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If your business has been operating for less than 24 months, then you might qualify for a startup loan.

Startup loans can be used for things like office furnishings, software, computers, advertising, and more.

But, as you probably know, getting a loan from a regular bank or a specialised company finance organisation might be challenging for a new firm that has only been open for a few months (normally at least 6–12).

UK Startup Grants and Loans

So, there are fewer choices for startups that need finance but can only do it by taking on debt rather than offering investors an interest in the firm. Here are a few options to consider.

TAKE NOTE: This guide isn’t financial advice, just friendly neighbourhood research from the HostingData team.

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Table of Contents:


The UK’s Best Small Biz & Start Up Grants + Loans in 2024

Service ProviderRangeRating
1. British Business BankUp to £25,000★★★★★Visit here
2. FleximizeUp to £500,000★★★★★Visit here
3. Clydesdale Bank£25,000-£1.2mn★★★★★Visit here
4. UK Government£500-£25,000★★★★★Visit here
5. Capital on TapUp to £50,000★★★★Visit here
6. Royal Bank of ScotlandUp to £50,000★★★★Visit here
7. ClearFunder£10,000-£100,000★★★★★Visit here
8. Lloyds Bank£1,000-£50,000★★★★★Visit here
9. Virgin Money£500-£25,000★★★★★Visit here
10. CubeFunder£5,000-£100,000★★★★★Visit here
11. Yorkshire Bank£100,000-£150,000★★★★★Visit here


1. British Business Bank – Average Startup Loan of £7,200 UK 🏧

Features & Fees:

  • ⭐ Interest Rate Is Fixed At 6% Each Year
  • ⭐ Personal Guarantee Unnecessary
  • ⭐ No Costs Associated With Applying For A Loan
  • ⭐ No Penalties For Paying It Off Early

Startup Funding that Features Mentoring 💼

A “Start-Up Loan”, despite its name, is really a personal loan that doesn't have to be repaid until the borrower starts making money. If your application is approved, you will earn funding and up to a year's worth of free mentoring.

It's essential to have a well-thought-out plan in place before beginning a firm. The free business plan template may serve as a repository for your organization's goals, strategy, marketing and sales initiatives, and financial forecasts. If you download their free template, you can get a head start on your plan.

Courses & More, All for Reportedly Low Interest Rates 🆓

Courses on a wide range of useful and free business-related subjects have been made available thanks to a partnership between The Open University and Start-Up Loans.

Topics including accounting, finance, leadership, and management are covered with the goal of educating new business owners on the basics of running a firm.

The British Business Bank has the lowest interest rate we could discover, at only 6% per year, and they provide interest-free loans to startups with no proven track record of profitability (fixed). New businesses may get loans ranging from £500 to £25,000, with repayment terms of up to five years.

Free Year of Mentoring 📅

The chosen participants will also be offered a free year of mentoring. The average loan size is about £7,200. Early repayment of the loan is permitted and a cosigner is not required.

The minimum age we require is 18, however, we may also inquire as to whether or not you are beyond that limit. 

Questions to Ask❓

  • When will you start a business? 
  • Will you be establishing a base in London? 
  • Where in the United Kingdom do you now reside? Is your business less than three years old? 
  • Do you have a company that has been around for a while but not quite five years?

Let’s make no mistake, inflation is high and banks are resistant to give out credit.

However, cash is usually the decisive factor when deciding whether to establish a new business before it is large enough to be publicly listed.

The British Business Bank and the Start-Up Loans Company have collaborated to give start-up businesses with access to loans of up to £25,000 and related services like mentoring and coaching.

PROS

  • Access to knowledgeable business role models
  • Eligible businesses must have launched within the last three years
  • Loans sizable sums for no-charge

CONS

  • Maximum of £25,000

2. Fleximize – Top Financing for New UK Businesses 💷

Features & Fees:

  • ⭐ The Lowest Rate Each Month Is Just 1.5%
  • ⭐ You Won't Have To Worry About Any Hidden Prepayment Costs
  • ⭐ One Receives Assistance And Guidance From A Designated Account Executive
  • ⭐ No Penalties For Prepaying

Here's Why We Love Flexiloan… 💝

Overall, Flexiloan Lite is great for young businesses who are in need of short-term financing. Rates are quoted between 1.9 and 3.9 percent per month.

