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Kickstart Your New Business Enterprise with a Start-Up Loan

By IntFormalities
Updated on November 20, 2023
Estimated reading time: 6 minutes

The UK is one of the best places to start a business. Thanks to the many grants, monetary incentives, and tax relief programs on offer, you can get the help you need to set your business apart from the competition. In this article, we’ll look at the government-backed start-up loan, a type of financial assistance provided by UK authorities to help fledgling business owners get their commercial endeavours off the ground. 

How to apply for a Start-Up Loan?
With loans ranging from £500 to £25000 the Kick Start Loan is an excellent opportunity to start a small business or a bigger private limited company

The Start-Up Loan

Start-up loans exist to stimulate entrepreneurship in the country, enhance business creation, and boost survival rate prospects. They are backed by the government and are administered by the Start Up Loans Company (SULCo), a division of the British Business Bank.  

The scheme provides loans from £500 to £25,000 with an interest rate of 6% annually. The program offers free support and a 12-month mentorship for those commencing a new business venture or trading for less than 3 years. In 2021, the UK government announced it would fund 33,000 new Start-Up loans in the following 3 years. 

Eligibility Criteria

There are certain criteria that must be met for eligibility. They are as follows:

  • Be aged 18 or older
  • Be a UK resident
  • Have had a new business or trade for less than 36 months
  • Be unable to obtain finance by other means (self-declaration is sufficient)
  • Have a company based in the UK
  • Have legal working rights in the country
  • Have a type of business and purpose of the loan permitted under the scheme (see below)
  • Pass credit checks and be able to repay the loan (see below)

The Types of Businesses Excluded from the Start Up Loan

The vast majority of businesses qualify for the start-up loan scheme. However, the following types of business are excluded from the program:

  • Activities regulated by the Financial Conduct Authority (such as banking and money transfer services)
  • Betting and gambling activities
  • Chemicals manufacture
  • Charities (not-for-profit, social enterprises, and community interest organisations are considered on a case-by-case basis)
  • Drugs
  • Illegal activities
  • Property investments
  • Unlicensed private investigators

Start-up loans are available purely to fund the cost of starting a new business venture. Therefore it cannot be used for purposes such as investment opportunities that are not part of a sustainable ongoing business, debt repayment, and training, education, or qualification programs.

Credit Checks and Fraud Prevention

Credit checks are undertaken with credit reference agencies (such as Experian, Equifax, and ClearScore) to ensure the applicant is credit-worthy and can repay the loan. Fraud prevention agency analysis is also conducted to validate personal and banking details and to authenticate the application. 

How To Apply

To apply for a start-up loan, you will need to go through an eligibility check and then provide personal information for the application (such as name, address, phone number, and email address). 

The Start-Up Loans Company will make contact to proceed with the application. Before starting the application, you will need to have considered the following things.

Business Plan

A business plan is a written document that lays out the objectives of the business and how those aims are to be achieved over a time period. It is an important document that clarifies the business idea, planning, goals, and strategies. Business plan sample templates can be found on the Start Up Loans Company website. 

Cash Flow Forecast

This is the best estimation of the funds the business venture will make and the expenses of the enterprise. As part of the application, a 12-month cash flow forecast is required. You can find out more about the cash flow forecasts, including templates here.

Personal Survival Budget

The personal survival budget considers a person’s monthly income (such as salary, benefits, etc.) and outgoings (for example, rent, utilities, etc.). It is used to determine if the applicant is in a position to pay back the loan. Download a personal survival budget template here.

Costs and Processing Times

There are no upfront costs to apply for the startup loan. A dedicated business adviser from the startup loans company will offer all the assistance required to complete the paperwork. Communication between the startup company and the applicant occurs online and over the phone, with document submission done online.

As part of the process, the startup company will ask the applicant to provide the three completed templates (for the Business Plan, Cash Flow Forecast, and Personal Survival Budget). Using this information, they will make a decision. 

With highly prepared applicants, it is possible to obtain a decision in 2 to 3 weeks. For those who require more help and support to prepare the necessary documentation, it can take 2 to 3 months to reach a verdict.

The startup loans are for those who cannot raise the funds through other means to begin their enterprise. However, if an applicant has raised funds from other sources but is still facing a shortfall, it may be possible to bridge the funding gap with a startup loan. All applications are considered on a case-by-case basis. 

Notable Considerations

There are several other things to note as part of a start-up loan. They are business partnerships, purchasing an already existing business, and franchises. We’ll discuss these deliberations below.

Business Partnerships

Sometimes, a sole person is not in charge of a business, with several people running the company. In these instances, differing partners can obtain a start-up loan. The applications are assessed individually, and for any company, obtaining a total of £100k in start-up loans is possible.

Purchasing an Existing Business

Buying an existing business and obtaining a start-up loan is possible, even if the company has been running for more than 3 years. Previous financial accounts must be submitted as part of the start-up loan business plan and solutions to remedy loss-making scenarios. 

Franchises

Franchise business models are eligible for the start-up loan. They are treated like a new business starting up or trading for less than 3 years. The great thing in this instance is that the franchising company and the start-up loan organisation will offer support. 

Taking Advantage of Business Opportunities

The UK is a fantastic country to start business ventures as the government can provide a great deal of assistance. One of the help on offer is the start-up loan. If you are a UK resident and wish to obtain a loan, support, and mentorship, the start-up loan scheme is well worth considering. 

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