Compare Start Up Business Loans

Explore the various features of business loans for startups and compare the best rates

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Start Up Business Loans in the UK

According to research, 846k new businesses were incorporated in the UK in 2024, showing that entrepreneurship is still very much alive and well. 

If you’re looking to take the plunge and launch your own startup business, you might be looking at funding options to help you get set up and gain momentum. One solution that might suit your circumstances is a start up business loan.

Government-Backed Start Up Loans

If you're an entrepreneur with a new business idea, or your company has been trading for a short time, you may be eligible for a UK Government-backed most popular start up business loan. The Start Up Loans scheme is designed to help new and early-stage companies access affordable finance and expert support.

Unlike a traditional startup loan, this is an unsecured personal loan for a business purpose. This means you won't be required to provide collateral, but you will be personally responsible for the debt. Lenders will also perform a credit check on you as an individual as part of the application process.

• Loan Amount: You can apply to borrow between £500 and £25,000.

• Fixed Interest Rate: Start Up Loans have a fixed interest rate of 6% per year, which is set for the full term.

• Repayment Terms: You can choose a repayment period of 1 to 5 years.

• No Additional Fees: There are no application or early repayment fees.

To be eligible, all of the following must apply:

1. You live in the UK

2. You’re 18 or over

3. You plan to start a UK-based business, or have one that has been trading for less than 36 months

A key benefit of the scheme is free support. When you apply, you'll get free guidance to help you write your business plan and cash flow forecast.

If your application is successful, you’ll also receive up to 12 months of free mentoring to help you navigate your first year of business.

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What are Startup Business Loans?

Startup business loans are essentially what they say they are: a borrowed cash lump-sum that helps fund new businesses or companies that have been trading for less than two years. These types of loans are usually used to fund business essentials, such as:

• Buying initial stock supplies

• Buying equipment

• The first few months’ rent on a business premises

• Employee wages

Business start up loans are designed to help companies that need a revenue injection so that they can quickly get into a position where they are generating enough cash flow to keep the business going while repaying the loan.

Who Provides Startup Business Loans?

As with other types of business loans, there are various lenders offering business loans for startups in the UK, including many high-street banks, a government-backed scheme and lots of alternative funding providers. 

The right option for your startup will depend on your specific circumstances, preferences and the eligibility criteria that different lenders have. 

Here at BusinessComparison, we take the hard work out of finding a startup business loan by comparing packages from high street banks, challenger banks, independent, and small specialist lenders to find a deal suited to you.

Simply click on the button below, enter your details, and we will provide you with the best Startup Business Loans in the market from our carefully selected panel of lenders.

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How Do Business Loans for Startups Work?

With start up business loans, you have the ability to spread the cost of investing in your company, breaking it down into more manageable payments rather than having to find a large lump sum yourself. Unsecured business loans may be an option when it comes to startup finance, but many startup owners tend to avoid using them as they require a Personal Guarantor.

With that in mind, most startups opt for secured business loans. This type of loan is designed for companies that own assets like commercial property, vehicles and machinery. The lender will then secure the loan against the high-value items just in case any loan repayments fail to be met, and if so, they then have the legal right to sell the assets and release the money from the sale to repay the loan.

Upon loan acceptance, the business will borrow a fixed amount of money at a certain interest rate, over a set period. Usually, startup business loans tend to be short-term, meaning that the repayments will be made over anything from 12 months to 5 years.

Things To Consider Before Taking Out a Secured Startup Business Loan

Secured loans are often cheaper than taking out an unsecured loan, in terms of the interest rate offered by the lender. This is because the risk to the lender is much lower with a secured loan. Before starting the application process, you’ll need to determine which of your startup’s assets are available for lenders to secure their funding against. Potentially, the higher the value of your assets, the larger the sum that the lender is prepared to advance to your business.

An important aspect to consider when taking out a secured startup loan is that the business owner or partners will not usually need to disclose their own assets, and no personal guarantee is needed when applying. With secured startup loans, less emphasis is placed on the trading history and credit rating of the business (although this will still be checked) as the lender takes on less risk due to the secured assets.

Understandably, as a startup, you may not be able to provide a long trading history but it is always good to highlight how long you’ve been in business for, your turnover so far and what your predicted annual turnover will be. When thinking about the start up business loan that you want, consider what you require the funds for, exactly how much you want to borrow and how long you would like to spread the repayments.

