Start up business loans: the government scheme and what else a new business can do

Start up business loans are borrowing for a business that is new or has not started trading yet. In the UK the phrase mostly points to one thing: the government-backed Start Up Loans scheme, which lends £500 to £25,000 to an individual at a fixed 7.5% a year. Most commercial lenders work differently. They want to see trading history before they lend, so a business with no filed accounts has fewer routes than an established one.

This guide sets out what the scheme offers, who can apply and what else a new business can realistically do. One point first: Capzy does not arrange Start Up Loans. You apply for one through the scheme itself.

The scheme lends a fixed sum to you personally, to spend on starting or growing your business, and you repay it in instalments with interest. Start Up Loans is part of the British Business Bank, is funded by the Department for Business and Trade and is delivered through a network of Business Support Partners.

Loans drawn before 6 April 2026 keep the rate they started with for their whole life. A page that still quotes 6% for new loans is out of date.

According to Start Up Loans, as shown in October 2026, the scheme has made 136,439 loans worth £1.4bn since it began in 2012.

You can apply if you live in the UK, are 18 or over, and have or plan to start a UK-based business that has been fully trading for less than five years. The trading limit was 36 months until 6 April 2026, when it was extended to 60 months.

• Right to work. The British Business Bank’s guide adds that you need the right to work in the UK.
• Excluded businesses. Some types of business are not eligible. The Bank’s examples include property investment, banking and money transfer, and gambling. Check the scheme’s current list before you plan around it.
• A credit check. The scheme carries out a credit check on you, so meeting the basic rules does not mean you will be accepted.

You need three documents: a business plan, a 12-month cash flow forecast and a personal survival budget. The forecast shows the money you expect the business to bring in and pay out each month, and the personal budget shows what you need to live on while the business gets going.

The numbers matter more than the prose. If you have not built one before, our guide to writing a cash flow forecast explains the steps. The scheme also gives applicants free support and guidance to help write the business plan, so you do not have to arrive with a finished one.

Applications go through the scheme’s own pages, which are listed in the sources at the foot of this post.

It is a personal loan. The scheme describes it as an unsecured personal loan for business purposes, so you are the borrower, not your company. Unsecured means no asset is pledged against it. It does not mean the debt disappears if the business does.

Yes, once the first is established. The scheme says you must have drawn down your first loan at least six months ago, been trading for at least three months and no more than 60 months, and made every repayment on schedule for the three months before you apply.

A second loan carries the same fixed 7.5% a year over one to five years, and your total outstanding balance cannot go above £25,000 at any one time.

Most commercial lenders want trading history because it is their evidence that the business can afford the repayments. Filed accounts and months of bank statements show what a business earns and how it handles money. A new business has a forecast instead, and a forecast is a plan, not a record.

Where a lender will look at a young business, it usually leans harder on the people behind it: the owners’ own credit files, and often a personal guarantee. The British Business Bank notes that lenders typically require one for unsecured loans. The FCA has also recorded small business representatives saying that guarantees are commonly required where businesses lack collateral, including among newer firms.

Minimum trading periods differ from lender to lender. Ask about it before you apply, not after.

A new business has four realistic routes beside its owners’ own money: a Start Up Loan, grants, asset finance and, at a lender’s discretion, a loan under a government guarantee. None is certain, and each suits a different need.

Grants are worth checking first because they are not repaid. Our guide to small business grants shows where to search and what conditions to expect.

If the money is for a van, an oven or a machine, asset finance is designed for that purchase. With hire purchase you take ownership once every payment is made. With a lease you pay rentals to use equipment the finance company owns.

For how the state-supported schemes fit together, see our overview of government-backed business loans.

Borrowing is the wrong move when the plan only works if everything goes to plan. Repayments start on a fixed date whether or not the sales arrive, and with a personal loan they follow you if the business stops.

• Run your forecast again with lower sales and a later start. If the repayments no longer fit, borrow less or wait.
• Borrow for things that earn, such as equipment, stock or a launch, not to cover losses with no end in sight.
• Keep your own living costs out of the loan unless your personal budget shows how they will be met once it is spent.
• Do not apply to several lenders at once to see what happens. A full application may involve a hard search on your credit file.

Capzy is a credit broker, not a lender, and gets paid by the lender. We do not arrange Start Up Loans or grants, so if your business has not started trading, begin with the scheme and the grant finder.

Once you are trading and want to see commercial options, such as finance for equipment, you can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and all funding is subject to status and lender criteria.