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NGExpert financial copywriter
November 2024
Page written by Rachel Wait. Last reviewed on November 6, 2024. Next review due April 6, 2025.
Bring your business dreams to life with a startup loan.
The startup loans programme is a UK-wide, government-backed scheme that offers a personal loan, up to £25,000 to those that have a viable business idea but no access to finance. All successful loan recipients are offered free mentoring and access to exclusive business offers.
To find out what other early stage funding and savings opportunities are available to your new business simply register here.
Startup Loans, a subsidiary of the British Business Bank, is a government-backed scheme designed to support UK businesses who struggle to access other forms of finance. Whether you’re taking the first steps or have been trading for a while and looking to grow, a startup loan can help you achieve your business goals.
£500-£25,000 per co-founder
1-5 years
6%
This can vary but generally a month from start to finish
Kickstart a new business
New businesses under 3 years old
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:
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 Swoop account and speak to one of our advisors to discuss your options.
Swoop are part of a network of official startup loans referral partners across the UK who signpost new businesses to the scheme. We do not provide any business support as part of this partnership, and will not charge you for anything related to startup loans. We may receive a fee from the Startup Loans Company if you subsequently obtain a loan having clicked on our link.
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.
To obtain a government-backed startup loan, eligible applicants must meet the following criteria:
Startup loans can be used for most legitimate business purposes if they support the early growth of the company, form part of the business plan and are shown in the financial forecasts. Financial support from £500 up to £25,000 is available, with a maximum of £100,000 possible for a single entity if four business partners or directors each personally apply. (Maximum per applicant is £25,000).
Your business ownership is unaffected if you take out a government startup loan.
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.
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 charge a fixed rate of interest of 6% per annum and you can repay the loan within one to five years.
The primary source for startup loans is the UK Government-backed startup loan scheme. Swoop is part of the UK-wide network of referral partners for government startup loans. Apply today to discover if your business is eligible for this type of loan.
Other options for startup funds include:
Register with Swoop to find the best option for your immediate business needs.
The UK Government-backed startup loan works differently to other kinds of funding. Many commercial lenders ask for security when offering a business loan, meaning you need to provide collateral, such as property, to cover the loan if you fail to repay it.
However, government startup loans are unsecured, so you don’t need to provide collateral, nor do you need to sign a personal guarantee.
You can apply for a government startup loan of up to £25,000 per person. If four business partners or directors each apply, you can get a maximum of £100,000 for a single company.
The loan is repaid over one to five years and there are no application or early repayment fees. What’s more, you’ll get support with your application and guidance to write your business plan. If your application is successful, you can benefit from up to 12 months of free mentoring on top.
To be eligible for a government-backed startup loan, you’ll need to:
If you cannot fulfil the above requirements, you may be able to raise necessary startup money via an alternative form of funding – for example, a business grant or business credit card.
Read more: how to get a startup loan in the UK.
Keep in mind that businesses in certain industries won’t qualify for a startup business loan. This includes charities and property investment firms, as well as companies, partnerships, or sole traders that engage in:
Some banks will offer loans to startups, but it can be harder to secure this funding. Lending to startups is risky and your business won’t yet have a credit history which can make it difficult for lenders to determine your creditworthiness. This is why they often look at your personal credit history instead.
However, if you put together a solid business plan that shows how you plan to make money and what you want to achieve, you can help to reassure lenders you can afford the loan, and they may be more willing to offer you funding.
Government-backed startup loans charge a fixed interest rate of 6% p.a. and there are no application or early repayment fees.
Loans from commercial lenders are usually more expensive, with higher interest rates and fees. These vary depending on the level of risk, credit scores and the availability of collateral.
This startup loan calculator helps you understand the cost of your loan. See monthly interest & repayment amounts, as well as total interest & cost.
Your loan details
This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.
Your results
Monthly payments
£-
Avg. monthly interest
£-
Total interest
£-
Total cost of finance
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You can use a startup loan to help get your business up and running or to expand a business that has been trading for less than 36 months. You can use the funds from your loan to:
Note that you won’t be able to use the funds for debt repayment, training qualification and education programmes or investment opportunities that do not form part of an ongoing sustainable business.
