Powerup Your Vision With Startup Business Loans

March 5, 2024

Your business idea will move ahead a lot faster when you have more working capital at your disposal.

Which is why startup business loans are so valuable. Even when you're putting a chunk of your own money into the business, having access to a loan facility will make a massive difference.

With the right finance in place, you may be able to accelerate growth, helping to secure your place in the market you're looking to break into.

What is a startup business loan?

Startup business loans are finance for entrepreneurs in the early days of planning or setting up their business. Every lender has their own criteria for deciding who qualifies. Some are willing to lend when your business is still at the planning stage, while others may be willing to provide startup finance even when you've been operating for a year or so.

Startup loans are particularly important because many mainstream lenders, such as a high street bank, are wary of lending to support a business idea. They prefer to provide funding for a business that's already operating and is proving that it can deliver profits.

There's a larger element of risk in lending to a startup, because not all good ideas can grow into successful, profitable operations.

Startup loans are valuable because they can help you invest in:

  • Inventory
  • Employees
  • Marketing
  • Premises
  • Plant and equipment

Whatever your business, you'll need some, if not all, of these.

Government-backed startup loans and grants

The UK government is keen to support enterprise and there are a number of government-backed loan and grant schemes available. Some operate nationally while others have a regional or industry focus, typically on areas that are considered in need of new investment.

Startup grants

The grant schemes offer the opportunity to receive cash that doesn't need to be repaid. This can be hugely valuable, but unsurprisingly, grant-giving bodies want absolute confidence that the funding will be used for its intended purposes and, where possible, it will go into businesses that are successful. This usually requires completion of a considerable amount of paperwork, usually without the guarantee that the grant will be awarded. You have to decide whether it's worth the investment of time and effort.

Benefits of startup loans

A benefit of a government-backed startup loan is that you could receive expert advice, or mentorship, as part of the finance package. Startup loans often come with a package of support for the business owner, to help guide them through the early days of setting up their operation.

The support often includes the services of a mentor, a specialist who provides advice during the early days of the business. This is particularly valuable for the first-time business owner, as they set out on their entrepreneurial journey.

You need a business plan

As part of the startup loan application process you will be asked to provide a business plan.

This can sound daunting, but if your business is going to be successful, this plan already exists, even if only in your head or in various notes that you've made.

Creating a business plan for a bank or other lender simply involves documenting these thoughts into a single, coherent document.

Your business plan should include:

  • Your overall vision for the business.
  • Business goals, with estimates of when they will be reached.
  • A strategy for achieving these goals.
  • A budget and cashflow forecast.
  • A list of the resources the business needs.

A business plan does not need to include lots of graphs, charts, or even lots of words. In fact, the shorter it is, the easier it is to read. If you're unsure about how to put a business plan together, there are loads of free examples available online, or speak to a business professional, such as an accountant, and they should be able to help you out.

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Factors to consider when looking at startup business loans

Every startup loan comes with slightly different options and terms. When you're considering your options, these are among the factors you should take into account:

Amount available

Will the loan give you the level of working capital that you need for your business to get off the ground quickly? In your planning you need to be clear about the amount you need to get the business up and running, including marketing and getting through the early weeks before customers start paying. Businesses fail because they run out of cash. If the loan isn't enough, you should look at other options, with either a different provider or by boosting it with other investment.

Interest rate and loan term

You're borrowing money because you expect your business profits to exceed the cost of borrowing, in particular, the interest that you're charged. The rate you're offered often reflects the level of risk that the lender feels they are taking. This is influenced by factors such as the industry you're in, your credit history, the term of the loan and the level of security that you can offer.

The loan term is the period over which you plan to make repayments. This is typically between one and six years. Many loans allow you to repay early without penalties, which can be useful if the business performs better than you expected.

Security required

Most loans for startup businesses are unsecured. This means the lender has no rights over any of your business assets. In a secured loan arrangement, the lender has rights over a specific asset, such a property. If you can't repay the loan, they can take control of the asset in order to recover some of what they are owed.

In an unsecured loan arrangement, you may be required to provide a personal guarantee. This commits you to personally repaying the loan even if the business is unable to.

Alternatives to startup loans

Not all entrepreneurs use a traditional loan, repayable over a fixed term, to finance their business. A growing number of alternatives exist, some of which are more flexible.

These alternatives include:

  • Working with an angel investor, who usually wants a share in the ownership of the business in return for their cash.
  • Crowdfunding, through one of a growing number of websites that allows small investors to put money into a business.
  • Invoice finance, a short-term finance option that provides working capital for B2B operations.

The digital technology revolution continues to provide new ways for those looking to lend to connect with new businesses seeking capital.

Let us help you unlock finance for your new business

Whatever stage you’re at in your business journey, we can help you raise the money you need right now.

Whether you’re a startup, you’re planning a new growth phase, or you simply need short-term capital to cover a shortfall, talk to us. Our team of specialists has helped many other businesses like yours.

Because we work with a panel of 250 funding providers, we have access to a wide variety of finance solutions. They include loans, invoice finance, asset finance and other options.

Don’t let lack of working capital hold you back. Get in touch with us today to see how we can help you.

Jamie Davies
Managing Director

As a founder of multiple businesses, Jamie believes that mindset, discipline and ambition are key drivers for success, both for his businesses and for his clients. 

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