Government launches start-up loans for young entrepreneurs
£82.5m scheme will offer finance and mentoring to 18-24-year-olds
The government has launched a new scheme offering loans to young entrepreneurs, to help them start-up successful businesses.
The £82.5m StartUp Loans scheme, which was proposed by Sir Richard Branson last year and confirmed in this year's Budget, will offer finance and support to entrepreneurs aged 18-24, in a bid to kickstart more businesses and tackle youth unemployment in the UK.
Applicants will receive advice and guidance, with the most promising going on to receive formal mentoring and training, including help with developing a business plan. Those with “robust and approved” plans will be eligible for loans of around £2,500.
Unlike student loans, the maximum repayment terms on offer will be five years, while the interest rate will be set at the Retail Price Index (RPI) plus 3%, with all repayments and interest channelled back into a central pot to support other young entrepreneurs.
Commenting on the scheme, which forms part of the government's ongoing ‘Business in You' campaign, Prime Minister David Cameron said: “I want this to be the year where people can think yes, I can do it, that we can get as many viable businesses as possible off the ground, that people can have a go, and that we see a whole new wave of entrepreneurs who start small but think big.”
StartUp Loans will kick off with a £10m pilot this financial year; if successful, the scheme will be bolstered by a further £32.5m in 2013/14, and £40m in 2014/15.
The loans will be administered by a handful of ‘delivery partners' – organisations with experience in helping young people start businesses – such as the Prince's Trust. These partners will provide support and mentoring, assess the viability of young people's business plans, and manage repayments.
James Caan, entrepreneur and former ‘Dragon', will chair a new body set up by the government to oversee the scheme, with other board members including Duncan Cheatle, founder of The Supper Club, and Julie Meyer, founder of Ariadne Capital.
Caan said: “The StartUp Loans initiative provides guidance, access to expertise, and finance. These are the three vital ingredients for starting your own business.”
One young entrepreneur hoping to benefit from the scheme is Kaylie Hill, a 23-year-old graduate from Swindon, who has struggled to access the funding she needs to get her business – a women's footwear fashion brand – off the ground.
She said: “I approached the bank for funding but they said I needed to improve my credit rating. As I had been a student up until that point, I hadn't had the opportunity.
“I approached the Princes Trust, but they said I had to be unemployed to qualify – I couldn't afford to lose my job or I wouldn't be able to live.
“I even looked into angel investment, but I found [this was more suitable] for bigger investments and they would want a portion of my business – which is not for me.”
If successful, Kaylie plans to use the loan to buy material to make her first collection, to take to potential stockists.
Lord Young report
Today's launch also coincides with a new report by Lord Young, the government's enterprise adviser and the ‘Godfather of StartUp Loans', which found that if the UK were to match the rate of entrepreneurship in the US, we would have 900,000 more businesses.
The report also argues that the internet, along with the amount of support available for those looking to start a business today, has significantly lowered the barriers to entry for entrepreneurship, meaning that now is “a great time to start a business”.