Start Up Loans: the government-backed borrowing route when investors are not an option

Most funding coverage obsesses over equity: angels, VCs, crowdfunding. But a large share of viable small businesses need something much simpler — a few thousand pounds for equipment, stock or working capital — and selling shares to get it would be disproportionate and expensive in the long run.

That is the gap the Start Up Loans programme exists to fill. It is a government-backed personal loan scheme for people starting or recently started businesses, delivered through the British Business Bank with a network of delivery partners across the UK.

What it is — and what it is not

Despite the name, this is a personal loan to you, not a loan to the company — you remain personally liable for repayment whatever happens to the business. The upside is that the rate is fixed, there are no arrangement or early-repayment fees, the government backs the scheme rather than you needing a track record, and every borrower gets access to free mentoring for the first year.

Each founder in a business can apply for their own loan, so a two-person founding team could in principle borrow up to £50,000 — though each application is assessed on its own merits and affordability.

Eligibility

You must be 18 or over, live in the UK, and be starting a business or running one that has been trading for up to 60 months. Most business types are eligible, though there are exclusions — check the current list on the British Business Bank site, as it changes. Credit checks apply: the scheme is aimed at people who might struggle to get ordinary business lending, but it is still lending, and it has to be repaid.

How to apply

1. Check eligibility on the British Business Bank site and register your interest — you will be matched with a delivery partner.
2. Complete the business plan and cash-flow forecast using their templates.
3. Prepare a personal survival budget showing what you need to live on.
4. Submit, respond to credit checks and any follow-up questions.
5. If approved, draw down the loan and start the 12 months of mentoring.

When to choose debt over equity

A loan suits businesses with predictable early revenue — trades, e-commerce, services — where you can model repayment from month one. It is a poor fit for a pre-revenue software startup that needs to burn cash for two years before earning anything. Debt is cheaper than equity if you survive, and fatal if you cannot service it; be honest about which business you are.

Current terms and the application route are on the Start Up Loans site via gov.uk. Figures quoted here are correct at the time of writing.

Making the loan earn its keep

The founders who get value from a Start Up Loan treat the drawdown as the start of the work, not the finish. Spend it against the plan you submitted — stock, equipment, the marketing push you priced — and keep the receipts mapped to that plan. When the mentoring calls happen, bring numbers: what the money bought, what it returned, and what you would do differently. The loan’s real value is the discipline it imposes early, when the business is still small enough for discipline to be cheap.