Start Up Loans in the UK: how much you can borrow, the rate and who gets one

A government-backed Start Up Loan is an unsecured personal loan of £500 to £25,000 per person, at a fixed 7.5% a year, repaid over one to five years. There are no application or set-up fees, and approved borrowers get 12 months of free mentoring. You can apply if you are starting a new business or have been trading for up to 60 months, and you must pass a credit check and show you can afford the repayments. It is a personal loan, so you carry the debt even if the business fails.

Key Takeaways

What the Start Up Loans scheme is and how Start Up Loans work

The scheme began in 2012 and is run by the Start Up Loans Company, a subsidiary of the British Business Bank, which is the government's development bank. It exists for individuals looking to start or grow a business in the UK. Applications go through a network of delivery partners: business support organisations that assign you a dedicated adviser and help you get the paperwork ready.

Two features matter more than the headline numbers.

First, it is unsecured. You do not put up property, equipment or any other asset, and you do not need a guarantor. For a founder with a business idea, no trading history and nothing to pledge, that is the main reason to use it.

Second, it is a personal loan, not a business loan. The money is lent to you, assessed against your own circumstances, and you are personally liable for repaying it. You do not need a business bank account, and the funds are paid into a personal account. If the business fails, the debt stays with you.

That is the trade-off, stated plainly. The scheme is cheap, unsecured and comes with support, but you carry the risk, not a company.

Start Up Loan interest rates, borrowing limits and the term

Feature	Start Up Loan
Amount per person	£500 to £25,000
Maximum per business	£100,000
Interest rate	Fixed at 7.5% a year
Repayment term	1 to 5 years
Application and set-up fees	None
Early repayment fees	None
Security or guarantor	None
Mentoring	12 months, free

The loan can be taken in tranches or as a single lump sum. The average loan is £9,295. Most founders borrow well below the ceiling, and you should too. The assessment tests whether you can afford the repayment, so a smaller, better-evidenced request tends to read better than a large one the forecast cannot carry.

Sharia Compliant Finance is also available under the scheme.

Several owners

Every owner or partner can apply individually for up to £25,000, with a cap of £100,000 per business. Each person submits their own start up loan application and is assessed on their own finances. A business with three owners could therefore draw up to £75,000 between them. An individual can only take a Start Up Loan for one business, so a founder running several ventures has to choose which one to fund.

What the loan costs: a worked example

Because the rate is fixed, the arithmetic is simple. The table below assumes equal monthly instalments with interest charged on the reducing balance. Your agreement sets the exact repayment schedule, but these figures are a sound guide for planning. The loan is £10,000 at 7.5%.

Term	Monthly repayment	Total repaid	Total interest
1 year	about £868	about £10,411	about £411
3 years	about £311	about £11,198	about £1,198
5 years	about £200	about £12,023	about £2,023

The working for the three-year line: 7.5% a year is 0.625% a month. Over 36 months, that gives a monthly payment of about £311. Multiply by 36 and you get about £11,198 repaid, so about £1,198 of interest.

The five-year term roughly halves the monthly payment compared with one year, but the interest bill is about five times higher. Because there is no early repayment fee, the sensible approach is usually to choose the longer term for a lower monthly commitment while the business finds its feet, and then overpay when cash allows. You keep the flexibility and only pay interest for as long as you hold the debt.

There is also no arrangement fee to add to the cost. Loan interest rates are only part of the price of commercial borrowing, so when you compare, ask any other lender for the APR and every fee in writing.

The Start Up Loans site has its own loan calculator for working out monthly amounts, and our how much can I borrow tool shows what your trading figures might support more broadly.

What you can and cannot use a Start Up Loan for

You can use a Start Up Loan for most things that get your business up and running or help business growth: equipment, stock, premises, marketing and promotion, and day-to-day running costs. What matters is that you can describe the purpose in your business plan and cash flow forecast and explain how it helps you start or grow a business.

Three uses are ruled out:

• Debt repayment
• Training, qualifications and education programmes
• Investments that do not form part of an ongoing, sustainable business

The scheme also excludes certain types of business, covered below.

Who qualifies and what credit checks apply

You are eligible if you meet all of these:

• You are 18 or over and live in the UK.
• You are starting a new business or have been trading for up to 60 months.
• Your business is based in the UK and you have the right to work in the UK.
• You cannot get finance from other sources. A self-declaration is enough.
• Your type of business and the purpose of the loan are eligible under the scheme.
• You pass the credit checks and can afford to repay.

Partnerships, businesses bought as going concerns and franchises can all apply, provided they meet the criteria above. If your business has been trading for more than five years, this is not your route.

