start up loan

How To Get A Business Startup Loan – A Definitive Guide

Kurt GraverBusiness Funding, Business Start-up Guides

The Startup 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 have 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 150,000 businesses have been funded.

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

Of the people who received a loan since 2012, two-fifths (40%) were women, and nearly one in five (20%) came from Black, Asian and Minority Ethnic communities (BAME). Of these, 10% were delivered to black ethnic groups, 3% to Asian ethnic and 5% to mixed ethnic groups. One-third (33%) were unemployed when they applied for the loan, reflecting the diversity of the UK start-up community.

The Start-Up Loans Company has lent money and provided mentoring support to aspiring business owners in every region of the United Kingdom. Its impact has been particularly noticeable in areas of deprivation.

When split regionally, the North West received the highest number of loans outside of London, with a volume of 7,691 (12%) worth £58 million. The South East received 5,570 loans (9%) worth £46 million, followed by the West Midlands, where a total of 5,331 loans (8%) were provided for a value of £40 million.

Barriers to accessing funding have 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, 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 challenging 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 significant 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, have been trading for less than 12 months, and want to expand your business, a Startup Loan may be the best funding option. 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 upon 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 more than 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 must include with your startup loan application.

1. Business Plan

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

2. Cash Flow Statement

You need to detail your expected costs and revenue for the next 24 months if you receive the loan. Your cash flow must correlate 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. Your bills and personal expenditures 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 must 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.

You will undergo a credit check when they are satisfied your business is viable. 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 must 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 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 allow you 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 your ideal customer and target market.
  • An understanding of the market – Is it 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 assumptions.
  • An explanation of how you will keep your costs as low as possible.
  • An explanation of the risks to your business and how you will overcome them.
  • How much money do you require, and what do you need it for?

It is important to ensure that the information you have stated in the business plan is 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 with.

Preparing a cash flow should not be difficult if you follow simple steps.


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

Depending on your business type, you must 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 keeping costs down by procuring the best value goods and services.

Variable costs

Variable costs are the costs that are incurred depending on your activity. It would be best if you tried to structure your business model to have as much of your expenses variable and dependent on sales.

To make a profit, you must 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, or food.

The second type of variable costs is costs 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 will not change, and you must pay for insurance, rent, and rates. A strong argument can be made for utilities to be included in your fixed costs. The amount is variable, but you must pay for them yearly.

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 down at any certain time in the year? Include these fluctuations in your cash flow.

Taxation – depending on the business’s legal structure, 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. The same goes for 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 – By the month, you must complete your cash flow for at least two years.

Don’t be put off by this; make some broad assumptions about your business 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).

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

Breaking Even

Whether you sell a product and require a stock or sell a service, you need 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, you must set a specific monthly sales target 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 must explain specific campaigns you launch that will convince potential customers to buy from you, not your competition.

5. The Criteria

To qualify for a startup loan, your business has:

  • 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.
  • An 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 personal and not business may put some people off, but if you are 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 several business planning services available. Visit our business plan writing services page and fund out how we can help you.

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