There would be an AER of between 25.3% and 58.3% every year. In addition, the total amount of the loan cannot be higher than the borrower's salary for a period of two months. To apply for a loan, you need to have been in company for at least six months, but your monthly income must be at least £5,000 (or £60,000 annually).

No Penalties for Paying Early 🏆

Loans may be paid back in whole and without penalty at any point throughout the term specified.

Companies with a year or more of profitable operation are eligible for Full Flexiloans, which provide financing of up to £500,000 (average APR 41% – 69%) for terms of one to four years. It is possible to get either kind of loan, whether secured or unsecured.

Nonetheless, there are substantial yearly interest rates, but they are only available for a short period. Moreover, you must make at least £5,000 per month in sales, with a maximum loan repayment period of 2 months' revenue.

Borrow Up to 2 Months' Salary 💰

An individual may borrow up to £500,000 (or two months' salary), with the option to borrow more money after making timely payments.

The name accurately describes the payback schedule, which may be anything from one month to twenty-four months (or 48 months for secured loans).

PROS

  • Six months of experience is more than enough
  • No penalties for paying off your loan early

CONS

  • You need to have been in operation for at least 6 months
  • You need to be making at least £5,000 per year in sales to qualify

3. Clydesdale Bank Business Finance – Good for SMBs 🗿

Features & Fees:

  • ⭐ Loan Amounts From £25,000 To £1.2 Million
  • ⭐ Borrowers May Often Choose A Payback Term
  • ⭐ Pay Between One And Ten Years
  • ⭐ Government Of Great Britain Funding

Top Choice for Medium and Big Businesses Seeking Launch Capital ⭐

This financing service supports the early to mid-stage expansion of promising firms like Monzo, which may shortly go public.

The holding corporation that owns Yorkshire Bank also owns Clydesdale Bank, a commercial bank that is far bigger. A loan from a large high street bank will allow you to conduct meetings and other business in the branch whenever you choose. The need to contact a helpline to initiate the process makes this impossible with internet lenders.

75% Guarantees ☑️

This loan is a little different from the others since the British government is financing it. Commerce, Energy, and Industrial Strategy in the United Kingdom has guaranteed 75% of the loan. A 2% government premium will be added to the loan's principal amount… (plus any other arranging costs).

A company “with no security or lack of acceptable security”, i.e. one that consists of nothing more than a concept, is eligible to qualify for this funding. Businesses in the public sector, the armed forces, the insurance industry, the mining industry, and the social services sector are not eligible to participate.

Range of Support Financing 📞

  • Commercial Mortgages 📖 – Get 5–15-year fixed-rate loans from £25,000 to £10mn. Startups can combine fixed and variable repayments to make extra payments during profitable business periods or choose a repayment schedule that meets their cash flow needs. 
  • Company overdraft 📖 – 8.75% unsecured overdrafts are available up to £25,000. (variable). 2.5% setup (minimum £120) applies. 3–12 months are available. Daily interest compounds monthly.
  • Asset funding 📖 – Hire buy and lease agreements can purchase equipment, machinery, and more. Depending on the agreement, your company will either own the asset or trade it in for a newer model at the end of the payback period.

PROS

  • Invoice financing
  • Business overdrafts and credit cards

CONS

  • Must make less than £41,000,000 per year in income

4. Trusted Business Loans from the UK Government

Features & Fees:

  • ⭐ The Government Provides Loans To Startups Ranging From £500 To £25,000
  • ⭐ Personal, Unsecured Loans (Unlike The Government Business Loan)
  • ⭐ The Rate Of Interest Is 6% Each Year

Ideal for Companies with Under 2 Years Operation ⌚

For newly established businesses in the UK, the government is offering a funding option with a payback plan.

