Start up business loans
Startup business loans to get you growing.
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Startup loans / New Business finance options
Raising finance for a new business venture as a sole trader, partnership or LTD is challenging but with good planning and advice there are options available.
Start Up Loans Scheme
The best place to start is the Government's Start-up loan scheme which can provide up to £25,000 per director up to a maximum of four directors (£100,000 is possible but it needs to be a very compelling case to qualify for this). The loans are at 6% over 5 years which is very competitive finance in this sector. To qualify you need the following:
- The business must have been trading for less than two years (NB It can be incorporated longer than this as long as it can be shown the start of trading was less than two years ago)
- The directors all need to have reasonably good credit scores (probably Experian 600+ at least)
- The directors need to be UK residents
- The business needs to have a well-thought out business plan and cashflow.
- The business needs clean bank statements with no returned payments, no CCJs or no debt arrangements
Applicants can apply directly at the Start-up loans website but this will see them allocated a delivery partner at random and the process will take 8-12 weeks.
However, should an applicant decide they would like help with the process (e.g. creating the business plan in the format required and producing cashflow numbers) then we can provide guidance via a dedicated delivery partner and the process should take far less time (circa 3-4 weeks). For this a fee is charged and the amount varies depending on the number of directors applying. Please contact us for details.
Other options
Aside from this government-backed scheme there are also some private lenders that will lend small amounts to start-up businesses (up to £25,000) but usually only where the directors are home owners and willing to offer a personal guarantee. These are at higher rates the the Start-up loans scheme but are still an option.
Larger loans
For larger funding requirements or where there aren't sufficient directors for the Start-up loan scheme, then property can be offered as security up to 65-70% LTV. Alternatively if the business is using the funds to buy and asset or wants to fund invoices, then this is also possible for start ups where a strong director's PG is available.
Please contact us to discuss your options.
What finance is available for Start-ups?
- Government Start-up loan scheme up to £25,000 at 6% over 5 years
- Larger loans (up to £250,000) with security over property and a clear business plan
- Invoice finance for B2B businesses
- Asset finance as long as Directors are offering a strong PG
Frequently Asked Questions
Can you have multiple unsecured business loans?
You can have multiple unsecured loans, but lenders will consider any existing financial commitments as part of their affordability checks.
I haven't started trading yet, am I eligible?
Startups can struggle to secure unsecured loans unless they have personal assets, experience and strong personal credit to back the application. There may be alternative options which are more suitable for start ups, including personal start up loans or asset finance.
Do I have to be a home owner?
No, but it does open up options.
Do I need a personal guarantee?
In many cases, yes. However, some lenders offer unsecured loans with a Debenture or limited Personal Guarantee instead. You may also be eligible for Personal Guarantee Insurance – please discuss this with us during your consultation.
What interest rates can I expect?
Interest rates depend on the lender, loan amount, and your business’s financial health. Since lenders calculate interest in different ways, make sure you're comparing rates on a like-for-like basis.
How quickly can I get an unsecured business loan?
There are some lenders in the market who can provide a funding decision in as little as 24 hours. If speed is your biggest priority, then you would need to apply with a lender that has this capability. Some of the quicker funding options in the market often come at a higher cost. Timeframes depend on the lender and application requirements for each business.
Can I apply with bad credit?
Although it is more challenging to obtain finance with adverse credit, it is possible. It all depends on the exact nature of your adverse credit (when, who, how much and why?). Please call us to discuss.
How much can I apply for?
I am a sole trader or partnership, can I apply?
What do I need to apply for a Start-up loan?
Applying for a Start up loan is relatively straightforward. Here's what you need to know...
- Eligibility Criteria Your credit must be very clean for a Start-up loan (secured options are available if credit is weak). There must be either affordability in the business projections for the loan or, failing that, an asset in the background (i.e. a home owner with equity).
- Documents Required The documents required to apply will depends on the lender and size of loan in question. Generally speaking a sound business plan, credible cash flow projections and detailed CVs of the Directors of the business are required. You can bypass much of this if you have a property to offer as security but the rates get higher (15-20%)
- Additional Comments A key requirement often overlooked is the experience the founders/directors are bringing to the table. If they can point to previous experience running a similar business then this goes a long way towards making a compelling business case for the loan.
Since the financial crisis of 2008/9 high street banks have backed away from Start-up loans in the UK. The gap left has been filled by a few private lenders but most require compelling business cases and/or security in the form of property.
With so much choice emerging, businesses are increasingly choosing the wrong type of finance,which costs them more and doesn't suit their requirements. This is where the Choice Loan experts can help. Call us to discuss your situation and we'll find "perfect match" small business loans in the UK for you.
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