When you borrow a cash lump sum from a lender to help fund a new business, it is called a start-up loan.

Perhaps you've got a great business idea but you've been wondering 'can you get a loan to start a business?'. The answer is 'yes'. But did you know that start-up business loans can also help a new business that's only been running for a short time? In fact, start up loans may be suitable for any businesses under two years old.

What can start-up loans be spent on?

The money from start up loans can be used for most business expenses. Start-up loans can help you with set up costs, cash flow or your premises. Alternatively, one of these loans could help with building your team, or getting your name out there.

You could spend the money on things like:

  • Buying stock

  • Buying equipment

  • Marketing

  • Paying workplace rent

  • Staff wages

  • Recruitment

  • Training.


Using our startup business loans comparison, you can check the loan amounts each lender can offer. Look at the rates charged when you're choosing. The higher the rate, the more you'll pay in interest.

How to get a startup business loan

If you've been wondering how to get a startup business loan, a good place to start is to look online at loans and grants.

Our comparison table will give you a good idea of what's out there.

How do start up business loans work?

Start-up business loans work like most other types of loans. You borrow money from a business lender, and agree to repay it with interest over a fixed term.

Depending on which of the available start-up loans and lenders you choose, you could borrow as little as 500 or as much as 5,000,000.

If you started your business within the last two years, you may still be eligible for one of the start-up loans in our table. Check the terms and conditions for the one you're interested in.

Can anyone access start up loans?

Start up loans usually come with a set of criteria that you'll need to meet to be eligible. For example:

  • You'll have to be 18 or over

  • You'll have to live in the UK

  • Your business will have to be based in the UK

  • Your business will have to be under two years old

  • You'll have to have the right to work in the UK.

Of course you'll also need to show that you can afford the repayments. You'll also have to go through the usual credit checks that you'd expect when taking out any form of credit.

How to get a start up business loan without collateral

You don't need collateral to get a start up business loan. Start-up loans tend to be unsecured, so you'll usually find that you don't need to put forward any assets to get one. This is great because, if you're just starting out, it's likely that you might not have anything to offer as collateral.

What do I need for a startup business loan?

The good news is that you don't need a lot. What you will need, before you apply for any startup business loans, is a business plan and cash flow forecast.

This will help lenders to see that you're serious about your business and that you have thought about what you need to do to get it going.

You can find templates for your business plan and cash flow forecast online if you're unsure of what these should look like.

You'll also need to have a decent credit history if you're going to apply for start up loans, as you will be credit checked when you apply.

Does the government offer start-up loans?

Yes. If you have a poor credit history, a government start up loan could be a good option for you.

These offer 500-25,000 and have a fixed interest rate of 6%. You can repay them over 1-5 years and they are government backed.

Start Up Loans is a UK government-backed scheme supported by the British Business Bank. It gives start-up loans and support to small businesses in the UK.

Are grants the same as start up loans?

No, grants are different to start up loans.

You apply for a small business grant from your local council. You could get, for example, up to 1,000 to help you start your business, without needing to repay the money or pay any interest. With start up loans, you'll always have to pay the money back to the lender.

Your council isn't obligated to accept your application. If your application is rejected you could look at start up loans as an alternative.

How to choose a business start-up loan

To find the best start up business loans you should:

  • Look for lenders that offer the loan amount you need

  • Compare rates to get an idea of how much interest you could pay

  • Apply for the loan with the lowest Annual Percentage Rate (APR).

Make sure you compare as many start-up loans as possible to find the lowest APR for the amount you need to borrow.

Top tips for people with start up loans

You'll need to be sensible when you get a start-up loan. When you get a sudden cash injection, it can be exciting and you could be tempted to overspend. But it's important to get it right.

Here are some tips:

  • Stick to the plan as much as possible. Keep referring to your plan to see how you intended to spend the money.

  • Keep separate bank accounts. Have one for your funds, and one for your usual business incomings and outgoings. This way, you can keep track of how much of your start up loan you've spent. Only transfer the funds as you need them.

  • Set up automatic payments. You'll never miss a repayment if you do this, and it's one less thing to think about each month.

  • Stay in touch with your lender. Keeping them updated could mean that if you run into trouble, you'll have a good relationship. This could come in handy.

What else to consider when taking out a business loan

As with any loan, the most important thing is making sure you can meet the repayments.

But there are a few benefits to start up loans that you might not have thought about:

  • Credit score. If you make all your repayments on time and in full, you'll build a good credit rating for your business. This will make borrowing easier in the future.

  • Unsecured funding. Start up loans tend to be unsecured, so you won't usually need to put forward any assets as security. This means your business and home are safe, whatever happens.

  • Full autonomy. If you get a loan, you remain in charge of all your business decisions. This may not be the case if you use an investor instead of a loan.

Start up business loan FAQs

Q

Can I get a start up business loan for a home business?

A

Yes, lenders can accept applications for home based businesses. You should still check with each lender to check your business is eligible to apply.

Q

Can I use a start up loan to pay for wages?

A

Yes, but only if you include wages as part of your loan application.

Q

Do I need a business account to apply for a start up loan?

A

Some lenders require you to have a business account with them to qualify for a business loan, but some are more flexible so ask before you apply.

Q

Can I repay a start up loan early?

A

Yes, 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.

About our start up business loans comparison

Q

Who do we include in this comparison?

A

We include loans available for businesses that have been trading up to 2 years, from lenders and through brokers on our panel. Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.

You do not pay any extra and the deal you get is not affected.

Last updated: 15 February, 2021