As a result, only companies with a very brief track record (less than two years) will be considered for the loan.

The government is not only loaning the business money, but also providing free training for the company's employees for a whole year.

Integrate Government Templates 🏛️

The government will also provide supplementary resources that may be helpful in your quest of funding, such as templates and instructions. The major advantage of this loan is its source: the government.

As a result, you can be certain that no one is trying to pull the wool over your eyes; the conditions of the loan are transparent and easy to understand. Rates of interest and other charges are fixed at 6% and will never increase.

Applications Can Be Complicated 🤖

The application process alone may be a formidable obstacle to getting financial aid. Yet here, the lender aids the borrower all the way through the application. Perfect for young businesses.

PROS

  • Enjoy payment periods between 1 and 5 years
  • Application and prepayment are free of cost

CONS

  • Your UK-based business must have been operating for fewer than 2 years

5. Capital on Tap – Loans for New and Existing Businesses

Features & Fees:

  • ⭐ Borrow Up To A Maximum Amount Of £50,000
  • ⭐ Flexible Options For Both The Size Of Your Payments And Frequency
  • ⭐ Both The Monthly And Annual Rates Are Always Presented Upfront

Get Results in as Little as 10 Minutes 🎐

Capital on Tap has lent small businesses in the United Kingdom close to a billion pounds. An extremely huge volume of money from a non-conventional lender is a positive sign of its trustworthiness.

With a 2-minute application process, instant judgements, and funding in as little as 10 minutes, Capital on Tap is changing the game for how rapidly applications can be handled.

Having funded over 65,000 businesses, Capital on Tap has shown itself as a reliable partner for creative projects and a source of superior service. It's small enough to know exactly what startups want and need.

Application Criteria 📑

The website provides little details about who is qualified to use it, such as the length of a business's commercial history or its annual turnover (although eligibility may be decided on a case-by-case basis).

PROS

  • Apply in about 2 minutes
  • Fast access results
  • After applying, you may get your funds as quickly as 10 minutes

CONS

  • Limit of £50k

6. Royal Bank of Scotland – Trusted Start-Up Business Loans 💻

Features & Fees:

  • ⭐ A Loan Of Up To £50,000 Could Be Available To You
  • ⭐ Terms Of Loans May Range From One To 10 Years
  • ⭐ You Won't Have To Pay Any Fees
  • ⭐ No Interest When You Pay Back Your Loan

No Minimum Requirements   🕶️

RBS, another major commercial bank, offers a solution tailored to the needs of startups that have exhausted their own resources for financing. RBS's Small Business Loan is attractive for startups since there is no minimum requirement for company age.

RBS has updated its website to reflect the fact that businesses with annual revenues of £2 million or less are now eligible for their Small Business Lending programme.

How Can I Take Off?  🛩️

The revenue threshold of £2 million has been lifted from the criteria for qualifying for a Small Business Loan, as reflected in updated information on RBS's website.

First of all, it's awesome that RBS offers a business finance solution to so many individuals. Indicative of how readily available it is, there is a very little sum of money available.

Yet, 50k may be plenty for many startup companies. The annual percentage rate (APR) for this loan programme may be no more than 12.49 per cent for more than half of the company's borrowers.

PROS

  • RBS no longer requires applicants to have annual sales of at least £2 million
  • No minimum amount of operational time

CONS

  • Having directors' personal guarantees may be essential

7. ClearFunder Startup Funding 💽

Features & Fees:

  • ⭐ Yearly Percentage Rates
  • ⭐ You May Make Larger Payments On A Daily Basis If You Have The Money
  • ⭐ You Are Free To Put A Loan Towards Whatever Use You Want
  • ⭐ A One-Time Fee That Is Paid When The Loan Is First Established

Stands Out from the Competition 🏅

ClearFunder stands out from the competition because it adapts to the specific requirements of each firm it works with, from small-scale investments to substantial lines of credit for medium-sized enterprises.

