Start Up Loans scheme explained

A guide to the government-backed scheme designed to provide loans and mentoring to people starting a business

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Desperate to encourage entrepreneurial activity and for the private sector to solve the ills of the UK economy, the government has backed a number of initiatives, including the Start Up Loans scheme, in the hope of seeing more people start a business.

What is the Start Up Loans scheme?

Administered by the Start Up Loans Company, which is chaired by former star of BBC Dragons’ Den James Caan, the Start-up Loans scheme is a government-backed initiative aimed at providing business loans and mentoring support to entrepreneurs.

Announced in May 2012 and launched in pilot in September 2012, the scheme offers average loans of £5,286 to people who wish to start a business, once their idea is approved by one of the scheme’s many delivery partners – these are companies that have partnered with the scheme; they are responsible for distributing the loan and providing mentoring support.

The amount pledged to the scheme over the course of three years was originally set at £82.5m, but this was given a £30m boost in January 2013 with prime minister David Cameron pledging his support and pointing to meetings with recipients, some of whom have become employers months after successfully securing loans. A further £34m boost was also announced in September 2013 giving the scheme a total value of £151m.

There have also been a number of other extensions to the scheme. Originally only available to young entrepreneurs aged between 18 and 30, in October 2013 the age cap was lifted to enable entrepreneurs of all ages to apply. Furthermore, the scheme has extended to include Northern Ireland, Wales and Scotland making the scheme UK wide.

Who has the scheme helped so far?

Thousands of new businesses have been approved for loans totaling over £250m. An estimated 41 businesses are backed per day.

Case Studies

… Wireside Productions: Film production graduates Michael Evans and Jason Brown were granted a Start Up Loan to fund the launch of their film and photography company. They are using the money to develop a user-friendly stylish website and to fund marketing plans.

… Miporto: Founded by 18-year-old Josh Valman, Miporto enables individuals without formal design skills to develop products with the help of a product manager. With the money and mentoring support from the Start Up Loans scheme, Valman has developed his business website ready for launch.

… Monroes Hair: Lisa Brady received a Start Up Loan to fund the launch of her hair dressing business focused on customers with hair loss problems. With the money and mentoring support, Brady has been able to expand the reach of her company and is in talks with private hospital Little Princess Trust, a charity for children undergoing chemotherapy.

How much can be borrowed?

The actual amount loaned is determined by the applicant and the delivery partner, according to how much is deemed necessary. The average figure for a typical loan is £5,286, but there is no official limit.

What are the repayment terms?

Loans must be repaid within five years at an interest rate set at the fixed rate of interest (known as the Retail Price Index and currently set at 6%) plus 3%.

The delivery partners then repay loans and interest back to a central fund, which can be used to fund further loans.

Who can apply for a Start Up Loan?

The loans were originally aimed at budding young entrepreneurs but at present, anyone over the age of 18 and living in the UK may apply for a loan.

As a general rule, start-ups must be in their initial phase, without existing debt and developed infrastructure, but this is flexible and the Start Up Loans company takes a positive view to issuing loans to existing start-ups.

A business loan is not necessarily required to apply for the loan, as it is a personal loan. This means that if multiple founders apply for a loan, they could each receive a loan to invest in the same business. However, if the specific delivery partner deems it necessary for the applicant to have a business loan, they will support applicants to set one up.

How to apply for Start Up Loans are supporting The Start Up Loans Company to help start-ups gain access to seed capital. Click here to visit Start Up Loans and find out more about how to get started.

Who decides whether an applicant is suitable?

Once the application has been sent, the Start Up Loans Company then identifies a delivery partner for the applicant.

The chosen delivery partner then helps each applicant to identify what stage the business is at and then supports the applicant to develop a business plan, which will be pitched to a panel.

Those who pitch successfully will be provided with a loan, distributed by the delivery partner.

Delivery Partners:

The Start Up Loans Company currently has 74 delivery partners in all regions of the UK (some are listed below).

… The Prince’s Trust … Business Finance Solutions, Manchester … South West Investment Group (SWIG) … Young Britain … Let’s Do Business … North London Community Finance (NLCF) … PNE/Virgin … Rockstar Youth … Foundation East … Enterprise Loans East Midlands … Hull Business Development Fund … GLE/One London/NACUE … Sheffield City Council … Norfolk and Waveney Enterprise Services … Wessex Enterprise … Community Finance Development Association … School for Start Ups

What support is available?

As well as pitch training, delivery partners provide applicants with business support and mentoring to help them get their business started.

Applicants will also be eligible for benefits packages supplied by the Start Up Loans Company’s global partners, which include workspace provider Regus, accounting software provider Intuit and secure payments service Paypal.

Regus package:

… Six months of free access to Regus’ virtual office package and access to a range of Regus’ worldwide business lounges.

Intuit package:

… Two years of free access to cloud-based accounting software, QuickBooks Online Simple Start.

PayPal package:

… Discounted rate with PayPal business account of 1.4%+20p per transaction (down from 3.4%) for six months.

There are lots of other corporate partners and discounts – more information is available on the Start Up Loans website.

What other loans are available for young entrepreneurs?

The Prince’s Trust:The Enterprise Programme launched in 2009-10 offers entrepreneurs aged between 18 and 30 the opportunity to apply for three-year loans of up to £4,000, in addition to mentoring support.

UnLtd: The social entrepreneur network offers grants of up to £5,000 to individuals aged 16 and over to fund their social enterprises.

Business Accelerators: Accelerator programmes, including Springboard and Seedcamp provide start-ups with intensive training and support, followed by the opportunity to receive investment. Similarly a number of universities, including the University of Reading provide programmes that offer coaching and mentoring to budding young entrepreneurs.

Want to apply for a Start Up Loan? Click here to visit the Start Up Loans website and get started

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