How To Get A Startup Loan

How To Get A Startup Loan – A Definitive Guide

Kurt Graver Business Funding, Business Start-up Guides

The Start-Up Loan Scheme started in May 2012. It is a government-funded initiative that provides start-up funding and mentoring for entrepreneurs across the United Kingdom.

It helps solve the problem of supporting people who have a feasible business idea or want to become self-employed but no access to funding.

The Start-Up Loan programme aims to equip enterprising individuals with the tools needed to make their businesses a success. Over 50,000 businesses have been funded with the total invested over £ 200m.

Businesses that would not attract interest from banks, angel investors and crowd funders will get an opportunity to launch. This is a fantastic opportunity for young people not in education, employment or training (NEET), the long-term unemployed and returning mothers.

Barriers accessing funding has been reduced, to apply for a startup loan you require a business plan and cash flow. There are no complicated financial projections, slide decks or pitches to unlike when you are trying to attract an investor.

Support is provided by the startup loan delivery partner who will assist you through the application process. This support is continued if your application is successful. All loan recipients are assigned a mentor to guide them through the difficult first year of operation.

A Startup Loan is not for every entrepreneur. The loan is a personal loan for business purposes. This means if the business does not succeed the entrepreneur, not the business is liable to pay back the loan.

Furthermore, if your business requires a large investment, the £25k limit will not be sufficient, although each owner can apply for a loan for the same business.

1. Startup Loan Criteria & Qualifications


If you are considering starting a new business or have been trading for less than 12 months and want to expand your business, a Startup Loan may be the best funding option for you. A Startup Loan is a personal loan for business purposes.

You are required to pay back the loan within 1-5 years. The exact term will be agreed as part of your application process, but individuals can receive up to £10k and groups up to £25k. Capital repayment holidays are available, but interest must be covered monthly throughout the loan term

Anybody living in England or Northern Ireland who is at least 18 years of age. You may have already started your business, but you must not have been trading for longer than a period of 24 months. You must have the legal right to remain in England or Northern Ireland for the duration of your loan term and the right to be self-employed.

2. Application Process

Below are all the documents you need to include with your startup loan application.

1. Business Plan

You need a simple but well-researched business plan describing what your business does, what your plans are and how you will be executing your plan.

2. Cash Flow Statement

You need to detail all of your expected costs and revenue for the next 24 months if you receive the loan. It is crucial your cash flow correlates with what you have discussed in your business plan.

3. Personal Survival Budget

You need to explain what you need as an individual to survive financially while you are setting up the business. All of your bills and personal expenditure should be listed as part of your budget.

4. Self Declaration Form

As with most loans, you will be credit checked. Therefore, you will need to state any previous debts that you have had in the past.

5. Your CV

Applicants will need to provide an up to date CV.

6. ID

You will need to provide a copy of a valid passport or driving licence.

7. Bank Statements

Three months of bank statements from a current account are required.

The Process

Once you submit all the information to your chosen delivery partner, you will meet with a business advisor to discuss your business plan financials.

When they are satisfied your business is viable, you will undergo a credit check. If you are successful, you will receive the money within a couple of weeks and will be matched with a business mentor to help you during the first year.

Startup Loan Application Summary

1. Submit Information
2. Business reviews with an advisor
3. Initial decision
4. Credit Check
5. Final Decision
6. Receive Money
7. Matched with a Mentor

3. What To Include in Your Business Plan

You will need to include a business plan with your application for a Start-up Loan. A well-researched and convincing business plan is not only the most important part of your startup loan application. It is the most important component of the development stage of your business.

It is important not to view the business plan as just another piece of paperwork in the application process. A business plan is a management tool. It should provide you with the roadmap to achieving your business goals.

Your business plan should cover at least two years. Ideally, it should cover the length of your proposed loan. This will give you the opportunity to highlight the long-term aspirations you have for your business and the steps you need to take to achieve them.

Main Points To Include In Your Business Plan

  • What your business does and how it will operate.
  • A clear Unique Selling Point (USP)
  • Research on your ideal customer and target market.
  • An understanding of the market – It is increasing, decreasing or likely to change?
  • Analysis of your competition and how you will beat them.
  • A solid marketing plan focused on your target market with specific campaigns.
  • An explanation of how much money you will make based on realistic revenue assumption.
  • An explanation of how will you keep your costs as low as possible?
  • An explanation of the risks to your business and how you will overcome them.
  • How much money you require and what you need it for?

It is important to make sure that the information you have stated in the business plan should be consistent with what has been stated in your cash flow statement.

