Looking for a Business Start Up Loan? Read This Article

Looking for a Business Start Up Loan? Read This Article

In case you want your business to become higher than ever before, you might require borrowing money. For financing your business, you can apply for a business start-up loan. However, before beginning, there are a few things, which you need to learn about this kind of funding.

Business Start-Up Loan – What is it?

A start-up loan refers to the kind of personal loan that is backed by the government. This is available to industries and commercial organizations that are seeking to grow or initiate a business in the UK. Some companies even provide exclusive business offers and free mentoring for a certain period along with the loan.

Types of Business Loans

A start-up business loan is of two kinds:

  • Secured Business Loan: A company or organization can borrow money for their business with the use of security, that is, an asset. If the borrower fails to pay the loan afterward, the lender will have the right to sell the asset to get their money back.
  • Unsecured Business Loan: When an individual borrows this kind of loan, they will not be required to provide any security. This means that none of their business assets will be at risk.

Who is eligible to get a Business Startup Loan?

If an individual wants to apply for a business start-up loan, they must:

  • Be a resident of the UK
  • Be 18 years old or over
  • Be trading business that is based in the UK
  • Be trading business for less than 2 years
  • Have the right for working in the UK

What is the Use of Business Loans?

As the owner of a business, you can borrow money for a purpose that is in relation to the business. These may include:

  • To move properties
  • To pay off debts, in some cases
  • To purchase new equipment or machinery
  • To take on new staff
  • To expand operations
  • To buy stocks

The purposes that an individual cannot obtain a loan for include:

  • Debt repayment in a majority of cases
  • Investment opportunities that are not a component of an on-going business that is sustainable
  • Education programs, qualifications or training

Business can get a Loan?

Most of the businesses typically acquire a loan of some type. Nevertheless, the loan that a person is eligible for depends on the kind of business they are trading. Hence, it is essential to check for the eligibility criteria of a loan ahead of applying for one.

For example, while a business owner who has been trading for over a certain period is qualified for a cash advance loan, a business that has been trading for less than 2 years is eligible for a business start-up loan.

Moreover, there are not any boundaries to the number of loans a business owner is eligible for. Nonetheless, whenever an individual applies for a loan, they will have to portray that they can afford it.

While various different types of businesses are eligible for a business loan, the following are the kinds that an individual may not get a business loan for:

  • Charities
  • Property investment
  • Money transfer services and banking
  • Pornography
  • Drugs
  • Chemical manufacture
  • Illegal activities
  • Weapons
  • Private investigators who do not hold a proper license
  • Agents for third parties (an exception to this is a franchise business)
  • Betting and gambling activities

Amount, Interest, Period and Repayment of Loan

An individual can apply for a loan amounting up to £500,000 at a fixed interest rate ranging from 1.9% to 8% per annum. The interest rates and amounts of loans offered can differ from lender to lender. However, when it comes to government-backed loans, the interest rate is fixed at 6% per annum.

Depending on the kind of lender you are borrowing from, your period of the loan can range from 1 month to 5 years, or maybe even more.

While some lenders charge an early repayment fee and an application fee, it is free of cost in the case of most of the lenders.

Choosing the Loan Period

An individual can choose the term of their business start-up loan depending on the range of period that the lender offers the loan for. For example, if a company offers loans for 1 to 5 years, then you can choose the period of loan between this range according to your preference and affordability.

It is noteworthy that if a business owner is in the UK on a visa, they must repay the loan at least 6 months before the expiry date of the visa irrespective of the period they have applied for.

Understanding the Loan

There are a few exceptions to certain cases, which must be understood before opting for a business start-up loan.

1: Business Partnerships

When it comes to a business that is based on partnerships, lenders often set a limit to the amount that can be borrowed by an individual and a business. For instance, a lender may limit the amount to £25,000 per partner and £100,000 per business.

2: Franchises

If you are eligible for a start-up business loan in general, then you are also qualified for a loan for your franchise. The rule that the third party agents cannot acquire this kind of loan does not apply to you.

3: Buying an Existing Business

A business start-up loan only applies to businesses that are being traded for less than 24 months. However, when an individual purchases an existing business, they are eligible for this kind of loan, provided that the business was earlier run for over 2 years under different ownership. Moreover, you should not have been in the possession of the same business earlier for over 2 years.


When it comes to borrowing a business start-up loan, it is essential to check the eligibility criteria and the requirements of the company you are applying to borrow the loan from. In addition, you must check the range of the amount of the loan offered, its term, interest rate, additional fees, and repayment.

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