Published and reviewed 14 October 2026. General information, not advice. Figures are illustrations, not lender quotes.
The short version
- Most “startup business loans” are really personal loans. The government Start Up Loan lends £500 to £25,000 to you, not your company, at a fixed 7.5% over one to five years, and you repay it even if the business closes.
- Lenders that fund a limited company directly usually want trading history. Before about 12 months, the realistic company routes are asset finance, invoice finance and a few online lenders, nearly always with a personal guarantee.
- Rate matters more for a startup than almost anyone. Over three years, £25,000 at 7.5% costs about £3,000 in interest. At 20% it costs about £8,450.
- Match the money to the stage. Savings and Start Up Loans before trading, asset and invoice finance in year one, and mainstream company loans once you have filed accounts.
- Grants and equity do not have to be repaid but come with competition, conditions or a share of the company. SEIS can make early investment far more attractive to investors.
What is a startup business loan?
A startup business loan is any borrowing used to start a business or fund its first few years. The phrase covers very different products, and the difference that matters most is who borrows.
- A personal loan for business use. You borrow as an individual and put the money into the business. The government-backed Start Up Loan works this way. Your personal credit file and budget are assessed, and the debt stays yours whatever happens to the business.
- A loan to the business itself. A limited company borrows in its own name. The lender looks at the company’s bank account, accounts and credit file, and usually asks the directors for a personal guarantee while the company is young.
For a sole trader there is no legal difference: the business and the owner are the same person. For a limited company the difference is real. A company loan is the company’s debt, while a personal loan is yours even if you lend every pound of it to the company.
New businesses are not rare. Companies House registered 815,277 new companies in the year to March 2026. Lenders are cautious with them because the record is short: the Office for National Statistics found that 38.4% of UK businesses born in 2019 were still active five years later. That is why most mainstream lenders want to see trading before they lend, and why the early routes look different from the later ones.
Startup funding options compared
The table sets out the main ways UK businesses fund their first years. Rates are indicative ranges for illustration and vary with the lender, the business and the people behind it.
| Option | Who borrows or receives it | Typical size | Trading history needed | Security or guarantee | Indicative cost |
|---|---|---|---|---|---|
| Government Start Up Loan | You, personally, for business use | £500 to £25,000 per person | None, up to less than five years | Unsecured, but personally liable | Fixed 7.5% a year |
| Your own savings or a director’s loan | The company, from you | What you can afford to lose | None | None | No interest, but your money is at risk |
| Asset finance | The company | £5,000 upwards | Often none for standard assets, with a deposit | The asset, plus often a personal guarantee | Often about 6% to 15% |
| Invoice finance | The company | A share of unpaid invoices | From the first invoices to creditworthy business customers | The invoices, plus often a guarantee | Service fee plus a discount charge |
| Online unsecured loan | The company | Often up to £10,000 in year one, more later | Usually 6 to 12 months or more | Personal guarantee is standard | Often 15% to 40% or more APR |
| Bank loan or overdraft | The company | £1,000 upwards | Usually one to two years of filed accounts | Personal guarantee or security for smaller firms | Often about 8% to 15% |
| Growth Guarantee Scheme loan | The company, through an accredited lender | Up to £2 million | Lender decides. Listed for start-ups with one to two years’ trading | Lender decides. Guarantees are not ruled out | Set by the lender |
| Community development finance institution | The company or the individual | Often £1,000 to £150,000 | Varies. Many lend to early-stage firms | Varies | Often higher than banks |
| Grants | The business | Usually small and competitive | Varies by scheme | None, but conditions apply | Nothing to repay |
| Equity investment, including SEIS | The company, from investors | Thousands to millions | None | Investors take a share | Part of the company and its future profits |
Two things stand out. First, the cheapest borrowing a brand new business can get is often the Start Up Loan, precisely because it is personal and government-backed. Second, the routes open to the company itself widen sharply once it has a year of trading and again once it files accounts. Our guide to commercial loans covers each type of company finance in more depth.
Which funding fits your stage?
