What To Expect When Applying For A Start Up Loan


Start-up businesses have considerable costs in their early stages, so many people turn to loans. But what is a start-up loan? And is your business eligible for one? In this article we explore everything you need to know about start-up loans.

What Is A Start-Up Loan?

Start-up loans provide entrepreneurs with access to finance to support their business growth and success.

Start-up business loans are usually unsecured so there is no need to provide valuable business assets as security.

Is A Start-Up Loan A Grant?

Unfortunately, no; a grant is a non-repayable fund, whereas a start-up loan needs to be repaid in full over an agreed term, which is usually between one to five years.

Can I Apply For A Start Up Loan Without Having A Business Yet?

Start-up loans are designed to support people in starting up or growing their business. Your business will need to have been trading for at least six months in order to apply and qualify.

For example, as part of the application process, you will need to submit a business plan and cash flow forecast, which requires a lot of time and planning. Furthermore, your chances of being approved decrease with a limited trading history, so if you hadn’t yet started your business you would be seen as a much higher risk.

Am I Eligible For A Start-Up Business Loan?

Speaking generally, your business will likely be required to meet the following criteria:

  • The business must have been trading for between 6 - 24 months.
  • The business owner must be over the age of 18.
  • The business must be registered in the United Kingdom.
  • If your business ceases trading, repayments still have to be paid off in full.

What Can I Use A Start-Up Loan For?

It’s important to know that the start-up loan can be used for business-related matters only. Areas where this funding could be useful include:

  • Setup costs
  • New premises
  • Marketing, advertising and promotion
  • Business website creation or development
  • Recruitment
  • Cash flow issues

It’s best to keep in mind that you need to sensibly and effectively utilise your loan. Receiving a large sum of money for your business is both exciting and overwhelming, but you want to prevent common business spending mistakes and do your best to keep moving your business forward, rather than taking a step back.

What Factors Are Considered When Assessing Loan Applications?

Your credit worthiness, whether or not you can afford to take on the loan (personal affordability) and whether your business is viable (business viability) are the three main factors that will be thoroughly considered when you make an application for a start-up loan.

Therefore, it is important to get your personal and business finances in order before you have a credit check. As well this, ensuring you have clear, reachable goals set out in your business plan and cash flow forecast is also a necessity.

How Do I Get A Start-Up Business Loan?

Business owners can get a start-up business loan from a variety of sources, these include:

  • Online lenders
  • The government
  • Banks
  • Investors

There are both positives and negatives to each source, so you will need to do thorough research to explore each option and decide on which is suitable for you and your business.

What Are The Best Business Start-Up Loans In The UK?

All start-ups are unique, making it impossible to declare which start-up loan is best for you. But the best benefits to look out for when choosing who to get your loan from are:

  • Relatively low interest rate
  • Flexible repayment plans
  • Clear guidelines surrounding the loan

Our main piece of advice here is to be careful who you borrow from, and to do your research to find a trustworthy scheme that works for your business.

What Are Government Start-Up Loans?

You can apply for a loan from the UK Government to start or grow a business, for up to £25,000. These loans are offered alongside one year of free mentoring for business success. Find out more at the gov.uk website.

Looking To Start A Company?

During this difficult time of uncertainty, please rest assured that Paramount Formations is still operating as normal. We are here to support your business formation needs in any way we can.

If you would like any advice, information or guidance on starting up a business, do not hesitate to ask! Call us on 0800 0198 698, speak to us on our live chat or use our contact form. Alternatively, you can browse our company formation products to find out more about what we can offer.

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