The Best Startup Business Loans in the UK

Here at BusinessComparison, we offer a huge variety of market-leading startup business loans and many exclusive deals. We compare the top loan products in the UK from high street banks, challenger banks, online lenders and alternative finance houses, then provide you with the best loans to suit your needs!

We specialise in sourcing startup business loans ranging from £1,000 to £20,000,000, with many different finance packages available, subject to eligibility. What’s more, all of our secured loans have flexible repayment options, giving you ultimate control as to how long you’d like the term to last.

Apply for a Startup Business Loan

To help us understand your requirements and to find the best startup business loan for you, please click on the button below to start comparing your options. It only takes a few minutes, and it is the first step towards that much-needed cash injection for your business. Compare business startup loans online and save yourself time.

Startup Business Loan Checklist

Once we have helped you find the right start up loan for your company, there are a number of pieces of information that a lender will need to know about you and your business, so we have developed a checklist to make sure you have everything to hand.

• What security do you have available? The overall worth of your assets will dictate the maximum amount you can borrow, but bear in mind that you can’t usually borrow more than 20-40% of your proposed annual turnover.

• Your business plan and financial forecasts - Most lenders will want to see that you’ve got a clear plan of how you’re going to use the loan, including backup projections should the worst happen.

• The loan amount, the term that you wish to repay this over and if there is any flexibility to be included.

• Bank statements and filed accounts - Having these to hand will make the process as quick as possible.

• Relevant details of the business and of the business partners.

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The Startup Business Loan Application Process

1. Application - You’ll be asked how much you want to borrow, what you’re going to use it for, and how long a term you would like to repay over. Next, they’ll inquire about your turnover and profit, trading history, payment history and your business sector. They may also need copies of your bank statements and filed accounts, alongside information about your assets.

2. Agreement in principle - If everything goes to plan, the lender will offer you an “agreement in principle,” setting out how much they are prepared to offer and what the terms are, then the ball is back in your court if you wish to go ahead with the loan application.

3. If you decide to proceed, the lender will look at your credit history, bank statements, and other details to make sure that your application is viable in practice as well as principle. If everything checks out, they will make you a formal loan offer.

4. Read the terms and conditions and accept. It’s now time to look over the offer agreement terms and provide any further information to the lender should they require it. More importantly, you can opt to accept the loan!

5. Accessing the funds – Once you’ve accepted, the funds will be sent to your business account within a few days in most cases, otherwise known as “drawdown.”

FAQs on Start Up Business Loans

What is a personal guarantor for a start up business loan?

A personal guarantor, sometimes called a personal guarantee, is where the startup’s owner, director(s) or business partner(s) will become personally liable for repaying the start up loan if the company cannot make the repayments. Being a personal guarantor is a legally binding agreement and the individual’s credit rating and personal assets can be at risk if the startup fails to make the loan payments. 

If a personal guarantor isn’t the right option for your start up business, you may be eligible to apply for a secured startup loan instead, which usually won’t require a guarantor. This is because the money borrowed is secured on the company’s assets instead. This could be things like the business premises (if owned), equipment, machinery or vehicles.

What’s the difference with a Government-backed startup loan?

For over a decade, a government-backed scheme has been offering Start Up Loans to eligible UK businesses of between £500 and £25,000 per applicant. This loan has a fixed interest rate and has to be repaid over a pre-arranged period of one to five years. This type of loan is essentially a personal loan for the business owner, director or partner, so is under their name and not the company name. To apply for a government-backed start up loan, applicants need to submit a business plan, cash flow forecast and a personal survival budget (detailing the individual’s personal monthly expenses etc). 

Other startup loans, whether from high-street lenders, challenger banks or alternative funding sources, are business loans and not personal loans. Therefore, they will usually be taken out in the company name and, unless a personal guarantor is required, the applicant does not become personally liable for the loan.

Can I apply for a start up business loan before I start trading?

Some lenders will agree loans for brand new businesses that haven’t started trading yet, but it will usually need to either be a government-backed Start Up Loan (which is a personal loan, not a business loan), a secured startup loan that is based on the assets your business owns, or will require a personal guarantor for the loan. 

Startup business loans for companies that have a limited or no trading history are likely to have higher interest rates, and the sum offered may be lower than for businesses which have been up and running for a while. This is because the risk to lenders is higher for a brand-new company that has not yet proven to be a viable business or has no evidence of good money management.

Can I get a business start up loan if I am a sole trader?

Sole traders can often access business finance, but due to the company and the business owner not being a separate legal entity, traditional business loans are not usually an option. 

If you’re a sole trader looking for a cash injection for your business, find out more about sole trader loans.

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