill in your residential status (whether you’re a tenant, you own your home etc.) and input your postcode to find your address with the address finder.

Enter the month and year you moved into the address, then click “save and continue”.

If you’ve been living at that address for less than three years, then you may need to repeat this step for previous addresses, entering the month and year for both moving in and moving out.

Start Up Loans Step 6-2

Step 6: Delivery partner allocation

For more on this, see below.

Start Up Loans Step 6

This step is pretty simple – just click the boxes to confirm the following:

  • Whether you are currently participating or have ever participated in the New Enterprise Allowance scheme
  • Whether you or an immediate family member work or have ever worked for the British Armed Forces or Emergency Services (police, medical, or rescue)
  • Whether your business is in the fashion sector

Step 7: Your Start Up Loan

Start Up Loans Step 7

Now we move on to the credit check. First, you’ll need to enter your desired loan amount, and choose over how many years you want to repay the loan. Don’t worry, you can change these amounts later, but the credit check still needs an idea of your desired loan terms.

Step 8: Your personal bank information

Start Up Loans Step 8

Now you need to enter the details for your personal bank account, specifically the account number and sort code. These will be displayed on your bank statements (if you still receive these by post), or should be accessible through online banking.

Make sure you also tick the box to indicate whether your personal account is a joint account, and tick the consent box at the bottom.

Step 9: Your business information

The next few screens are all focused on your business. You’ll need to submit more details about your business/proposed business, and upload those three all-important documents – your business plan, your cash flow forecast, and your personal survival budget.

If you’re concerned about any of these, then make sure you take advantage of the Start Up Loans templates. It’s best if you attempt to complete them yourself first, and then receive assistance once your application has been submitted – but if you really are struggling, then make sure you contact Start Up Loans for help. 

Start your application

And that’s it – your application is done! Here’s a quick recap of the steps:

  1. Confirm eligibility
  2. Personal details
  3. Contact information
  4. General information
  5. Residential information
  6. Delivery partner allocation
  7. Your start up loan
  8. Your personal bank information
  9. Your business information (including business plan, cash flow forecast, and personal survival budget)

Raring to go? Apply for a Start Up Loan now

What happens after your Start Up Loans application is complete?

Once you’ve submitted your application, you should be contacted by Start Up Loans or a delivery partner within 2-3 days.

Once this process has begun, it’s difficult to say how long it will take, as it depends how much support and guidance you require – it could be as little as two to three weeks, or over three months for applicants who require extensive assistance.

Delivery partners

While Start Up Loans oversees the whole process, it’s the delivery partners who will be your crucial point of contact once you’ve completed your application, and who will ultimately decide whether your loan is approved.

There’s a full list of delivery partners on the Start Up Loans website, but they’re organisations that often operate in a specific region or sector, and have experienced business advisors that can support you during the process. They’ll help you refine your business plan, cash flow forecast, and personal survival budget for the best chance of success, and will also arrange mentoring services if you’re successful.

During the application process, you’ll have the option to pick your preferred delivery partner. If you don’t, then you’ll be assigned to one that matches your area/sector. You can’t change your delivery partner once the process has started, so if you have a preference, make sure to indicate this.

Start Up Loan benefits

Underlining the company’s commitment to kickstarting UK business, a business loan from Start Up Loans includes some great benefits:

  • An easy to understand fixed interest rate of 6% – Unlike many providers, Start Up Loans offers the same rate to all applicants, and the interest is fixed at 6% for the duration of the loan.
  • Borrow up to £25,000 – So that it can cater to a wide range of business needs, Start Up Loans lets you borrow any amount from £500 to £25,000. As a Start Up Loan is a personal loan rather than a business loan, multiple individuals can also apply for their own loan for the same business, with a limit of £100,000 per business.
  • No early repayment fees – Should your business take off, you can pay the loan off early without having to pay any extra fees, letting you be free of debt and able to grow your business more rapidly.
  • Flexible repayment terms of one to five years – Not every business grows at the same rate, and everyone’s financial circumstances are different. This is why a Start Up Loans business loan can be taken out for up to five years (and easily repaid early too).
  • 12 months of free one-to-one mentoring for those accepted – This really sets Start Up Loans apart from some other lenders – everyone who is accepted gets 12 months of one-to-one support from an experienced business mentor.