The only stipulations are that the private company's main office be located in either England or Wales, and that it not be in the midst of any bankruptcy or layoff processes. Anybody may apply, regardless of credit history, although proof of financial stability will be required.

Straightforward Terms 📕

ClearFunder is a company that promises to make business funding easier and clearer. Loans may be used for everything from the purchase of a company car to facilitating business expansion, reorganisation, cash flow, equipment acquisition, and staff promotion.

ClearFunder, based in Windsor, provides fast online quotes in addition to flexible repayment plans. All circumstances are taken into account, as promised on their website.

What are the Deals? 💳

You may borrow between £10,000 and £100,000 for your company, depending on the terms and restrictions.

PROS

  • Strong financing
  • Early payment is not subject to any fees

CONS

  • Situations are evaluated on an individual basis since everyone is different

8. Lloyds Bank – Most Competitive Fixed-Rate Business Start-Up Loans

Features & Fees:

  • ⭐ Borrow Between £1000 and £50,000 To Launch Your Company
  • ⭐ An Enticingly Low Annual Percentage Rate (APR) Of 9.3 Percent
  • ⭐ There Are No Fees For Prepayment
  • ⭐ Commercial Banking Powerhouse
  • ⭐ Lloyds Provides A Competitive Interest Rate Of 9.3 Percent

Serves Expanding Startups 💹

If your firm needs funding for expansion, equipment purchases, management of commodities resources, or even simply improved cash flow management, Lloyd's Business Loans may be able to help.

Nonetheless, it may be difficult for a startup to get this financing, despite its lenient terms. It's true that you don't need any expertise trading to get started here. This is not an issue for most major banks, but it may be for a company that has been around for less than two years.

Where Can I Get Deals? 🆓

It might be time-consuming to fill out the application, but if you're serious about applying, it could be well worth it. After all, if you are approved, you will have access to one of the best small business loans out there.

Who is it Best for? 🛡️

To avoid the arrangement fee, borrowers who require a loan of less than £25,000 might apply for a smaller loan amount.

PROS

  • Trusted provider
  • Choose any number of years between 1 and 10

CONS

  • There is no live chat support
  • The set monthly payments are not subject to change

9. Virgin Money – Financing Options for New Ventures

Features & Fees:

  • ⭐ Borrow Between £500 And £25,000 (Approximately) Per Co-Founder
  • ⭐ Borrowing Terms Range From One Year To Five Years, With An Annual Fixed Rate Of 6%
  • ⭐ There Is A Dedicated Helpline And Advisory Service For Businesses

Mentors and Support ☎️

An investment made possible by a Virgin Start-Up Loan is priceless in more ways than one. Virgin understands that their funding may serve as more than simply a stopgap for your company.

Together with the money, Virgin provides exceptional amounts of support for the lender, such as mentors and a business helpline. Expert meetings and promotional opportunities are two other services that Virgin StartUp coordinates (being featured on its website, for example).

Average Loan of £10k 🎏

The exclusivity of this financing to new businesses is perhaps its strongest selling point. It's not even necessary to have started trading yet. Virgin's typical loan size is £10,000. They aren't exactly flushing money down the drain.

PROS

  • Choose a seasoned expert whose advice and assistance will be invaluable to you and your business
  • Benefit from the virgin group's special offers and savings

CONS

  • You need a startup or a firm that has been around for less than two years

10. CubeFunder – Sound Small Business Start-Up Financing 🧊

Features & Fees:

  • ⭐ Loan Of £5,000 To £100,000
  • ⭐ No Interest Will Be Applied To This One-Time Payment
  • ⭐ The Route Of Obtaining Funding Is Short And Easy To Navigate
  • ⭐ There Isn't Much Of A Minimum Credit Score Requirement

One-to-One CubeFunder Support ⏹️

CubeFunder is an alternative lender based in the UK that places an emphasis on one-on-one communication with its clientele.

For applicants' convenience, CubeFunder has broken down the application process into just four simple steps, and the company hopes to provide lower costs and fewer rules than its rivals.

