Start up loans – do they exist?

In the general commercial finance sector, the answer is a straight ‘no’.

Banks might offer secured loans, or (in rare as hens’ teeth cases) unsecured loans.

Niched financiers such as factoring companies & asset finance companies can help if the equipment or circumstances are right, but there is no real source of cash to put into your business and run it.

Despite popular conception, it has always been the case.


And now, the good news:

There are 2 potential sources of loan funding for start-ups:

  1. Mummy & Daddy (or other close relatives).
  2. The Government Start Up Loan scheme

You can decide whether/how to approach your family for a loan.

The Government scheme is operated through selected providers throughout the UK. This official site will give you the lowdown and lead you to the right provider.

Do not be fooled into paying fees or buying consultancy – official providers will not do this! They will,  however give you access to a volunteer mentor.

The maximum loan is £25K, though they will mostly advance a lower sum (average £6.5K), with the remainder paid on achieving targets.

There are a few boxes to be ticked before application, the key one being that you should have applied to a bank and been declined, or offered ‘unreasonable terms’ (Ie they require charges on property or have offered a rate >16%).


The less good news:

Not really, just a reality check.

You will appreciate that this is not ‘easy money’ – in this risky area the Government and their providers want to be lending to the right people. In order to illustrate that you are the right person, here are a few pointers:


It’s not about the idea: Resist the temptation to way lyrical about your idea, invention or concept – Most of the emphasis is on attitude & aptitude – ie how are you going to turn it into a viable business model.


Do your homework: There is opportunity through the process to refine & develop your plan, however before applying you should really have given thought to those tough ‘what if’ questions; market research is a particular area that people overlook or gloss over.


Be realistic: Never, ever be tempted to create a business plan to impress someone else – it doesn’t work. If your plan is to be a sole trader from home until you retire, build your plan around that, don’t pretend you want to go multinational. On the other hand, if your plan is to employ 20 people and open outlets, show the steps required to achieve that.

2 of the most common areas of unreality are sweeping statements like ‘everyone is a customer’, or ‘there is no competition’ – these highlight the fact that you haven’t thought through marketing.


Be available: You don’t need to crawl to the lender, but you do need to work with them. If you are given a choice of interview dates, don’t respond with ‘I can only do weekends or evenings’ –  This suggests that you business takes second place.


Don’t ask for money you don’t need: Your cashflow projections should show the need for money and the ability to repay it. The lender and mentor will dig into the assumptions to ensure that they are reasonable. Asking for more money ‘just in case’ suggests that you aren’t confident in your plan.

Also, having borrowed cash sitting in the bank is an expensive luxury!


This is a truly great scheme for good, committed applicants, please do flag it to your friends, customers or networking contacts!