Start-Up Loan: 5 Most Important Things to Know Before Applying

Have you ever thought of getting a start-up loan? Or are you looking forward to growing your business and increasing stock through a Start Up loan? Or even buying a small company to develop? While your intentions might be genuine, lack of preparation can land you so much trouble with little accomplishments. For instance, when taking a loan without a plan, you could have unprecedented debts to pay, thereby incurring avoidable losses. Lending companies are for the benefit of the common public and the owners. This article discusses a few concepts related to Start Up loans and major considerations you should address before you take a Start-Up loan. 

What Is A Start-Up Loan?

A start-up loan is a personal loan backed up by the government and available for qualified individuals looking to establish and grow their businesses in the U.K. It offers friendly services to applicants regarding rates and interest to enhance business growth. For instance, there is a fixed interest rate of 6% P.A, the payment duration could go as far as 5 years, and many more. 

In line with finance, successful applicants receive 12 months of free mentoring and exclusive business offers geared at helping them succeed. When applying, you won’t need to put forward any assets or guarantors to support the application like other loan-lending companies because this loan is unsecured. Furthermore, all owners or partners in a business can individually apply for loans up to £25,000 each, with a maximum amount of £100,000 for each business. 

Read: Where to Get Free Money: Small-Business Grants

There are no charges for the application process, and one more outstanding feature is that they’ll help you with the application process if you get stuck. So be sure of a smooth application process. They also offer free post-loan support and mentoring to help you with decision-making for the cash. There are also free templates and guides for your benefit. 

The Eligibility for a Start-Up Loan

Each loan-lending company has its own rules and regulations that might differ from one company to the other. Even though a start-up loan gets its support from the government, it must have specific measures to be considered for applicants. Business advisors assess and review your Start-Up loan application. Among the issues they consider are:

Your Credit Worthiness

Your creditworthiness is crucial in determining whether you’ll be able to repay the loan or not. You will have to provide a credit check to review your past and current financial behaviour in your application process. If your previous history indicates some defaulting, you might be withheld from applying for a loan. This explains why most loan-lending companies require your payment before the due date. While this might happen to many, checking your financial behaviour also prevents you from overburdening yourself with debts. 

Personal Affordability

As mentioned at the onset, you won’t need guarantors or collaterals to apply for a Start-Up loan. This explains why your affordability in terms of the ability to repay even if the business runs bankrupt is crucial. It also helps determine whether you’ll manage to pay respective interests if you delay making the payment within the agreed duration. In line with your application form, you must submit a personal survival budget and the application indicating your key source of income and any other expenses incurred each month.  

Read: How to Quit Your Job and Start a Business: 6 Untold Truths

Business Viability

Since these loans are geared at helping you grow your business, ensure that this decision would serve you best to be able to repay the loan on time. Make sure it is also profitable enough to earn you some extra cash. Your business advisor would need to assess this by checking your product(s) and service(s) to weigh whether you’ll manage to achieve all the expected goals for your business plan and cash flow forecast. 

If you have never created these documents, your business advisor will help you.

The Application Process for a Start-Up Loan

Each company has a unique loan application form that might differ from the others. So instead of making assumptions about the process, get acquainted with what you are getting yourself into. The following are steps to consider when applying for a Start-Up loan:

  • Check your eligibility for the expected funds
  • Complete the expression of interest form, which includes your contact information to send to the delivery partner. Someone will then contact you within 3 working days.
  • After, you’ll discuss your business idea with your delivery partner and submit some relevant documents. 

Expect the loan disbursement within 6 weeks after that. 

5 Most Important Factors to Consider Before Applying for a Start-Up Loan

Associated risks

When applying for any loan, you must always be prepared for any possible risks, and this is not an exception. These include taking action in case your business fails or possible penalties after defaulting. Banks may fail to step in when you need their aid, and friends and family might also stir contentions against you when you fail to pay, leading to broken relationships. Since this is a government institution, you may want to avoid the hurdle of breaking the rule.

Cost of Capital

Get the most affordable cost of finance to ease your payment terms. Interest rates are a great way of increasing your profits, so get lenders with the best rates. For instance, debt financing will give you the control you need for your business, but you will have to deal with the interest rates on your own. On the other hand, equity financing will involve your shareholders, meaning that you won’t make any decisions regarding your business without involving the but the interest rates will be shared. 

Read: How DAOs can Revolutionize Startups


As mentioned above, if you prefer sharing ownership or renting your company, you may want to go for equity financing; if not, choose debt financing. Whether you want shareholders is up to you and not the loan-lending company. 

The Eligibility Criteria

Ensure that you meet each loan application requirement first. Your respective delivery partner will look into your credit score and payment history. It is also important to analyze the business risk, and the ability to repay the loan. Have these documents ready. 

Terms of Repayment

The time taken to repay a long-term loan cannot be the same as that used to repay a short-term loan. Consult a business advisory agent for help determining which loan to take. Always prepare for the risks of the loan you choose to take. 

Final Remarks

StartUp loan is a government-sponsored loan-lending company that issues short- and long-term loans to its customers. With many people seeking to grow and establish their businesses, this company has set forth some rules to follow in case you wish to apply for a business loan. This article has outlined the procedure for loan application with Start Up, the eligibility for a loan, and the 5 most outstanding steps to consider before applying for a loan. Looking at this essential report will help you prepare the necessary documents to help you get the loan and grow your business to gain profits. 

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