If you are setting up a business in the UK, you’ll be pleased to know you could well be eligible for a business startup loan. This is a government-backed personal loan for those looking to start or grow their business. If you are successful, another bonus on top of financing is 12 months of free mentoring and access to business offers to help you succeed. As an unsecured loan, you don’t need to include guarantors or put forward assets to support your application.

Individually, each owner or partner in a business can apply for up to £250,000 each, with £100,000 being available to apply for per business. Also, if you started your business less than 2 years ago, you’re still eligible for a start-up loan on this venture!

The minimum you can borrow is £500. To give you an idea of what other businesses borrow, the average amount for this type of loan is £7,200. This is to be paid back between 1 and 5 years, and the interest rate is fixed at 6% per annum. Included in this is free application support, free support and mentoring (pre and post loan), free templates and guides, and no fees when it comes to applying or setting up.

It is important to note that a start-up loan is not a grant. A start-up loan must be paid back in full over the term agreed, and a grant is provided by an organisation or individual for a specific purpose and is non-repayable. So, what is considered when applications are assessed?

Three main areas are considered

You’ll be assigned a Business Adviser who will consider the below:

1.   Your credit score

You’ll have to have a credit check to review your financial behaviour. If your credit history isn’t the best, this won’t necessarily mean you aren’t eligible for a start-up loan. This is really to make sure you’re borrowing responsibly and don’t strain yourself.

2.   Ability to repay

You’ll need to pay back your loan in full even in the case of your business plans changing in future. Even though start-up loans are non-secured (meaning that to guarantee the loan, you don’t need to put down any collateral), the loan and associated interest need to be paid back by the end of the loan term. You’ll also need to submit a personal survival budget with your application – this highlights the key sources of your income and monthly expenses. This will support your assessment.

  1. Viability of business

The decision to lend hangs on whether your business will generate enough income for you to be able to make your monthly loan payments. You really need to do your research and make sure the demand for your service or product is going to be enough to stick to your business plan and cash flow forecast. If you’re unsure about how to put these together, don’t worry – you can access free guides here https://www.startuploans.co.uk/business-planning-templates/ and you’ll have support from your Business Adviser as well.

More about the money…

Start-up loans are incredibly flexible in that you can select your own loan terms based on how much you want – and can afford! However, it’s worth mentioning that, if you’re on a visa in the UK, your loan and interest will need to be repaid at least six months prior to the expiry of your visa. Use this loan calculator https://www.startuploans.co.uk/loan-repayment-calculator/) to help you decide how much you can afford to borrow and pay back.

Each person can apply for one loan for one business, meaning that if you have your fingers in many pies, aka multiple businesses, you can only get this loan for one of them. If you need more funding for the same business later, you might be able to apply for the loan again if you have paid back at least 6 months of full payments. To qualify for a second loan, you will also need to have been training for less than 24 months. The total loan balance you can have out at any time is £25,000.

What can you spend it on?

In short… a lot of things! The longer answer is that anything you purchase must relate to your business, such as a building to run it from, marketing, equipment, stock and promotional expenses. You must detail what you want to spend the money on and why in your business plan and cash flow forecast. There are a few things you’re not able to spend the money on, such as repaying debts, training or education, and also investments that don’t contribute to an ongoing business.

What is the process?

Fill in the registration form on the Start-up Loans website https://www.startuploans.co.uk/. You can then select a delivery partner, or they will give you one based on who is more suitable to support you in your application. Your delivery partner will then allocate you an experienced Business Adviser who will help you as best they can, review your application and finalise it with you.

You’ll then give detail on your proposed plans on your application. This will give Start-up Loans the information they need to decide whether the loan is right for you, based on how you’ll use it. They’ll ask for permission to run a credit check, and if you’re eligible and they can see you’ll be able to afford the loan, you can start finalising your application – this will need to include a Business Plan, Cash Flow Forecast and Personal Survival Budget.

Once the full application has been submitted, your business plan will be checked and deemed viable with a loan assessment, and your affordability will be checked. The various sections you provide will show whether the amount you’ve requested is necessary and your reasoning behind your intended spending will be examined. When it’s approved, you’ll receive your loan agreement by post, and you’ll need to sign and return it. Once this has been done, you’ll receive the payment and instructions on how to take advantage of the free one-to-one mentoring, which lasts for 12 months.

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