What is the Start Up Loans scheme and how does it work?

What the Start Up Loans Scheme Is

Start Up Loans is a UK government-backed programme delivered by the Start Up Loans Company, a subsidiary of the British Business Bank, which is wholly owned by the government. It’s built specifically for people starting a business or in the first few years of running one, at a point where most mainstream banks won’t lend because there’s no trading history to underwrite against.

The scheme works differently from a normal business loan in one important respect: the money is lent to you as an individual, not to your company. That structure is what allows the scheme to lend to pre-revenue founders in the first place, since the credit decision is based on your personal circumstances and the credibility of your business plan rather than on company accounts that don’t yet exist.

Start Up Loans is one of two live UK government-backed lending schemes as of August 2026, alongside the Growth Guarantee Scheme for more established businesses. If your business has been trading for a while and you’re looking for larger commercial finance rather than a personal start-up loan, our Growth Guarantee Scheme guide covers that route instead.

Current Rate and Loan Amounts

The terms below reflect the scheme as it stands in August 2026, following a change that took effect on 6 April 2026:

• Interest rate: fixed at 7.5% per year, charged on the reducing balance. This is up from the 6% rate that applied before 6 April 2026. Some older articles, comparison sites, and even lender listings still quote the previous 6% figure; treat any source quoting 6% as out of date.
• Loan amount: £500 to £25,000 per individual applicant.
• Per-business maximum: each founder or director can apply separately, so a business with multiple co-founders (up to four) can collectively access up to £100,000.
• Term: 1 to 5 years.
• Fees: no arrangement fee and no early repayment charge. You can overpay or settle the loan in full at any point without penalty.
• Security: unsecured, with no personal guarantee required, because the loan is already made directly to you as an individual.

Because the rate is fixed and identical for every approved borrower, there’s no negotiation and no “representative APR” that only the best-qualified applicants actually receive: 7.5% is what everyone pays.

Who Can Apply

Eligibility has also changed alongside the rate. As of the April 2026 update, you can apply if:

• Your business is based in the UK and either hasn’t started trading yet or has been trading for under 60 months (five years). This is an extension from the previous 36-month (three-year) limit.
• You are 18 or over and have the right to live and work in the UK.
• You have a viable business plan and cash flow forecast, or are willing to work with your assigned adviser to build one during the application.
• You are not currently in bankruptcy, subject to a live Debt Relief Order, or in an undischarged Individual Voluntary Arrangement.

A small number of business types are excluded regardless of how long they’ve been trading or how strong the plan is, including property investment, gambling and betting, FCA-regulated financial services such as banking and money transfer, and a handful of other restricted sectors. Loans also cannot be used simply to repay existing debt or to fund a course, qualification, or investment opportunity that isn’t part of an ongoing trading business.

Applying With More Than One Founder

Because the loan attaches to the individual rather than the company, each director or co-founder in the same business can apply for their own Start Up Loan, each up to the £25,000 cap. In practice this means a business with four founders could raise up to £100,000 in total, spread across four separate personal loan agreements rather than one larger business loan. Each applicant goes through their own credit check and affordability assessment, so approval for one founder doesn’t guarantee approval for another.

The Mentoring and Support That Comes With It

What sets Start Up Loans apart from a normal personal or business loan is the support bundled in alongside the money. Every approved borrower gets up to 12 months of free business support, which includes:

• A dedicated business mentor for one-to-one guidance after you’ve received funding.
• 24/7 access to online resources, guides, and templates covering common early-stage business questions.
• Live and recorded webinars from industry experts on topics like marketing, cash flow, and hiring.

Before you even reach a lending decision, you’re also paired with a business adviser during the application itself, who helps you put together the business plan and cash flow forecast the assessment is based on. For a first-time founder, this pre-application support is often as valuable as the loan itself, since it forces a level of planning rigour that’s easy to skip when you’re moving fast.

How the Application Works

Applying for a Start Up Loan is not an instant online decision. You submit an application through a delivery partner, work with your assigned adviser on the business plan and forecast, and then go through a credit and affordability assessment before funds are released. Because of the planning stage, the process typically takes several weeks from first application to funds landing, considerably longer than a same-day decision from a commercial alternative lender.

Lendus is an introducer, not a lender, a credit broker, or a delivery partner for the Start Up Loans scheme. We don’t process Start Up Loans applications ourselves. What we can help with is working out whether a Start Up Loan is the right fit for your stage of business in the first place, and if it isn’t (for example, if you need funding faster than the scheme’s timeline allows, or you’ve already been trading more than five years) pointing you toward commercial alternatives that might suit better, such as an unsecured business loan from a specialist lender.

Start Up Loans vs a Commercial Alternative

For a genuinely pre-revenue or very early-stage business, Start Up Loans is usually the cheaper route by a wide margin: a fixed 7.5% APR is far below what an unsecured start-up-friendly commercial lender would typically charge for lending to a business with no trading history. The trade-off is speed and ceiling: the application process takes weeks rather than days, and £25,000 per founder is a hard cap. Once a business has a few months of real trading behind it and needs more than £25,000, or needs it faster than the scheme allows, commercial lenders willing to look at short trading histories become the more realistic option, even at a higher rate.

What Happens If You Can’t Repay

Because a Start Up Loan is a personal loan, not a company debt, the consequences of missing payments fall on you directly rather than on the business. If the company later fails, the loan doesn’t fail with it: you remain personally liable for whatever is still outstanding, and missed payments are reported to credit reference agencies against your personal file in the normal way. This is one of the trade-offs of a structure that otherwise makes the scheme so accessible to founders with no company track record to lend against. It’s worth going into the application with a realistic view of what you can afford to repay even in a scenario where the business doesn’t perform as planned, rather than treating the approval itself as proof the amount is affordable.

Checking the Terms Before You Apply

Because the rate and eligibility rules on this scheme have both changed within the last few months, it’s worth confirming the current figures directly with the British Business Bank or the Start Up Loans Company before you apply, rather than relying on a comparison site, a forum post, or an older guide. A rate or eligibility limit that was accurate a year ago may no longer be, and the only way to be certain you’re working from the current terms is to check the scheme’s own published position at the point you apply.