How to apply for a Start Up Loan for your business
What is a Start Up Loan? And who can apply for one? Alex Till, Chief Executive of MENTA, explains how the government-backed Start Up Loan can help new and early-stage UK businesses access affordable finance and mentoring support.
What is a Start Up Loan?
A Start Up Loan is a government-backed personal loan available to individuals looking to start or grow a business in the UK:
- All owners or partners in a business can individually apply for up to £25,000 each, with a maximum of £100,000 available per business.
- The loan is unsecured, so there’s no need to put forward any assets or guarantors to support an application.
- There’s a fixed interest rate of 6% per year.
- You can repay the loan over a period of 1 to 5 years.
It’s a low interest loan and a great alternative to a traditional bank loan to help you fund your business idea.
In addition to finance, successful applicants receive 12 months of free mentoring and exclusive business offers to help them succeed. No matter what stage your business has reached, advisors are available to guide you through the process, from writing a business plan for a new venture, to creating a marketing strategy.
Who can apply for a Start Up Loan?
To apply for the Start Up Loan, the following must apply:
- you live in the UK
- you’re 18 or over
- you have the right to work in the UK
- you have (or plan to start) a UK-based business that’s been fully trading for less than 24 months
There’s no application fee and no early repayment fee, and applicants can apply to borrow between £500 and £25,000. The average loan amount is currently £7,200.
Start Up Loans are designed to finance the initial costs of starting and developing a business, and therefore cannot be used for the following:
- debt repayment
- training, qualifications or education programmes
- investment opportunities that do not form part of an on-going sustainable business
Most business types are eligible for funding with a Start Up Loan, however there are some business types which are not eligible, including:
- weapons
- chemical manufacture
- pornography
- drugs
- banking and money transfer service, and other FCA regulated activities
- gambling and betting activities
- property investment
- charities
How do you apply for a Start Up Loan?
The process for getting a Start Up Loan is straightforward:
- First, you make an application, explaining about your business idea, how much money you want to borrow and what you will be spending it on.
- Then you’ll go through a credit check, which is undertaken to make sure that by providing finances to the applicant they will not be overburdened and put in any financial difficulty by taking out a loan. If successful, an adviser will work with you on your business plan and financial forecasts.
- Once your loan is approved, you’ll be sent paperwork to sign and return to the finance provider, who will then pay the funds into your personal bank account.
On average, the process can take between four to six weeks, depending on how quickly information can be supplied back to the advisor.
It should be noted that applicants participating in debt management plans, debt relief orders (DROs), individual voluntary agreements (IVAs) or other such schemes will be ineligible for borrowing.
This article first appeared in the https://www.thegazette.co.uk/
Alex Till is the Chief Executive of MENTA, a leading provider of support for businesses of all shapes and sizes who have provided business advice and support to over 35,000 businesses taking them through their journey of knowledge to the point of establishing their business and securing funding for start-up costs and working capital.
Discover how MENTA can help with Start-up loans here
