Apply for a Start Up Loan

A Start Up Loan is a government-backed personal loan designed to help you launch or grow a business that has been trading for fewer than 60 months. The scheme is delivered through the British Business Bank and funded by the Department for Business and Trade, making it one of the most accessible forms of early-stage business finance available in the UK.

You can borrow between £500 and £25,000 per individual at a fixed interest rate of 7.5% per annum. If you have business partners or co-directors, each person can apply individually, meaning a single business can access up to £100,000 in total funding. There are no application fees, no arrangement fees, and no early repayment charges.

Unlike traditional business loans from high street banks, Start Up Loans are unsecured. You do not need to put up property, equipment, or any other asset as collateral. The loan is made to you personally rather than to the business itself, which means you are personally responsible for repaying it regardless of how the business performs.

Every successful applicant receives free mentoring and business support for up to 12 months after funding. This includes access to a dedicated business adviser who helps with your business plan, cashflow forecasting, and ongoing strategic decisions. Since the scheme launched in 2012, over 115,000 loans have been approved, totalling more than £1 billion in funding to UK entrepreneurs.

Start Up Loans work well for sole traders, freelancers, and partnerships at an early stage. If your business has been trading for more than five years, or you need to borrow significantly more than £25,000, you may need to explore small business loans or government business loans as alternatives.

The Start Up Loan scheme offers straightforward, transparent terms with no hidden costs. The fixed interest rate of 7.5% per annum has remained consistent, and because it is fixed for the full loan term, your monthly repayments stay the same throughout.

You can repay the loan over one to five years (12 to 60 months). Shorter terms mean higher monthly payments but less interest overall. Longer terms reduce your monthly outgoings but increase the total amount you repay.

Here is what a £10,000 Start Up Loan costs over different repayment periods. On a one-year term, you would pay approximately £868 per month and £410 in total interest. Over three years, that drops to around £311 per month with £1,185 in total interest. A five-year term brings monthly payments down to roughly £201, but total interest rises to £2,065.

There are no arrangement fees, no application charges, and no penalties for repaying early. This makes the total cost of borrowing more predictable than many commercial alternatives, where arrangement fees of 1-3% are standard. You can use a business loan calculator to model different borrowing amounts and terms before you apply.

The £25,000 cap applies per individual applicant. If your business has two co-founders who both apply successfully, the combined funding could reach £50,000. For businesses with up to four qualifying applicants, the theoretical maximum is £100,000.

Start Up Loan eligibility is broader than many applicants expect. You do not need a perfect credit history or an established trading record, though you will need to demonstrate that your business idea is viable.

Age: you must be 18 or over. There is no upper age limit.

Residency: you must be a UK resident. This includes British citizens, those with indefinite leave to remain, and individuals with valid visas that allow self-employment.

Business stage: your business must have been trading for fewer than 60 months. This covers pre-trading startups as well as early-stage businesses that have already begun generating revenue.

Business plan: you need a written business plan and cashflow forecast. Your assigned business adviser will help you develop these if you do not already have them.

Credit check: a credit check is part of the assessment, but having a low credit score does not automatically disqualify you. The scheme is designed to support entrepreneurs who may not qualify for mainstream lending. Applicants with CCJs, defaults, or thin credit files have been approved where the business plan is strong enough. If your credit history is a significant concern, you can also explore bad credit business loans as an alternative.

Existing businesses: if you already run a business and want to start a new venture, you can apply as long as the new business meets the under-60-month requirement.

Self-employed applicants: freelancers and sole traders are eligible. You do not need to have a limited company structure.

The scheme does not require a personal guarantee or any form of security. Your home and personal assets are not at risk if you cannot repay, although missed payments will affect your personal credit score.

Start Up Loans can be spent on any legitimate business purpose. The British Business Bank does not restrict how you use the funds, as long as the spending supports your business plan and the goals outlined in your application.

Common uses include purchasing equipment and machinery, buying initial stock or raw materials, funding marketing and advertising campaigns, covering website development and IT costs, paying deposits on commercial premises, and financing professional services such as legal or accountancy fees.

You can also use the loan to cover working capital during your first months of trading, when revenue may be inconsistent. This includes rent, utilities, insurance, and other recurring overheads that need paying before the business becomes self-sustaining.

There are some restrictions to be aware of. You cannot use a Start Up Loan to repay existing debts, fund personal expenses, or invest in speculative assets. The funds must be used in line with the spending plan you submit as part of your application. If your plans change after receiving funding, speak to your business adviser before redirecting the money to a different purpose.

Your adviser will review your intended use of funds during the application process. Being specific about how you plan to spend the money strengthens your application and demonstrates that you have thought through your startup costs carefully.

