Starting a business often requires money before the first sale comes in. You may need to buy equipment, develop a website, purchase stock, rent premises or cover early operating costs. If you cannot secure traditional business finance, a government-backed Start Up Loan could be an option.
In the UK, the Start Up Loans scheme provides eligible individuals with unsecured personal loans of £500 to £25,000, at a fixed interest rate of 7.5% per year, repayable over one to five years. Successful applicants can also receive up to 12 months of free business mentoring.
This guide explains who can apply, how much borrowing costs, what documents you need and how to complete an application in 2027.
Table of Contents
What are business start-up loans in the UK?
A Start Up Loan is a government-backed personal loan designed to help individuals start or develop a UK-based business. The scheme is delivered through the British Business Bank’s Start Up Loans programme.
Although the money is intended for business purposes, the loan is made to you personally rather than to your limited company or business. You are responsible for repaying it, even if the business does not succeed.
The main features in November 2026 are:
- Loan amount: £500 to £25,000 per applicant.
- Interest rate: Fixed at 7.5% per year.
- Repayment period: One to five years.
- Security: No business assets or guarantor required.
- Application fee: None.
- Early repayment fee: None.
- Additional support: Free business guidance and up to 12 months of mentoring for successful applicants.
It is a loan, not a grant. You must repay the borrowed amount and interest according to the agreed schedule.
Who is eligible for a Start Up Loan in 2027?
You may qualify if you are at least 18, live in the UK, have the right to work here and plan to operate a UK-based business.
A major change took effect on 6 April 2026: the scheme extended its trading-history limit from 36 months to 60 months. This means businesses that have been trading for up to five years can now be considered, rather than only businesses in their first three years.
The main eligibility conditions include:
- You must be 18 or older.
- You must currently live in the UK and have the right to work here.
- Your business must be based in the UK.
- You must be starting a business or have been trading for less than 60 months.
- You must have a suitable business idea and an eligible reason for borrowing.
- You must meet the scheme’s credit and affordability requirements.
- You must be unable to secure suitable finance from other sources, in line with the scheme’s criteria.
You can apply before your business starts trading. Existing businesses, partnerships and some franchise or business-purchase plans may also qualify, subject to the scheme’s rules.
Can you apply with a poor credit history?
A poor credit history does not automatically rule you out. However, the scheme carries out a personal credit check and considers your financial circumstances.
Certain situations, including current bankruptcy, an outstanding Individual Voluntary Arrangement (IVA), a Debt Relief Order (DRO) or certain debt management arrangements, can prevent an application from being approved.
The lender also needs to establish that you can afford the monthly repayments. Approval is not guaranteed simply because you meet the basic age and business requirements.
How much can you borrow, and what does it cost?
You can apply for between £500 and £25,000. The interest rate for new successful applications from 6 April 2026 is fixed at 7.5% per year.
The repayment period can be between 12 and 60 months. A longer term generally reduces the monthly payment but increases the total interest paid.
For example, the scheme’s repayment calculator gives the following indicative figures:
| Amount borrowed | Repayment term | Monthly repayment | Total repayment |
|---|---|---|---|
| £2,000 | 5 years | £40.08 | £2,404.55 |
| £5,000 | 5 years | £100.19 | £6,011.38 |
| £10,000 | 5 years | £200.38 | £12,022.77 |
| £10,000 | 3 years | £311.06 | £11,198.24 |
These are examples, not personalised offers. Check the official calculator for the latest figures before applying. <Cite refs={[“turn851529search0″,”turn851529search3”]} />
Are there any application or early repayment fees?
There is no application or set-up fee for the government-backed scheme. You can also repay the loan early without an early repayment charge.
However, interest still forms part of your agreed repayments. Before borrowing, consider whether your business can generate enough income to cover its costs and your personal loan commitments.
Remember that the debt remains your responsibility if the business closes or makes less money than expected.
What can you use a Start Up Loan for?
The loan is intended to cover reasonable costs involved in starting or developing an ongoing business.
Depending on your business plan, suitable spending may include:
- Equipment, tools and machinery.
- Initial stock and materials.
- Website development and online services.
- Marketing and advertising.
- Business premises and related start-up costs.
- Working capital and other approved operating expenses.
There are restrictions. You cannot use the scheme to repay existing debts, pay for training or education programmes, or fund investment opportunities that are not part of an ongoing sustainable business.
