Starting your own business can seem daunting, especially when it comes to finding funding.
However, the UK Government have backed Start Up Loans that are available to help you get started.
What is a Government-backed Start Up Loan?
The Government-backed Start Up Loan is a type of money lending scheme for people creating or expanding a business (as long as it is less than three years old) that has been approved by the Government.
The money you can borrow ranges from between £500 to £25,000, which you can borrow over a term of one to five years.
All owners of the business can apply for up to £25,000 separately, with a maximum of £100,000 available per business.
How is it different to a normal business loan?
Unlike normal business credit lending, the Start Up Loan is a personal one. This means that for your application to be successful, you will need to have credit checks to ensure you can pay it back.
Furthermore, it is an unsecured loan, meaning that there is no need to put forward assets or provide a guarantor for approval.
The interest rate is also fixed at six per cent per annum over the whole lending period too, and there are no fees when applying for the loan or if you decide to pay it back early.
Additionally, when you apply for a Start Up Loan, you will get support to complete the application, as well as 12 months of free mentoring and exclusive business offers, including discounts from brands such as O2 and Experian.
Further financial advantages
Some further advantages of the Start Up Loan include being able to tranche it. This means that you can split what you have been approved for, and borrow some now, then keep the rest of it for the future in case you need it.
This is particularly helpful as it means that you can take the extra finance if needed, or not use it at all if it’s unnecessary. You will not start paying interest on the additional amount until you take it out, and it will remain at the six per cent interest rate.
An additional financial advantage is that you can apply for a secondary loan too. Your success in this will depend on how you repaid your first loan, but it can be helpful if you are in need to purchase additional equipment for your business to keep it flourishing.
Am I eligible to apply?
You can apply for this loan so long as you are a UK resident over the age of 18, you are starting a new business (or growing a business that is less than three years old), and you have been unable to secure funding from elsewhere. Furthermore, your business must be eligible and based in the UK, and you must pass the necessary credit checks to ensure you can pay back the loan.
It should also be mentioned that you cannot use the loan to pay back any debt, pay for training and education, or use it for investment opportunities that do not form part of a sustainable business.
The three main things that will be checked in your application are your credit worthiness, your own personal affordability, and your business’ viability.
If you would like more information about how to financially prepare starting or expanding your business, please contact us.
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