Lenders think about age in bands. Knowing which band you are in saves wasted applications and unnecessary hard searches on your credit file.
| Stage | What lenders can see | Routes usually open | What to do now |
|---|---|---|---|
| Not yet trading | A plan, a forecast and your personal credit file. | Savings, Start Up Loan, friends and family, some grants, angel or SEIS investment. | Write the plan and cash flow forecast. Open a business bank account. Check your personal credit file. |
| 0 to 6 months | A few months of bank statements and early sales. | Start Up Loan, asset finance with a deposit, invoice finance if you sell to businesses. | Keep business and personal money separate. Invoice promptly and keep a clean account. |
| 6 to 12 months | Six months or more of trading in the bank account. | As above, plus some online lenders, usually for smaller sums with a personal guarantee. | Keep management accounts monthly. Avoid running the account into an unarranged overdraft. |
| 1 to 2 years | A first set of filed accounts and a year of bank history. | Most online lenders, some banks, Growth Guarantee Scheme lenders. | File accounts on time. Prepare a forecast that shows the new repayments. |
| 2 to 5 years | Two or more years of filed accounts. | Most mainstream lenders and products. Start Up Loans are still open until five years of trading. | Compare offers on total cost. See how to get a business loan. |
Many young companies become eligible for mainstream lending when they file their second set of accounts, but no one tells them. If you are a few months from that point, waiting can be cheaper than borrowing early at a high rate.
The government Start Up Loan
The Start Up Loans programme is run for the government by the British Business Bank. It is the only widely available loan in the UK designed for businesses that are about to start or have only just started. These are the current terms on GOV.UK.
| Feature | Current terms |
|---|---|
| Amount | £500 to £25,000 per person. |
| Interest rate | Fixed 7.5% a year for new applications since April 2026. It was 6% before. |
| Term | One to five years. |
| Fees | No application fee and no early repayment fee. |
| Who can apply | UK residents aged 18 or over with a UK-based business that is about to start or has been fully trading for less than five years. |
| Type of loan | An unsecured personal loan. You must pass a credit check. |
| Support | Free help writing a business plan, and up to 12 months of free mentoring for successful applicants. |
Each owner of a business can usually apply for their own loan, so a business with more than one founder can raise more in total. Check the official site for the current limit per business.
Worked example: what a Start Up Loan costs
These figures use a fixed 7.5% a year with equal monthly repayments. They are illustrations, not quotes.
- £25,000 over five years: about £501 a month. Total repaid about £30,057, so the interest is about £5,057.
- £25,000 over three years: about £778 a month. Total repaid about £27,996, so the interest is about £2,996.
- £10,000 over five years: about £200 a month, with interest of about £2,023.
The shorter term saves about £2,060 of interest on £25,000 but adds about £277 to every monthly payment. In a first year, when income is uncertain, the lower payment is often the safer choice. There is no early repayment fee, so you can pay it off sooner if trading goes well.
Using a Start Up Loan in a limited company
Because the loan is made to you, the money reaches the company in one of two ways. You can lend it to the company, recorded in a director’s loan account, so the company can repay you over time and you use those repayments to pay the loan. Or you can invest it as share capital, which strengthens the company’s balance sheet but cannot simply be drawn back out. Many founders lend it, because the company can then cover the monthly cost. Agree the approach with your accountant before the money arrives, and keep a written record.
Whichever you choose, the debt to Start Up Loans stays personal. If the company fails, you still owe the balance. Our start-up loans page has a calculator for the scheme. You can apply directly on the official Start Up Loans website, and you never need to pay anyone to apply.
Loans to a new limited company
If you want the company to borrow in its own name, expect lenders to look harder at the people than at the business. A young company has little history, so the directors’ credit files, experience and personal commitment carry most of the weight.
- Personal guarantees are close to universal. Most lenders to companies under two years old ask the directors to guarantee the debt. That puts your personal assets behind the company’s loan, so read our personal guarantees guide before signing one.
- Asset finance is often the easiest first yes. The van, machine or equipment secures the deal, so a provider can lend before the company has accounts, often with a deposit of 10% to 20%. Our guide to how asset finance works compares hire purchase and leasing.
- Invoice finance can start with the first invoice. If you sell to creditworthy businesses on 30 to 90 day terms, the provider is mainly assessing your customers, not your trading history. Our guide to how invoice finance works explains the costs and contract terms.
- Online lenders start at about six months. Some lend to companies trading for under a year, usually for smaller sums of around £10,000 or less, at higher rates and with a guarantee.
- Government guarantees help, but do not replace the basics. The Growth Guarantee Scheme gives accredited lenders a 70% government guarantee on loans up to £2 million, and GOV.UK lists it as available to start-ups with one to two years of trading. The lender still decides, still checks affordability and can still ask for a personal guarantee.