Government startup loans are personal loans. This means that you are personally liable for repaying the debt – even if your business ceases trading.
If you are struggling to pay the loan, you should contact the provider as soon as possible. They should work with you to come up with a repayment plan that is more affordable. If you don’t do this, be aware that your finance provider could try to recover the debt through means such as issuing a County Court Judgment or referring your case to a debt collection agency.
Like all business loans, startup loans are not considered taxable income, so long as they are repaid. This is because you’re borrowing the money, not earning it.
However, interest payments on a business loan are usually tax-deductible, meaning you can claim the interest as an expense and potentially lower your tax bill.
Possibly. When you apply for a startup loan, the lender will carry out a personal credit check to see if you can afford the loan. If your credit is poor, you may find it harder to get accepted for a startup loan, but this will depend on the lender.
Some lenders are more lenient than others and if you have a well-written business plan and can demonstrate how you will repay the loan, you might still get accepted. Just be aware that interest rates can be higher.
Also note that you won’t qualify for the government startup loan scheme if any of the following apply:
Read more: our guide on how to get a business loan with bad credit.
Government startup loans work slightly differently and don’t require a personal guarantee. But do remember that you are still contractually obliged to repay the loan.
Other startup loan providers might ask for a personal guarantee, which means you’ll become personally liable for repaying the debt if your business can’t. Alternatively, they might ask for collateral to cover the loan if you default.
No, you will need to undergo a credit check when you apply for the government startup loan scheme, and this will be the same for all other lenders. Credit checks are required to determine how responsible you are as a borrower and how likely you are to repay the loan.
Swoop works with lenders who specialise in loans for applicants with poor credit. Even if you’ve been turned down elsewhere, it may still be possible to obtain funds for your new business. Register with us to learn more about these alternatives.
Want to improve your credit score? Find out how to check and improve your credit score here.
You can apply for the UK Government-backed startup loan if you’re retired or an ex-member of the armed forces. The loan is issued by British Business Bank with X-Forces as the appointed Armed Forces Community Business Support Partner.
This means you can borrow from £500 to £25,000 per person over one to five years. Eligibility criteria remain the same for veterans and ex-forces applicants as it does for all other startup loan applicants.
It’s still possible to apply for the government startup loan scheme if you don’t have an income, but it can be harder to get accepted. Without an income it may be more challenging to produce the required business plan and financial forecasts if you are unable to create these yourself and need professional support.
If you are currently receiving state benefits you are still eligible to apply for a startup loan. To find out which state benefits you are entitled to while applying for such a loan, you can contact Job Centre Plus.
Some commercial lenders offer loans for borrowers without an income, and you might be able to use this to fund your startup. However, these types of loan are always more expensive than the government scheme, and the lender will usually require collateral (such as your home) to cover the value of the loan in the event of your default.
If you are aged 18 or over (and meet the other qualifying criteria), you can apply for the government startup loan scheme.
Young Brits might also qualify for various grants to launch their business, and unlike a loan, a grant doesn’t need to be repaid. If you’re aged between 18 and 30, the King’s Trust Enterprise Programme (previously the Prince’s Trust) is one of the most well-known small business grants. It provides funding and resources, as well as training and mentoring for those who want to start their own business.
There’s nothing to stop you from applying for the UK Government-backed startup loan if you’re a sole trader, provided you meet the other qualifying criteria. You may find that other lenders are also happy to offer you a business loan if you’re a sole trader but be aware these can be more expensive and may ask for collateral.
Buying a franchise can be a safer option than starting a business from scratch as you’ll be able to buy the rights to sell goods or services from a company that’s already established.
You can still apply for the government startup loan scheme if you meet the other criteria, but banks may also be more willing to offer you funding compared to other business startups.
Many high street banks have a franchise department that can support you with your franchise and offer funding, whether through a loan or asset finance and leasing. You can find out more in our guide on how to get a franchise loan or contact our experts at Swoop to discuss your options.
