Startup
loans
A startup loan is a business loan designed to help new UK businesses launch and grow. Like any other business loan, it’s a lump sum of capital that you pay back with regular repayments at a fixed interest rate
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What is a Start up loan?
A startup loan is a business loan designed to help new UK businesses launch and grow. Like any other business loan, it’s a lump sum of capital that you pay back with regular repayments at a fixed interest rate.
Lenders will usually want to see details of:
- Your business plan
- Your turnover
- Your trading history (if you have any)
- Your founders
- Your projected earnings
Do I qualify?
You might find, however, that your business doesn’t currently meet the lending criteria for a UK Government-backed startup loan If this is the case, create a Lemon account and speak to one of our advisors to discuss your options.
Many types of business can obtain a startup loan, from those still in the concept stage to those that have been trading for up to 36 months. However, some areas of industry are excluded. Companies, partnerships, or sole traders that engage in Illegal activities such as drugs, weapons, and chemical manufacture; FCA-regulated activities such as banking and money transfer services; gambling and betting; pornography; charities; private investigators without the correct license; property investment; and agents for third parties where your company does not receive most of the revenue it creates, are some of the businesses that are not eligible for a startup loan.
How do Start up loans work?
Startup loans are designed to bring a seed or early-stage business to life. They inject early money to pay for concepts, testing, designs, prototypes, machinery, plans, legal needs, premises, marketing, staff costs and more. Often, a startup loan is the only cash a company has when it first begins to operate, and these loans are often provided when the business is little more than an idea.
The UK Government-backed startup loan scheme, offered by the British Business Bank, provides funds without requiring security, a personal guarantee, or a stake in the business. The loans are also provided at a low rate of interest and with up to five years to repay.
Funds from private investors, (‘angels’) are not loans, they are investments, even if they provide the same outcome as a loan. Be aware that some investors may ask for a large share of your business as well as regular payments in turn for their cash.
Choosing the right source of startup loan is important for any new business. The sum required, the length of time the money must last, the company’s ability to repay, and the retention of ownership must all be considered. Most importantly, time and effort should be put into the business plan to ensure the company has sufficient capital to reach the stage when revenues arrive.
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