Business Loans For Startups: A Guide To How They Work And How To Apply

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Written by Luke Glassford

Startup loans

Starting a business is an exciting time, but it can also be expensive. If you're a startup founder, you may be wondering if there are any grants or loans available to help you get off the ground.

The good news is that there are several government and private sector grants and loans available to startups in the UK.

What do I need to be eligible for a startup business loan?

Eligibility for business loans varies depending on the type of loan or grant and the organisation that is offering it. However, some common eligibility criteria include:

  • You’re 18 years of age or older.
  • You’re a current UK resident.
  • You’re starting a new business or have been trading for up to 36 months.
  • You’re unable to secure finance from other sources.
  • Your business is based in the UK.
  • You have the right to work in the UK.
  • Your business type and loan purpose are eligible under the terms of their scheme.
  • You pass their credit checks, and you can afford to repay the loan.

Examples of loans available for startups

There are several ways to find and apply for business loans and grants. You can search on the UK government website or on the websites of specific organisations that offer loans or grants. You can also contact your local chamber of commerce or business support organisation for help.

Once you have found a loan or grant that you are eligible for, you will need to apply. This will typically involve providing information about your business, your business goals and how you plan to use the loan or grant money.

Some examples of loans for startups include:

Startup Loan

The Startup Loan is a government-backed loan scheme that provides funding of up to £25,000 to individuals and businesses. To be eligible, you must be a UK resident and have a viable business plan.

The loan has a fixed interest rate of 6% and a repayment term of up to five years. The scheme also includes a year of free business mentoring.

Find out more >

The Prince's Trust Enterprise Award

The Prince's Trust Enterprise Award is a collaboration between the Start Up Loans Company and The Prince's Trust. It provides funding of between £500 and £5,000 to would-be business owners between the ages of 18 and 30.

The loan has a fixed interest rate of 6.2% and a repayment term of up to five years.

Find out more >

Virgin Startup Loan

The Virgin Start Up Loan is a loan scheme run by Virgin Money. It provides funding of between £500 and £25,000 to entrepreneurs looking to start or develop their businesses. To be eligible, you must be a UK resident and have a viable business plan. The loan has a fixed interest rate of 6% and a repayment term of up to five years. There are no set-up fees or early repayment penalties.

Find out more >

Which loan scheme is right for you will depend on your individual circumstances and needs. If you're unsure, it's always best to seek professional advice.

Advice for startups applying for a business loan

If you're a startup founder, there are a few things you can do to increase your chances of success when applying for business loans and grants:

Focus on loans or grants that are relevant to your business

Don't waste your time applying for grants that you're not eligible for or that don't align with your business goals.

Tailor your application to each loan or grant

Don't just send out the same generic application to every grant that you apply for. Take the time to tailor your application to each specific grant and explain why your business is the best fit.

Be persistent

Don't get discouraged if you don't get the first grant that you apply for. Keep applying and eventually, you'll be successful.

Start planning early

The application process for some grants can be lengthy and complex, so it is important to start planning early.

Read the eligibility criteria carefully

Make sure that you meet all of the eligibility criteria for the grant or loan before you apply.

Prepare a strong application

Your application should be well-written and persuasive. Be sure to explain why your business needs the grant or loan and how you will use the money to achieve your business goals.

Get help from a professional

If you need help with the application process, you can consider hiring a business consultant or grant writer.

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Written by

Luke Glassford

Marketing Director at Gambit Partners