The business types that are excluded

Most sectors are fine, but you cannot use the loan to fund a business that provides or deals in:

• weapons
• chemical manufacture
• drugs
• pornography
• illegal activities
• banking, money transfer services and other FCA-regulated activities
• gambling and betting
• property investment

Also excluded are unlicensed private investigators, charities, and agents for a third party where that party earns most of the revenue or you would earn only a commission. Franchises are not caught by that last rule and remain eligible. Community Interest Companies, not-for-profits and social enterprises with a sole community focus can be considered case by case.

The credit check and your personal credit score

Because a new business has no credit history of its own, the check looks at you. Expect your personal credit score and credit file to be reviewed, and expect to show up to three months of personal bank statements.

Poor credit does not automatically end the application, but it makes it harder. What does end it is formal insolvency. The Start Up Loans Company will not approve applications from people who are:

• bankrupt or filing for bankruptcy
• on a Debt Relief Order
• in an Individual Voluntary Arrangement or Trust Deed
• in a Debt Management Programme or Debt Arrangement Scheme

If your file has blemishes, deal with them before you apply. Check your own credit report first so that nothing in the assessment surprises you, and prepare a short, honest explanation of any late payments or defaults. The assessor is judging whether you can pay this back from the business, so the strongest answer to a weak credit history is a forecast that visibly covers the repayments with room to spare.

Are Start Up Loans easy to get?

Easier than most, but not automatic. There is no trading history to meet and no security to find, which removes the two obstacles that stop most new businesses getting a mainstream loan. But the application asks for a lot of paperwork, and approval depends on a viable plan, a believable forecast and a personal credit check you can pass. Founders who are organised and whose documents are detailed generally find it manageable. Those with unrealistic projections or insolvency on their record are the ones who struggle.

How to apply for a Start Up Loan: what you need to provide

The process runs in stages:

1. Check eligibility online, then register to start the application.
2. Submit the application. You will be contacted within two working days.
3. Pass the credit check and you are assigned to a Business Support Partner with a dedicated business adviser.
4. Prepare and submit the documents, with the adviser reviewing them and helping you get them ready for assessment.

What you need to provide:

• a business plan
• a cash flow forecast
• a personal survival budget
• personal bank statements for the three months before you apply

The assessment weighs two things. The strength and viability of the business comes from your business plan and cash flow forecast. The affordability of the loan comes from your personal survival budget. Both have to work. A good plan does not rescue a personal budget that cannot carry the repayments.

Writing the business plan

The plan should explain the business concept and the market, who is running it and what experience they have, what you sell, who buys it and how you will reach them, who you compete with, and a summary of the financial projections. It must also say what the loan will be spent on and how that spend produces revenue.

Building the cash flow forecast

This is the document that decides most applications, and the one founders do worst. Build it monthly for the first 12 months. List every source of cash coming in, including sales, the loan itself and any other income, and every cost going out, including running costs, fixed costs, wages and the loan repayments themselves.

Three habits separate forecasts that get approved from those that get sent back:

• Explain the revenue. If you show £10,000 of monthly revenue from month three, the plan must say specifically where it comes from. Unexplained optimism is the commonest reason for delays.
• Put the repayment in. Use the figures from the table above and show the business covering the instalment every month, not just on average.
• Keep the documents consistent. The forecast, the business plan and the personal survival budget must tell the same story. An assessor who finds the numbers contradicting each other will stop trusting all of them.

How long the application process takes

You have 90 days to complete the application once it is under way, so the clock is real. Treat it as a deadline, not a guide.

How quickly you get through depends almost entirely on how ready you are. A well-organised applicant with the documents finished can be through in a few weeks. If the plan needs reworking, the forecast does not add up or the paperwork is incomplete, it can stretch to months. Do not plan a launch date around the earliest possible approval. If a supplier deposit or a lease signing is on a fixed date, start the application well ahead of it.

The free mentoring

Approved borrowers are invited to 12 months of free post-loan mentoring. Treat it as part of the deal and use it. A mentor who has run a business will question your pricing, your customer assumptions and your cash discipline at the stage when mistakes are cheapest to fix.

Borrowers also get access to business offers, including discounts at retailers and on personal development and training, and the Start Up Loans site provides free templates and guides for business plans and cash flow forecasts.

The risks you carry

Be clear about these before you sign:

• You are personally liable. There is no limited liability shield on this debt, even if you trade through a limited company.
• Missed payments hit your personal credit score, which affects your ability to borrow personally, including a mortgage or later business finance.
• The ceiling is low. £25,000 is the most any one person can borrow. If your plan needs more, the loan will be a part of the funding, not the whole of it.
• The preparation is real work. The plan and forecast take time to do properly, and the 90-day window rewards organisation.

On tax, whether interest on borrowing is deductible depends on how the loan is used and how your business is structured, so take that question to your accountant before you assume anything.