Understanding what you will actually repay each month helps you plan your business cashflow with confidence. The table below shows monthly repayments and total interest costs for three common borrowing amounts across the available term lengths.

At the lower end, a £5,000 loan over three years costs approximately £155 per month, with £593 in total interest. That is a total repayment of £5,593. The same amount over five years drops to £101 per month but increases total interest to £1,032.

For a mid-range loan of £15,000 over three years, expect monthly payments of around £466, with total interest of £1,778. Spreading this over five years reduces payments to £302 per month but pushes total interest to £3,097.

At the maximum individual amount of £25,000, a three-year term means monthly payments of approximately £777 and total interest of £2,963. Over five years, monthly payments fall to £503, but you will pay £5,162 in interest over the full term, bringing your total repayment to £30,162.

These figures assume the current fixed rate of 7.5% per annum with no additional fees. Because there are no early repayment charges, you can overpay or clear the loan ahead of schedule if your business generates stronger revenue than expected.

Start Up Loan repayments begin one month after the funds are disbursed. Factor these repayments into your cashflow forecast before applying, and consider starting with a smaller amount if your early revenue projections are uncertain.

Choosing the right type of funding depends on your business stage, how much you need, and whether you can afford repayments from day one. Start Up Loans sit between grants (free money with strict criteria) and commercial lending (higher amounts with higher costs).

Grants are non-repayable, which makes them the cheapest funding option by far. However, they are highly competitive, often restricted to specific sectors or regions, and can take months to process. Most grant programmes require detailed applications and offer no guarantee of success. If you are rejected, you may have spent weeks preparing with nothing to show for the effort.

Start Up Loans offer a middle ground. The 7.5% fixed rate is below what most commercial lenders charge for early-stage businesses, and the free mentoring adds value that purely financial products do not provide. The trade-off is the £25,000 cap per person, which may not cover larger capital requirements.

For businesses needing more than £25,000, unsecured business loans from commercial lenders typically offer £1,000 to £500,000, though interest rates range from 5% to 30% depending on your credit profile and trading history. Asset finance is another option if you need to purchase specific equipment, as the asset itself acts as security and rates start from around 4%.

Angel investors and crowdfunding platforms offer equity-based alternatives where you give up a share of ownership rather than taking on debt. These can provide larger sums but require you to share future profits and decision-making control with outside investors.

The best approach for many startups is to combine funding sources. A Start Up Loan can cover initial costs while you build the trading history needed to access larger commercial facilities later.

Start Up Loans work well for a specific type of borrower. Understanding both the strengths and limitations helps you decide whether this scheme fits your situation.

On the positive side, the 7.5% fixed rate undercuts most commercial alternatives for new businesses. No fees of any kind (application, arrangement, or early repayment) keep the total cost predictable. The free mentoring for up to 12 months is genuinely useful, particularly for first-time business owners who benefit from structured support. The unsecured nature of the loan means your personal assets are protected, and the scheme is specifically designed for people who may not qualify for mainstream bank lending.

The downsides are worth considering too. The £25,000 maximum is low for businesses with significant capital requirements such as retail premises, manufacturing equipment, or large stock purchases. Because the loan is made to you personally, it appears on your personal credit file and affects your ability to borrow for other purposes such as a mortgage. Repayments start within a month of receiving funds, which can strain cashflow before the business generates meaningful revenue.

For most early-stage businesses borrowing under £25,000, the scheme is worth pursuing. The combination of a competitive rate, zero fees, no security requirement, and built-in mentoring makes this one of the strongest funding options available to UK startups. The key risk is taking on more debt than your business can service in its first year of trading.

If you need larger amounts, treat the Start Up Loan as a foundation and plan to layer additional funding on top as your business grows and your credit profile strengthens.

One of the most undervalued aspects of the Start Up Loan scheme is the free mentoring that comes with every approved application. This is not a token add-on. Every borrower is matched with a dedicated business adviser who provides structured support for up to 12 months after funding.

Your mentor helps you refine your business plan, review your cashflow forecasts against actual performance, and identify problems before they become critical. Sessions typically take place monthly, either in person or by video call, and cover topics ranging from pricing strategy and customer acquisition to tax obligations and employment law basics.

The mentoring is delivered through a network of accredited delivery partners, not directly by the British Business Bank. Each partner specialises in different business types and regions, so you are typically matched with someone who understands your sector. Past participants consistently rate the mentoring as one of the most valuable elements of the scheme, often more impactful than the funding itself.

Beyond one-to-one mentoring, approved borrowers gain access to exclusive business offers, discounts on software and services, and networking events with other Start Up Loan recipients. These additional resources can reduce your operating costs during the critical first year of trading.

If you are also planning your employee benefits strategy early, consider looking into startup health insurance options alongside your financial planning.