Register with Swoop to get started.
You can apply for the government startup loan scheme if you’re a woman setting up her own business and you meet the qualifying criteria. But you might also qualify for a grant that won’t need to be repaid.
Some grants are offered exclusively for female business owners and entrepreneurs, so it’s well worth exploring these first.
Check out our guide to business loans for women to find out more.
If you’re ready to kickstart your new business, register with Swoop to check your eligibility for a government-backed startup loan and a range of other products available to new UK businesses. Our one-of-a-kind matching engine will give you funding results unique to your business, with a dedicated team of funding managers on hand to help guide you through early-stage funding.
Swoop has partnered with UK and European business grant providers, as well as Local Enterprise Partnerships (LEPs), to offer access to a wide range of small business grants and schemes. Many of these are suitable for startup businesses, and unlike a startup loan, a grant does not need to be repaid.
To increase the chances of a successful application, make sure you attach a well-prepared business plan and accurate financial forecasts. Check the eligibility criteria carefully to be sure you qualify.
The Swoop network offers thousands of business grants available in the UK at both national and regional levels. Grants are often sector-specific or tied to a particular product or outcome. We are constantly updating our database so that we can provide you with comprehensive up-to-date access to the latest grant opportunities. Register with Swoop to discuss the best business grant for your startup operation.
The key difference between a small business startup loan and a grant is that a loan needs to be repaid (with interest), while a grant does not.
Other differences include:
No, if you have a Debt Relief Order, you won’t be able to apply for a startup loan. If you are on a DRO, this can make it difficult for you to launch your business so it’s best to wait until you have been discharged from your DRO.
No, startup loans are not available to anyone subject to a Debt Management Plan. However, upon full repayment of any outstanding debts, your application can be considered.
This will depend on your visa. If you are residing in the UK on any of the following visa tiers, you will not be eligible for a startup loan:
Other visa categories may be eligible but it’s best to visit the government’s visa website to confirm this. If you hold an ancestry visa or a visa that states “no recourse to public funds”, you should be eligible for a startup loan.
Also bear in mind that if your visa does make you eligible, your application must allow you to pay the loan back in full within 12 months of your visa’s expiration date.
Whether you can apply as an international student again depends on the visa you have. If you have a Tier 4 (students) visa, you won’t be able to apply. This also applies to Tier 1 graduate entrepreneur visas as the duration of the visa is shorter than the minimum length of the loans available.
Provided you have personally not owned the business for more than three years, you could still be eligible for a startup loan, even if the business has been trading for longer.
When filing your application, you will need to provide a copy of the business’ accounts, and if the business is operating at a loss (or has previously operated at a loss) your business plan must include details of how you expect to ensure a level of business growth that will lead to the company turning a profit.
As startup loans are only available to businesses that have been trading for less than 36 months, it’s important to know exactly when your business became operational. An operational business is considered to be a business that is buying/selling goods or providing services and generating regular revenue. Any business prior to this point - for example research or market testing - that does not generate revenue does not need to be taken into consideration.
If your business exports goods to other countries, you will be eligible for a startup loan if you meet the following criteria:
No, you don’t need to be registered with HMRC or Companies House before you apply for a startup loan. However, you should register with both HMRC and Companies House before you start trading to avoid fines.
Yes, up to four business partners for the same business can each individually apply for a Startup Loan. You can receive up to £100,000 for a single business, or £25,000 each.
Just keep in mind that you must all apply to the same organisation and the assessment process is carried out on an individual basis. Credit checks will be carried out on each of you to assess your ability to repay the loan.
Written by
Rachel has been writing about finance and consumer affairs for over a decade, helping people to get to grips with their finances and cut through the jargon. She's written for a range of websites and national newspapers including MoneySuperMarket, Money to the Masses, Forbes UK, and Mail on Sunday. Rachel has covered almost every financial topic, from car insurance and credit cards, to business bank accounts and mortgages.
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