4. Cashflow

The cash flow statement is the component of the Startup Loan application that people tend to experience the most difficulty.

Preparing a cash flow should not be that difficult as long as you follow a few simple steps.


Predicting income can be difficult, but if you understand your marketing and sales plans, you should understand when you will make sales.

Depending on your business type, you need to work out when you get paid. Cash flow is tight for startups so it would be prudent not to have payment terms exceeding 30 days.


Your plan should include a detailed explanation of your Start-up Costs, Cost of Sales (costs to produce your goods/services), Administrative Costs and Asset Purchases.

Rising costs hit many small businesses as they grow, if possible you should include a plan of how you will keep costs down using by procuring the best value goods and services.

Variable costs

Variable costs are the costs that are incurred depending on your activity. You should try to structure your business model to have as much of your expenses to be variable and be dependent on sales.

To make a profit, you have to ensure you have priced your goods or services to cover variable and fixed expenses.

Think of all the costs you will incur to make sales, this could be temporary staff, equipment, food.

The second type of variable costs are costs that you can control depending on circumstances. For instance, marketing can be a variable cost as you may decide to increase your marketing spend for a special promotion like Christmas or reduce your marketing spend when business is slow.

Fixed costs

Fixed costs are costs that will not change, and you have to pay for insurance, rent, and rates. A strong argument can be made for utilities to be included as part of your fixed costs. The amount is variable, but you will have to pay for them throughout the year.

If you have permanent staff and have a set amount you as the owner must take from the business, you need to budget this within this section.

Things to consider:

Seasonality – is your business seasonal? Does it ramp up or ramp down at any certain time in the year? Include these fluctuations in your cash flow

Taxation – depending on your legal structure of the business you will be obliged to pay income tax, whether personal or business from the business. It is usually paid in lump sums and will be a large amount. Make sure you seek advice. Same goes with VAT which is usually paid quarterly

Loan Repayments – your delivery partner, will let you know how much you should budget for repayments in your cash flow. It depends on how much you have borrowed and how quickly you would like to repay.

Future Years – You will have to complete your cash flow for at least two years by the month.

Don’t be put off by this, make some broad assumptions about what how your business will be in the second year. For instance, if you want to grow year on year revenue by 20% include this in your cash flow.

To achieve this level of growth, you may need to increase staff, increase your marketing spend or buy additional equipment.

Make sure you add these costs to your second-year cash flow.


There are several pricing techniques to choose from. The most common pricing technique is to work out your variable and fixed costs and charge a markup (profit) on top of that.

However, before you decide what you will charge you need to budget your costs and see how much each unit costs you to make or deliver. If you cannot make a healthy profit and the price you can charge is fixed, due to market value or to remain competitive. You will have to find ways to reduce your costs to remain in business.

Breaking Even

Whether you sell a product and require stock or a sell a service, it is important for you to understand how many units you need to sell to make your business profitable.

A simple break-even graph will help your application, showing the delivery partner exactly how many units you need to sell to break even.

The basic Break Even calculation for units is:

Fixed Costs / (Price – Variable Costs) = Break Even Point (Units)

No matter how large the profit is on each unit is you will have to set yourself a specific sales target each month to ensure you make enough money to cover your costs.

Any unit you sell above your Break-Even Point is profit.

Market & Sales Planning

Allocate a significant portion of your expenditure budget to marketing your business. You should demonstrate your knowledge of your target market and not only list the marketing channels you will use to engage them. You need to explain specific campaigns that you launch that will convince potential customers to buy from you and not your competition.

5. The Criteria

To qualify for a startup loan you business have:

  • The business has been operating for less than 12 months and is legal in the UK.
  • You reside in the UK
  • The loan repayments loan are affordable
  • The assumptions around the Cash Flow Forecast appear reasonable and achievable.
  • The business can sustain a full-time salary of at least one person by the end of year one.
  • Applicant has relevant skills and qualifications to carry out the intended business.
  • You can compete in the market with available investment.

6. Partner Offers

If you are successful in your startup loan application, you will get access to lots of free resources from partner organisations. It would be wise to utilise these offers and factor them into your business plan and cash flow.


The startup loan scheme is a very good way of raising seed funding if you need a startup loan with no collateral or if you have bad credit.  The fact that the loan is a personal loan and not a business loan may put some people off but if you are really desperate to start your own business it should not stop you.

Let Us Help You WIth Your Business Plan

Whether you need a business plan for investment, funding or  a startup loan we have a number of business planning services available. Visit our business plan writing services page and fund out how we can help you.

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