In July 2026 the government announced an expansion of the Growth Guarantee Scheme, raising the turnover limit from £45 million to £54 million and the maximum term from six to ten years for loans up to £1.1 million. The British Business Bank is working with lenders to put these changes in place, so check with the lender which terms apply.
How much does startup finance cost?
A young business pays more because the lender takes more risk. The difference compounds quickly on the sums startups usually borrow.
Worked example: the same £25,000 at three rates
Each option borrows £25,000 over three years with equal monthly repayments and no fees. The rates are illustrations of the kinds of pricing a new business might see, not quotes.
- 7.5%, the current Start Up Loan rate: about £778 a month. Interest about £2,996.
- 15%, a typical rate for a young company with a guarantee: about £867 a month. Interest about £6,199.
- 20%: about £929 a month. Interest about £8,447.
The 20% loan costs nearly three times as much interest as the 7.5% loan, and about £151 a month more. Over the three years, the extra interest adds up to about £5,450, money a new business could have kept as a cash buffer.
Watch for products priced in ways that hide the rate. Some short-term lenders quote a monthly rate, such as 1.5% a month, or a factor rate, such as 1.3, where you repay £13,000 for every £10,000 borrowed. Convert every quote to an annual rate and a total cost in pounds before you compare. Our guide to business loan interest rates shows how, and the business loan calculator turns any rate into a monthly figure.
A funding plan for a new company
Most startups that borrow use more than one source, each matched to a different job. Combining them is usually cheaper and safer than forcing one loan to do everything.
Worked example: two founders, one workshop
Two founders set up a joinery company and need £70,000: £30,000 for a CNC machine and a van, and £40,000 for fit-out, first materials and six months of running costs. Every figure is an illustration, not an offer.
- £10,000 of their own savings, invested as share capital. No repayments, but it shows lenders the founders have committed their own money.
- Two Start Up Loans of £20,000 each, £40,000 in total at 7.5% over five years. Each founder pays about £401 a month personally. They lend the money to the company, which repays each of them about £401 a month through their director’s loan accounts, about £802 a month in total.
- £30,000 of asset finance for the machine and van, at an illustrative 10% over four years. The company pays about £761 a month, and the equipment secures the deal.
The company’s total finance cost is about £1,562 a month. Before committing, the founders check that their forecast covers that figure in a slow month, with the founders taking a modest salary. If it only works when every month is busy, they borrow less, lease rather than buy the van, or start with a smaller workshop.
Total interest over the full terms is about £8,090 on the Start Up Loans and about £6,522 on the asset finance.
The structure follows a simple rule: the equipment is funded by finance secured on the equipment, over a term no longer than its useful life, and the working capital is funded by the cheapest unsecured money available. Our borrowing checklist walks through the quiet-month test in five steps.
What you need to apply
A startup cannot show years of accounts, so the paperwork has to do more work. Lenders and the Start Up Loans programme ask for broadly the same things.
| Document | Why it matters | Tip |
|---|---|---|
| Business plan | Shows what the business does, who buys from it and why it will work. | Keep it short and specific. Show evidence of demand, such as early orders, letters of intent or pricing tested with customers. |
| Cash flow forecast for 12 months | Shows whether the business can afford the repayments. | Include the loan repayments and a cautious version with slower sales. |
| Personal survival budget | Shows that you can live while the business grows. | The Start Up Loans programme asks for one. List your household costs and other income honestly. |
| Personal credit file | The main evidence of how you manage money. | Check it free with the main credit reference agencies and correct mistakes before applying. |
| Bank statements | Show early trading and how the account is run. | Use a separate business account from day one. |
| Identity and address | Anti-money-laundering checks. | For a company, include every director and person with significant control. |
| Quotes for assets | Needed for asset finance. | Get a written quote from the supplier, including VAT and delivery. |
| Your experience | Shows you can run this kind of business. | A short CV of relevant work, qualifications and contacts helps more than most founders expect. |
A plan that admits risks and explains how you would handle them reads as more credible than one where everything goes right. Lenders see a lot of optimistic forecasts, and they discount them.
Startup loans with bad credit or no revenue
With a poor personal credit history
Because almost every startup loan leans on the founders’ credit files, a poor history narrows the options more for a new business than an established one. It does not always close them.