Explain exactly how you intend to spend the money in your application. A clear breakdown makes it easier for an adviser to assess whether the amount requested is reasonable.
How to apply for a Business Start-Up Loan
Applications are made online through the official Start Up Loans programme. The process includes an eligibility assessment, a personal credit check and a review of your business and financial documents.
1. Check your eligibility
Start by reviewing the scheme’s age, residency, business and trading-history requirements. Make sure your proposed business activity and intended use of the money are permitted.
2. Prepare your business plan
Your business plan should explain:
- What your business will sell or provide.
- Who your target customers are.
- How you will attract and retain customers.
- Who your competitors are.
- How the business will generate income.
- What you need the loan to pay for.
Use realistic sales estimates and explain the assumptions behind them. A lender needs to understand how your business could become financially sustainable.
3. Complete your financial documents
You will generally need three important documents:
- Cash flow forecast: A month-by-month estimate of money coming into and leaving the business over the next 12 months.
- Personal Survival Budget: A breakdown of your personal income and living expenses to show whether you can afford the repayments.
- Personal bank statements: Usually three months of statements that support the figures in your personal budget.
You will also need personal identification, proof of your UK address and evidence of your right to work. The application may request further information about your finances and other funding.
4. Complete the credit check
The scheme carries out a personal credit check to assess your financial history and ability to repay. This is recorded as a hard search on your credit report and may affect your credit score.
The credit check is generally valid for 90 days. If your application takes longer, another check may be required.
5. Work with a business adviser
If you pass the initial checks, you will be matched with a Business Support Partner. An adviser can help you improve your business plan, cash flow forecast and personal budget before the application is assessed.
Your application is reviewed against three main areas: creditworthiness, personal affordability and the viability of your business plan.
If approved, you will receive loan documents from the finance provider. Read the agreement carefully before signing.
How long does it take to receive the loan?
There is no guaranteed processing time. The official scheme says applicants who have prepared their documents may complete the process in around two to three weeks. Applications that need more guidance or additional information can take two to three months or longer.
You can reduce avoidable delays by preparing your business plan, cash flow forecast, personal budget and bank statements before starting the application.
Is a Start Up Loan the right option for your business?
A Start Up Loan may suit someone who needs a relatively modest amount of funding and wants support with business planning. It can be useful for a new business that has not yet built the trading history required by many traditional lenders.
However, compare it with other funding options before committing.
| Funding option | What to consider |
|---|---|
| Start Up Loan | Fixed interest, personal liability and free mentoring |
| Traditional business loan | Eligibility may depend on trading history, security and business finances |
| Business grant | May not need repayment, but eligibility and permitted spending can be restrictive |
| Personal savings | No loan interest, but uses your own money |
| Private investment | May provide funding without loan repayments, but could involve giving up a share of the business |
The right choice depends on how much money you need, how quickly you need it and whether the business can support regular repayments.
Frequently asked questions
Can I get a Start Up Loan before my business starts trading?
Yes. You do not need to be trading already. You must have a clear business idea and provide a business plan and financial forecasts as part of your application.
Do I need to provide security or a guarantor?
No. The scheme provides unsecured personal loans, so you do not normally need to offer business assets or a guarantor. However, you remain personally responsible for repayment.
Can two business partners apply for separate loans?
Yes. Eligible owners or partners can apply individually for up to £25,000 each. The scheme allows a maximum of £100,000 per business, subject to each applicant meeting the eligibility and assessment requirements.
Is a Start Up Loan a grant?
No. It is a loan that must be repaid with interest. A grant is different because it generally does not need to be repaid if you meet its conditions.
Can I apply if my business has been trading for four years?
Yes, potentially. Since 6 April 2026, the scheme has allowed applications from businesses that have been trading for up to 60 months, or five years. Other eligibility and lending checks still apply.
Final thoughts
Business Start-Up Loans can provide useful funding for UK entrepreneurs who need money to launch or develop a business. The 2026 scheme offers loans of £500 to £25,000 at a fixed 7.5% interest rate, with repayment terms of up to five years and free mentoring for successful applicants.
Before applying, work out exactly how much you need and whether your business and personal finances can support the repayments. A realistic business plan and cash flow forecast will help you make a stronger application and decide whether borrowing is the right step.
