Start Up Loans — UK Government-Backed Finance
What Are Start Up Loans?
The Start Up Loans scheme is a UK government initiative delivered by the British Business Bank specifically to help new and early-stage businesses access funding they cannot obtain from conventional lenders. Unlike a bank loan, the Start Up Loan is a personal loan taken out by the business owner(s) and used for business purposes.
Since the scheme launched in 2012, it has delivered over 120,000 loans totalling more than £1 billion to UK entrepreneurs. The average loan size is around £8,200.
How Much Can You Borrow?
- Minimum: £500
- Maximum per applicant: £25,000
- Maximum per business: £100,000 (if multiple co-founders each apply)
If your business has two co-founders, each can apply for up to £25,000 — giving the business access to up to £50,000 in total.
Terms and Costs
- Interest rate: 7.5% per annum fixed — this rate does not change during the loan term
- Repayment term: 1 to 5 years (you choose)
- Application fee: None
- Early repayment fee: None — you can pay off the loan early at any time
- Security required: No assets need to be pledged as collateral
At 7.5% fixed, the Start Up Loan is often cheaper than credit cards and significantly cheaper than most alternative lenders for unsecured finance. The lack of early repayment penalties means you can pay it off as soon as your business generates surplus cash.
What's Included — Beyond the Money
Unlike a standard bank loan, Start Up Loans comes with significant support:
- Business plan support: A business adviser helps you develop your business plan and financial forecasts before you apply — this is valuable in its own right, regardless of the loan.
- 12 months of free mentoring: After receiving your loan, you are paired with an experienced business mentor who provides ongoing support and advice. The mentoring alone is worth hundreds of pounds.
- Exclusive business offers: Access to discounts on software, legal advice, and other business services from the scheme's partners.
Eligibility
To qualify for a Start Up Loan you must:
- Be aged 18 or over
- Be a UK resident
- Have a business based in the UK
- Be starting a new business or have been trading for less than 5 years
- Pass a personal credit check (adverse credit history does not automatically disqualify you)
- Have a viable business idea with a credible business plan
The scheme is open to all sectors. There are some exclusions (financial services, pyramid selling, religious organisations) — check the British Business Bank website for the full list.
How to Apply
- Check eligibility — use the eligibility checker at british-business-bank.co.uk/start-up-loans
- Choose a delivery partner — the scheme operates through a network of 60+ accredited delivery partners (local enterprise organisations, CDFIs). You can apply direct or through a partner — the outcome is the same.
- Prepare your business plan — your delivery partner will provide templates and support. You'll need a business plan and 12-month cash flow forecast.
- Submit your application — online application with business plan and financial forecasts attached.
- Interview — a brief interview (often by phone or video) with your assigned business adviser.
- Decision — typically 4–8 weeks from submitting a complete application.
Start Up Loan vs Traditional Bank Loan
| Start Up Loan | Bank Business Loan | |
|---|---|---|
| Available to brand-new businesses | ✅ Yes | ❌ Usually no |
| Security required | ✅ No | ❌ Often yes |
| Trading history required | ✅ No | ❌ Usually 2+ years |
| Free mentoring included | ✅ Yes (12 months) | ❌ No |
| Fixed interest rate | ✅ 7.5% fixed | Variable (often higher for unsecured) |
| Early repayment fee | ✅ None | Sometimes applies |