- Find out exactly what is on your file. Old defaults, a wrong address or an account that is not yours can often be corrected.
- Explain any past problems openly in your application, especially if they were caused by a one-off event.
- Consider asset finance, where the asset reduces the lender’s risk, or a community development finance institution, which lends to viable businesses that banks will not.
- Avoid applying to many lenders at once. Each full application can leave a hard search on your file. Ask whether a lender uses a soft search for its first check.
Be wary of any lender that promises guaranteed approval for a startup with bad credit, and of anyone asking for a fee before they release a loan. That is a common sign of advance-fee fraud.
With no revenue yet
A business with no sales has nothing for a company lender to assess, so the realistic options are personal or equity-based: your savings, a Start Up Loan, friends and family, grants or investors. Asset finance is sometimes possible with a larger deposit. If you can, start trading on a small scale first. A few months of real sales in a business account changes what lenders can offer.
Grants and investment instead of a loan
Money that does not have to be repaid sounds better, and sometimes it is. It comes with different trade-offs.
- Grants. Usually small, competitive and tied to a purpose, a place or a sector, such as innovation, hiring or decarbonisation. Many need you to match the funding. Search local and national schemes on GOV.UK’s finance and support finder. Innovate UK’s Smart grants are closed to new applications while its funding is realigned, so check what is open before you plan around one.
- The Seed Enterprise Investment Scheme (SEIS). Investors in a qualifying early-stage company can claim 50% income tax relief on up to £200,000 a year. The company can raise up to £250,000 under SEIS if its trade is under three years old, it has gross assets of £350,000 or less and fewer than 25 full-time equivalent employees. That makes a small first round much more attractive to angel investors.
- Angel investors and crowdfunding. Investors take a share of the company in return for their money and, often, their experience. You have no repayments, but you give up part of the future profits and some control.
- Friends and family. Often the first money in. Put any arrangement in writing, saying whether it is a loan or an investment and when and how it will be repaid.
A loan keeps all the ownership with you but needs repaying from the start. Equity costs nothing month to month but can cost far more if the business succeeds. Many founders use both.
Risks to weigh before you borrow
- You may be personally liable whatever the legal structure. A Start Up Loan is personal, and company loans to young businesses usually carry a personal guarantee. A limited company does not protect you from either.
- Early income is hard to predict. New businesses often take longer to reach steady sales than planned. Borrow for the plan you can afford if sales arrive slowly.
- Borrowing to cover losses is different from borrowing to invest. A loan that buys equipment or stock that earns money pays for itself. A loan that only covers a gap with no end in sight usually makes the gap bigger.
- Short-term products can trap a new business. Merchant cash advances and very short loans can be expensive, and stacking several can drain cash flow quickly.
- Your personal credit is on the line. Missed payments on a personal loan or a guarantee called in can affect your personal credit and, in some cases, your home.
None of these is a reason not to borrow. They are reasons to borrow the right amount, from the right source, with a plan for the months that go badly.
Becoming a business lenders say yes to
The first two years decide how easily, and how cheaply, the business can borrow later. These habits cost nothing and change what lenders see.
- Open a business bank account on day one and keep business and personal money apart. Running business money through a personal account is one of the liquidity warning signs behind many declined applications.
- Keep monthly management accounts from the start, even simple ones from your accounting software.
- File everything on time at Companies House and HMRC. Late filing is an early warning sign to lenders.
- Keep the account in credit, or within any agreed overdraft. Bounced payments and unarranged overdrafts stay on bank statements for lenders to see.
- Use a little credit and repay it on time. A small asset finance agreement or business card repaid reliably builds the company’s own credit record.
- Plan around your second set of accounts. That is when most mainstream lenders start to look at you properly.
Are startup business loans regulated?
It depends on who borrows and how much. According to the Financial Conduct Authority, lending of £25,000 or less to sole traders and small partnerships is generally regulated, giving those borrowers consumer credit protections. Lending to limited companies, and business lending over £25,000, generally falls outside the FCA’s rules.
So a new limited company borrowing in its own name usually has fewer protections than a sole trader borrowing the same amount. Read every agreement in full, check any personal guarantee carefully, and check that any lender or broker that carries on regulated activity is on the FCA Register. Micro-enterprises can take complaints to the Financial Ombudsman Service, including about some lending that is not otherwise regulated.
