If your business is more than three years old, you can look into applying for a traditional business loan. This loan is a way to get external funds to run or grow your business.
If you would like a startup business loan, then you can apply for one so long as your business is less than three years old.
That means you don't have to apply for a startup loan at the very beginning of your business journey. The loan can help to finance a new business that is already up and running, just so long as it's less than 36 months old.
A startup business loan is a lump sum from a lender which can be used for a variety of things from creating cash flow to covering staff wages, paying rent on business premises or investing in tech or equipment.
While most businesses under three years old can apply for a startup loan, it’s always worth doing your research to see which loan is the right one for you.
A startup is a company that is new and in the initial stages of business. It is normally a small business funded by the founders, but startups also seek investment elsewhere to get their business off the ground.
A startup can also be in ‘startup’ mode for as long as three years, so it is not isolated to the first year.
Specific requirements may differ for startup business loans - it'll depend on the loan provider you choose. But there are some general criteria that usually applies regardless of the lender.
You need to be:
18 or over
A UK resident
Your business must be:
Less than three years old
UK-based and registered
If your business ticks these boxes, then you need to start thinking about the application process. Before you can apply for the loan you’ll need to create a business plan. Your business plan is an important document that sets our your idea, market research, how you plan to make money, repay borrowing alongside a cash flow forecast.
You’ll need to demonstrate the position of your business and illustrate how you plan to use the loan to ensure your business is a success.
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A startup loan acts in a similar way to a business loan. It requires you to go through an application process and then the lender will decide if your business can use the loan and then repay it within a specific timeframe.Some startup loans, including the government scheme, also come with the benefit of support from business advisers.
Startup loans normally come with a greater risk for lenders, so you might have to pay a higher interest rate or have a personal guarantee. You might also find that lenders look at your personal credit history if the business is still in the early stages and doesn't have a credit history of its own. It's a good idea to try and limit your debt before applying, as lots of credit applications in a short space of time could be seen as unfavourable to lenders.
Traditional business loans are typically used by businesses that have been trading for at least two years and you can normally borrow more with a traditional business loan compared to a startup loan.
The government-backed is a scheme which aims to help small businesses with a cash injection. This is in the form of a loan of £500 to £25,000. To apply, you’ll need to live in the UK, be over 18, and have started (or about to start) a 91㽶ɫƵthat cannot have been trading for more than three years.
This loan differs slightly from a business loan as it is an unsecured personal loan, which means the applicant, rather than the business, will have a credit check during the application process. If successful, you can repay the loan over a period of time, ranging from one to five years. The government-backed Start Up Loan charges a fixed interest rate of 6% per year and there’s no application or set-up fee, which can make it easier to work out the affordability of the loan for your business.
If you apply for the government-backed Start Up Loan there are no fees involved, but other startup loans could come with some fees attached.
For example, there might be an early redemption fee if you wish to repay the loan before the end of the agreed term, or an application fee which can be a percentage of the loan amount. You might find lenders with no fees, so always look into the terms and conditions of the loan to understand the full story and be sure to check and compare fees when deciding on a loan to apply for.
The eligibility criteria can be strict. Ensuring you have good credit history could help, if you don't then you may not be eligible or you may need to provide a guarantor.
If your business is more than three years old, you can look into applying for a traditional business loan. This loan is a way to get external funds to run or grow your business.
Pitch your business idea online and offer perks, rewards or equity to investors if your target's met. Crowdfunding can be a good alternative to startup business loans, but remember getting the amount you need can be a slow process and if you don't reach your funding target you may not get anything.
Business grants don’t have to be paid back making them a very competitive form of business finance. are available from your local council and could provide the funds to help your business idea.
If your business is more than three years old, you can look into applying for a traditional business loan. This loan is a way to get external funds to run or grow your business.
Pitch your business idea online and offer perks, rewards or equity to investors if your target's met. Crowdfunding can be a good alternative to startup business loans, but remember getting the amount you need can be a slow process and if you don't reach your funding target you may not get anything.
Business grants don’t have to be paid back making them a very competitive form of business finance. are available from your local council and could provide the funds to help your business idea.
Getting a business loan with bad credit can be more difficult, but it's not impossible. You may need to accept higher fees or interest rates, particularly if you're looking at more traditional banks to lend to you. You could also consider building your credit score before applying for a loan, or looking at alternatives such as private lenders through angel investment.
The amount you can borrow with a startup loan varies depending on the provider and loan type. The government-backed Start Up Loan for example allows you to borrow between £500 and £25,000.
Other commercial lenders may lend more, with some lending between £1,000 and £500,000 to limited companies.
Startup loan terms will vary, but you can usually set the term during the application process. Typically the term is between one year and seven years, but some lenders may require it be paid back in under five years.
The time it takes to receive the startup loan funds into your business account will depend on the lender and the amount you're borrowing. Once approved, you should usually expect the funds within 24 hours, but it can take up to a week.
Yes, you can get a startup business loan for a home business. However, you should still check with each lender to check if your business is eligible to apply.
A startup loan can be used for a whole range of things to help start or grow your new business. These could include:
Paying wages
Buying equipment such as machinery, tools or computers
Paying bills or rent on office, retail or warehouse space
Paying suppliers and stocking up inventory
Marketing and advertising your business
Some lenders require you to have a business account with them to qualify for a business loan, but some are more flexible. Ask before you apply.
Yes, you can repay a startup loan early but you may get an interest penalty based on your remaining loan balance. Check with your lender if you can afford to repay your loan early.
If you fall behind in repayments, or find you're struggling during the term of the loan, it's important to notify the loan provider straightaway. If you ignore the situation, it can have a negative impact on your credit file - potentially on your personal credit file too - making it harder to get other forms of credit or even certain types of jobs.
Startup loans can be difficult to obtain - it depends on the information the provider requires, how quickly you're able to provide it and how well you can evidence your business plan and ability to repay borrowing.
Carrying out research and ensuring you have a thorough business plan can make the process more straightforward and hopefully reduce the chance of disappointment.
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