Start Up Loan benefits: a case study

Flotation Point

Michael Cordova, along with his wife Tina, founded the Floating Point Float Centre – Berkshire’s only dedicated flotation therapy centre. He got his company off the ground with two loans from Start Up Loans. After opening in 2015, the company is now helping a range of clients improve their physical and mental wellbeing, with notable users including Olympic athletes and members of the GB running team.

“In the beginning we applied for £10,000, which we used towards our rent deposit to secure the property – as a brick and mortar business, this was particularly important. We had the perfect property in terms of size and location. The start-up loan gave us security, and allowed us to move forward with our exciting plans. After a year, we applied for additional funds of £6,000 to help with marketing and growing the business. The cash injection helped us to grow by 10% in 6 months.

“The start-up loans application process was fairly straight forward. We registered online, then had to complete an application form. Because our business was so unique at the time, I had to have two face to face interviews to ascertain whether the business was viable.

“The third step is finalising the business documents: we had to provide a business plan, five-year cash flow forecast, and personal survival budget as part of the application. I then spoke to a business advisor before the loan was approved. We also received 12 months of one-to-one business mentoring, which really helped at the start when we needed marketing advice and support.”

And Michael has a few pearls of wisdom for anyone thinking of applying for a Start Up Loan:

  • Research is vital – the more you know about the industry you are entering, the better. Focus on your competitors, and make sure you can clearly explain the product or service you wish to offer. This should be an integral part of your business plan.
  • Know your target audience – you don’t just need to know what your product is – you need to know who it will appeal to. Social media is a great way to go about this, as is creating a temporary landing page to gauge interest in your product or service.
  • Be realistic with your cash flow forecast – use the template provided by the Start Up Loans company and produce a 5-year plan that includes all costs and a contingency fund for those challenging early days.
  • Identify exactly what you need the money for – we had an idea when we applied, but didn’t factor in additional costs. We then had to apply for a second Start Up Loan as a top up, which cost us more in interest in the long run.

And, finally, if you’re accepted:

  • Maximise mentoring – make the most of the time with your business adviser – they are an invaluable source of advice that will help your business grow.

Start up business loan alternatives

If you don’t feel that the government-backed Start Up Loans scheme is the right funding solution for your business, then there are alternative options, both for start up loans and more general small business loans.

Alternative start up loans

There are a number of other start up loans available, with varying terms and eligibility criteria (some require your business to have been trading for 18 months, for example). You also shouldn’t naturally assume your bank will turn you down – indeed all the major UK banks have publicly stated their commitment to helping startups.

You may also want to consider crowdfunding. Sites like Seedrs and Crowdcube allow you to sell equity in your business in return for funding, while Funding Circle and Thin Cats offer crowd-funded business loans, with the interest rate agreed during the fund-raising process.

Compare start up loans with independent comparison site Know Your Money now

Small business loans

For more mature businesses with an established trading record, the choice of lenders increases exponentially. Make sure you check the terms and eligibility criteria carefully, though: some lenders will only provide loans secured against property, some will only accept you if you process credit and debit card transactions, and many have a minimum turnover requirement. The specifics of these loans can vary widely, with amounts ranging from £500 to £50m and repayment terms being anything from one month to 30 years.

Also bear in mind the crowdfunding platforms discussed above – they are a viable funding route for all sorts of businesses, and are not limited to startups.

Apply for a Start Up Loan today

There’s no doubt that a Start Up Loan can make a huge difference to your business. This government-backed scheme has already helped to kickstart nearly 68,000 businesses, and is committed to helping UK startups, with expert support, flexible terms, a fixed interest rate of 6%, and 12 months of one-to-one mentoring for all accepted applicants.

We’ve gone through the straightforward application process, and discussed how you’ll get help putting together your business plan, cash flow forecast, and personal survival budget. You’ve got insight from those who’ve been there and done it, as well as an idea of what other options are out there.

If you’re ready to take your business to the next level, apply for a Start Up Loan now?

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Written by:
Alec is Startups’ resident expert on politics and finance. He’s provided live updates on the budget, written guides on investing and property development, and demystified topics like corporation tax, accounting software, and invoice discounting. Before joining, he worked in the media for over a decade, conducting media analysis at Kantar Media and YouGov, and writing a wide variety of freelance pieces.
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