Where Business Loan Advice fits
We are not a lender and we do not give personal advice. We are preparing a service that will introduce UK limited companies directly to lenders. No lenders are confirmed yet, so we cannot currently obtain quotes or make introductions. You will not pay us a fee. If a lender pays us commission after the service launches, we will tell you before asking your permission to refer you.
We do not collect or refer applications for personal Start Up Loans. Apply for those directly through the official scheme. If you run a UK limited company that is planning to borrow, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.
Common questions
Can I get a business loan to start a business in the UK?
Yes. The most common route is the government-backed Start Up Loan, a personal loan of £500 to £25,000 at a fixed 7.5% for businesses about to start or trading for less than five years. A new company can also use asset finance, invoice finance or, after about six to twelve months, some online lenders.
Is a Start Up Loan a personal loan?
Yes. A Start Up Loan is an unsecured personal loan for business use. You are assessed on your personal credit file and budget, and you must repay it even if the business closes. If you run a limited company, you can lend or invest the money into the company.
Can a limited company get a Start Up Loan?
Not in its own name. Start Up Loans are made to individuals. Each director or owner of a limited company can apply personally and then lend or invest the money into the company. Agree how it will be recorded with your accountant first.
How hard is it to get a startup business loan?
Harder than for an established business, because there is little trading history to assess. Approval depends heavily on the founders’ credit files, the business plan and cash flow forecast. Asset finance and the Start Up Loans programme are often more accessible than unsecured company loans in the first year.
Does a Start Up Loan affect my credit score?
A Start Up Loan is a personal loan, so the application involves a credit check and the loan appears on your personal credit file. Repaying on time can help your record. Missed payments can harm it, whatever happens to the business.
Can I get a startup business loan with bad credit?
Possibly, but choice is narrower and the cost is usually higher. Correct any errors on your file, explain past problems openly and look at asset finance or community development finance institutions. Avoid anyone promising guaranteed approval or asking for an upfront fee.
Can I get a startup loan with no revenue?
A company with no sales has little for a company lender to assess, so most routes before trading are personal or equity-based: savings, a Start Up Loan, friends and family, grants or investors. Asset finance is sometimes possible with a larger deposit.
How much can a startup borrow?
A Start Up Loan is £500 to £25,000 per person, and each owner can usually apply. Company loans in the first year tend to be small, often £10,000 or less from online lenders, while asset finance is sized to the asset. Amounts rise once the company files accounts.
Do I need a personal guarantee for a startup business loan?
Usually, if the loan is to a young limited company. Most lenders ask directors to guarantee the debt until the company has a track record. A Start Up Loan needs no guarantee, because you are already the borrower and personally liable.
Are Start Up Loans worth it?
For many new businesses, yes. At a fixed 7.5% with no fees and free mentoring, it is often cheaper than other finance a startup can get. The trade-off is personal liability. Only borrow what your plan can repay if sales grow more slowly than expected.
Is startuploans.co.uk legitimate?
Yes. Start Up Loans is the government-backed programme run by the British Business Bank, and GOV.UK links to it. There is no application fee, so be wary of anyone who charges you to apply or asks for a fee to release a loan.
Should I use a grant or investment instead of a loan?
They suit different situations. Grants do not need repaying but are competitive and conditional. Equity investment, including SEIS, brings no repayments but means giving up a share of the company. Loans keep ownership with you but must be repaid from the start. Many founders combine them.
GOV.UK: Apply for a Start Up Loan for your business (amount, 7.5% rate, term, eligibility and fees)
GOV.UK: Growth Guarantee Scheme, published 29 June 2026
HM Treasury: Chancellor to unlock billions in finance for small businesses, 13 July 2026
Office for National Statistics: Business demography, UK: 2024 (five-year survival)
Companies House: Companies register activities, April 2025 to March 2026
GOV.UK: Apply to use the Seed Enterprise Investment Scheme
GOV.UK: Venture capital schemes, tax relief for investors
UK Research and Innovation: Innovate UK guidance for specific funds (Smart grants)
Financial Conduct Authority: steps to support small businesses’ access to finance
Responsible Finance: find a community development finance provider
Financial Ombudsman Service: which small businesses we can help
Rates, tax bands and lender criteria change. Confirm the current details with the lender, your solicitor or your accountant before relying on them.