Reportedly Ignores Bad Credit 📚

On the other hand, CubeFunder will ignore a company's bad credit history in exchange for a substantial loan if the company can show that it is making £4,000 or more per month in sales.

It's not easy to estimate how much it will cost, despite the fact that the application process just takes a few days and the payback amount is a flat pound number rather than an APR.

The loan from CubeFunder is fantastic, since it has all the best aspects of both alternative and traditional forms of financing.

PROS

  • Startups with a three-month sales history should be able to be approved
  • Fast approvals

CONS

  • To be eligible, you must be earning at least £4,000 per month

10. Yorkshire Bank Startup Grants

Features & Fees:

  • ⭐ Borrow Between £100K And £150K For A Term Of 12 Months To 60 Months
  • ⭐ Application Takes Less Than Two Days To Process
  • ⭐ Only Takes Approximately Ten Minutes To Complete
  • ⭐ No Fees Or Interest Adjustments For Prepayment

Financial Powerhouse 🏦

Yorkshire Bank is a northern financial powerhouse and a spinoff of the well-known Clydesdale Bank. They are now promoting a loan with an enticingly low APR and straightforward, unambiguous payback conditions.

Usually reserved for mega-banks, Yorkshire puts its own twist on the practise. It takes as little as 10 minutes to apply for this loan online, and you might hear back from the lender in as little as 48 hours.

One significant drawback of the programme is its annual revenue threshold of £5 million, which may rule out participation from many startups and smaller enterprises that aren't yet established enough to go public and get shareholder backing.

PROS

  • No fees for paying off the loan in full at any time
  • Financial banking powerhouse

CONS

  • The company's financial records need to go back at least 18 months

Grants & Loans Startups Buying Guide ⭐

A Roadmap to Success 🗺️

Funding for startups is commonplace in the first two years of operation from many different kinds of businesses.

Lenders take several factors into consideration when deciding whether or not to provide a loan, so although a credit check is a standard part of the application process, they are willing to deal with businesses with varied credit scores.

What are the typical requirements for obtaining a loan to kick off a new business? If you want a startup financing, your business must meet these minimal criteria:

A minimum of six months of business activity is required to apply for a startup loan, with twelve to twenty-four months being preferred. (It's required to become registered in the UK.)

You need to be at least 18 years old under the law to own a business.

The principal proprietor of any firm must be above the age of eighteen, and all operations must take place inside the United Kingdom.

How Startup Grants & Loans Work

There is a large range of commercial loans available, each with its own set of advantages. One consideration when selecting a format is the stage of growth that your business is now at.

As with individuals, businesses may have a credit history and score. In that case, securing money shouldn't be too hard. A new business won't have much of a credit history, so a lender would probably want to take things gradually or want some kind of collateral.

Funding the launch of a new business or the growth of an existing one is the primary purpose of “start-up” loans. Provided for periods of one to five years, they are sometimes sponsored by the government.

Larger Volumes are Possible than a Credit Card 💳

Lenders are more likely to provide credit to businesses that have been operational for a long and have a track record of making payments on time. Options like company credit cards and factoring are further choices.

There are benefits and drawbacks to receiving government funding for your firm, however. A business loan might be the best option if you require access to a sizable volume of money for a longer period of time than you would get with a company credit card. Whilst not the least adaptable option, meeting the prerequisites isn't always easy.

Pros ☑️

Large quantities of money may be borrowed and disbursed all at once, making this kind of financing great for one-time bills like building out a new office or buying new employees.

It will be made very clear up front what your interest rate and monthly payment will be.

Interest rates that are lower than those offered by business credit cards (depending on your creditworthiness: subject to status).

In the grand scheme of things, the loan conditions are beneficial. A select group of loan providers now offers extended payback periods of up to 25 years.

Cons ❌

Not very flexible; you should know the exact amount you need to borrow before applying.

There is a chance that the bare minimum loan amount is more than what you'll really need.

Potential penalties for early repayment.