Taking a second Start Up Loan

A second loan is possible, but only if you meet each of these conditions:

• Your first loan was drawn down at least six months before you apply.
• The business has been trading for at least three months and no more than 60 months.
• You have made every repayment on schedule for the three months before the new application.

How many loans the scheme has made

The government made £151 million available when the scheme launched in 2012, with a target of 30,000 new businesses by 2016. By July 2014, 20,000 loans had been issued, worth more than £100 million. By the end of 2015, nearly 35,000 entrepreneurs had been supported, with a total loan value of £180 million, and by February 2016 the Start Up Loans Company had lent over £200 million. The government added £1 billion of lending capacity in 2025. The current average loan is £9,295, which tells you what the typical borrower actually asks for: nowhere near the £25,000 ceiling.

Alternative funding options if you do not qualify

The scheme does not suit everyone. You might be over the trading limit, in an excluded sector, or insolvent, or simply need more than £25,000. If you want the easiest way to get business funding, there isn't a single answer: the right route depends on your trading history, your credit and how much you need. These are the realistic alternatives.

Option	What it suits	The catch
Bank referral route	Declined by a major bank	Not a guarantee. It passes you to alternative funders who decide for themselves.
Regional programmes	Businesses in particular regions	Limited to the relevant region.
Community lenders (CDFIs)	Founders struggling to get mainstream finance	Smaller amounts, and availability varies by location and sector.
Bank or alternative lender loans	Businesses with some trading history	Stricter criteria for startup loans, sometimes personal guarantees, and rates are often higher with alternative lenders.
Business credit cards and overdrafts	Short-term cash flow gaps	Interest is charged on balances carried, so they suit short-term use, not long-term borrowing.
Equity investment	Ventures that can scale	You give up part of the company.
Crowdfunding	Consumer-facing ideas	Time-intensive, and equity-based versions dilute ownership.
Grants	Businesses that match a specific programme	Strict criteria, long applications and no guarantee. They are not repaid.
Invoice finance	Businesses with unpaid customer invoices	Needs invoices to exist first, so it does not help before you trade.

The Bank Referral Scheme, launched in 2016, is worth knowing about if a major bank has turned you down. With your consent, it passes your details to three platforms, Alternative Business Funding, Funding Options and Funding Xchange, which review the information and offer funding if they find a match. Lenders differ in their appetite for risk, so one refusal does not mean the same answer everywhere.

The British Business Bank also runs regional programmes with local partners, including the Northern Powerhouse Investment Fund, the Midlands Engine Investment Fund and the Cornwall and Isles of Scilly Fund, covering both debt and equity finance. Its wider range of debt finance also includes the Growth Guarantee Scheme.

If you have more than one need, combining sources is common. A Start Up Loan can cover working capital, with asset finance such as hire purchase or a finance lease used for vehicles or larger machinery.

Why a business loan application gets rejected

If you are asking whether you are eligible for a business loan more generally, the reasons lenders decline are consistent. They look at your business and personal credit scores, the age of the business, existing debt, the sector, the security on offer, and whether the plan makes sense. Some providers want two years of trading before they will lend at all. A founder who knows which of those is the weak point can fix it or choose a funder that weighs it differently.

Frequently Asked Questions

Can I get a Start Up Loan with bad credit?

Possibly. A credit check is part of the application, and poor credit does not always mean automatic rejection. But the Start Up Loans Company will not approve applications from people who are bankrupt, on a Debt Relief Order, in an IVA or Trust Deed, or in a debt management programme. Anything short of those is judged on whether your plan and personal budget show you can repay. If you are refused, community lenders (CDFIs) exist for founders who struggle to get mainstream finance, although amounts are smaller and availability varies.

Do I need a business bank account?

No. It is a personal loan, and the money is paid into a personal bank account. You can open a business account separately for trading.

Can I apply if I already have a business?

Yes, if it has been trading for up to 60 months. The loan can fund growth as well as a start, so you can use a Start Up Loan to grow your business as well as to launch it.

Is a Start Up Loan the same as a grant?

No. It is a loan, repaid with interest at 7.5% a year over 1 to 5 years. A grant does not need to be repaid.

What happens if my business fails?

You still owe the money. The loan is a personal liability, and missed repayments affect your own credit file. If trouble is coming, speak to your adviser early rather than after the first missed payment.

If you are weighing a Start Up Loan against a larger or faster facility, Deplexifi works with UK businesses on commercial finance and can tell you quickly where your numbers sit. You can start at Deplexifi UK.

It is a personal loan: the application is judged on your own credit and a personal survival budget, and you stay liable if the business fails.

Nothing here is regulated financial advice. Deplexifi arranges commercial finance for businesses — this article describes general lending practice and the published position of the sources listed below, not a recommendation for any individual business.