Some banks have strict restrictions for yearly revenue, credit history, and the kind of business that seeks a loan from them.

To get a loan, you may need to put up collateral and provide a personal guarantee.

You can improve your financial situation if you are struggling to make ends meet.

Nevertheless, not all loan companies are forthright about their rates up front.

Startup Grants & Loans Tips 💡

A loan might be compared to a dose of adrenaline for a startup business. Startups face substantial costs in their early stages.

Possible applications of the funding include:

Budgeting for Seed Money and Other Beginning Costs

It takes time and money to start a business, from doing the necessary research and planning to hiring workers and purchasing enough inventory to fulfil consumer demand. The first few months of a company's existence are often the most challenging. Without access to outside finance, it may be challenging to sustain continuous operations when initially starting out.

One of the most costly aspects of starting a company is purchasing or leasing suitable premises. One of the toughest parts of launching a business is securing a lease or purchase of a suitable site.

Spreading the News

Both PR and marketing are crucial for any business hoping to thrive. For up-and-coming businesses trying to create a customer, this is crucial. You can build awareness for your business and launch a marketing campaign using these resources.

eCommerce

An efficient website is essential for expanding a business's reach and attracting new customers.

An additional benefit of business finance is the ability to hire a web developer to create a technologically savvy website with a professional appearance.

More than half of all searches are now done on mobile devices, and there is a growing consumer middle class in developing markets.

Hiring Staff

At some point, you'll need to hire additional people to help run the business. It may be expensive to hire new employees, but waiting until it's too late to do so might have a catastrophic impact on your company's success.

Apply Caution

If you need to borrow money, you should do it with prudence. It may be both exciting and worrisome to receive a huge quantity of money for your business. Borrowing money is a great opportunity, but you must use it properly and prevent frivolous spending.

You should try to avoid transferring corporate funds into your primary business account unless absolutely required.

Good Relations 

Maintaining cordial connections with your lender is essential.

Keeping an open line of contact with your lender is essential to maintaining good relations in the event that you have difficulty making a repayment on the due date. Setting up automatic payments might help you avoid penalties for paying late or missing deadlines.In most cases, taking on debt is a wise decision if doing so will result in the creation of a reliable asset, such as a decent mortgage on a desirable piece of real estate.


Conclusion 🏁

According to conventional wisdom, borrowing money is acceptable if it is used to acquire an asset with a high probability of future profitability, such as a good house. The price of the home will never reach £0. Yet, you will need to give this topic a lot of thought since, according to certain surveys, almost half of firms fail within the first five years.

Thank you for taking the time to read this information. One final time, these are the top five loans for new businesses:

  • ☑️ Fleximize
  • ☑️ The British Commercial Bank
  • ☑️ Administration in the United Kingdom
  • ☑️ Clydesdale Business Capital
  • ☑️ Virgin

FAQs

During the recession, are banks willing to provide me a loan to launch my company?

Because of the state of the economy after the pandemic, it may be difficult to get a loan from a traditional lender to launch a new business.

If you operate a business and have an investment account in the United Kingdom but have had problems acquiring a loan to get things started, you may want to look into our guide to potential financing channels for COVID-19.

Included are not just the funding options already provided by the government to startups, but also competitive alternatives.

At what percentage does a loan to a new company start earning interest?

A company startup loan's annual percentage rate (APR) is tied to both the lender and the kind of funding selected. The interest rate may also vary according to the company's age, credit, and monthly sales volume.

Hence, it is difficult to foresee with precision what an interest rate on a loan to start a business would be. If you are unsure about the APR, it is in your best interest to ask the lender you are matched with.

What are some reputable places in the United Kingdom to apply for a business loan? 😎

It might be difficult for a new company in the United Kingdom to get the best loan for their specific requirements due to the wide variety of options available. Good terms for a startup loan include affordable interest rates, a flexible payback timeline, and enough funding to launch the business.

A reliable credit broker will have established ties with many banks and other lending organisations that are eager to work with startups.