We source high-quality startup finance solutions for our clients.
- Market-leading rates
- Business loans, commercial property finance, cash-flow funding, merchant cash advances, asset finance, VAT loans and business acquisition finance.
- Loans for retail outlets, restaurants, cafes, hotel loans, guest houses and B&Bs, offices, warehouses, industrial units, manufacturing, HMOs, nursing and care homes, gyms, investment properties, development land and buy-to-let property (portfolios and limited companies welcome)
Business startup loans - how we can help
We offer a range of startup loan solutions, from securing finance for an existing business to acquiring a business. Every business is unique, so our business finance experts provide bespoke financing solutions.
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Why Do Lenders Provide Startup Loans?
Do I Need Money To Get a Startup Loan?
How Important is a Business Plan?
How Relevant is My Credit History?
Launching a business requires a certain level of financial investment - it is rare that a business can rise from literally nothing. For some entrepreneurs, start-up loans can offer a necessary boost of capital.
In this article, we cover everything you need to know about start-up loans. From what constitutes a startup loan, to what they can be suitable for and alternative sources of funding that can be used in their place.
Startup Loans Explained
A startup loan is a type of financial support provided to new or early-stage businesses to help them get off the ground and cover various initial expenses.
Startup loans are used to fund the initial costs of starting a business, which can include purchasing equipment, acquiring inventory, covering marketing expenses, hiring employees, and securing office or retail space.
In business, a startup is considered a business that has been trading for three years or less. If your business has been going for more than three years, you are ineligible for any sort of startup loan.
Below are some examples of financial solutions that can be considered startup loans:
|
Finance |
Is it a Startup Loan? |
|
Unsecured bank loan |
Yes, if in the first 3 years of business |
|
Unsecured personal loan |
Can be depending on terms of the loan |
|
Secured bank loan |
Yes, if in the first 3 years of business |
|
Asset finance |
No, though some asset finance is designed for startups |
|
Government grant |
No |
|
Business grant |
No |
|
Peer-to-peer loan |
Yes, if in the first 3 years of business |
|
Invoice finance |
No |
|
Merchant cash advance |
No |
|
Commercial mortgage |
No |
|
Personal director investment |
No |
|
Personal director loan |
Yes, if in the first 3 years of business |
|
Venture Capital |
No |
|
Credit cards |
No |
|
Bank account overdraft |
No |
Why Do Lenders Provide Startup Loans?
It’s correct to assume that banks tend to shy away from risky investments. But while offering loans to young businesses can be risky, the pros often outweigh the cons when providing capital to promising startups.
New businesses are the lifeblood of the country’s economy. While established corporations play a significant part in the country’s success, it is the startup that often brings the innovation to prevent a stifled economy and drive growth.
Startups seeking funding are also exceptionally good business for financial institutions, who take care to lend money to businesses with a strong chance of success, making profit from interest and any other associated fees.
Because of this, financial institutions and the government both have an incentive to support new enterprises with startup loan products.
Alternatives to Startup Loans
As seen in the chart above, there are many different financial products that may not be startup loans but are still good tools in the arsenal of a young business.
Grants and investments are two alternative financial channels available to the entrepreneur, while line of credit solutions such as credit cards, bank overdrafts, and merchant cash advance can prove invaluable in the early years of business.
Do I Need Money to Get a Startup Loan?
Probably. One of the biggest questions when looking to start a business is how much of your own money you will need to invest. In truth, this is a complicated question as it forms part of the whole package you are presenting to potential lenders. In many cases, you will need to show you have some money to put into the business yourself.
Banks and other lenders are looking to mitigate their risk, and seeing that you are willing to put your own money forward to your business is a strong indicator of your faith in the idea.
How much money you need to invest will differ based on many other factors - including the strength of your business plan, your experience in the work, and the profitability of the business sector.
In many cases, the more capital you can put forward, the stronger your application will be. Don’t let that put you off the application, though, as it is possible to be accepted for a startup loan even if you don’t have much in the way of personal capital to invest.
How Important is a Business Plan?
Very. In terms of being eligible for a startup loan, your business plan is the most important document you will have. A professional business plan showing the viability of your business model is certainly a large part of instilling the lender with confidence.
Your business plan is more than simply the financial forecast, although that is a very important aspect. It also details the strength of your idea, presents your experience in the industry, and shows your passion and belief in the business.
It is advantages to polish your business plan to present your company in the best possible light. Remember, there is help available to complete your business plan, from specialist companies who will work with you to write the perfect plan to charitable institutions who will provide advice on writing business plans for free.
How Relevant is My Credit History?
Very. Both your personal credit history if you are a director, sole trader, or partner will be looked at in detail by a prospective lender, and the business credit history will also be considered.
If your business is very new, it will not have relevant credit scoring and greater weight will be placed on your personal credit and those of the other directors or partners in the business.
If your credit history has taken a recent hit, it may be worth working on improving it for a few months before applying for a startup loan.
Next Steps
Navigating the world of startup loans can be confusing, especially if it is your first venture into securing business finance. As a specialist finance broker, Clifton Private Finance can provide a clear picture of the options available to you. We will assess your specific set of circumstances and arrange a finance solution tailored to your needs.
Our team have all the experience needed to get your business the startup funding it needs to become a reality.
Contact us now for some one-to-one personal advice.Call us on 0203 880 8890 or book a free consultation below to discuss your options.
Getting a Startup Loan - FAQ
Do I Need to go to a High-Street Bank?
No. There are many different financial institutions that offer startup loans, and you are not limited to high-street banks – it's about finding the product that best fits your needs.
But mainstream banks should not be ignored either, they offer a wide range of startup products, and your bank may be the best source of funding if it offers a product that is the right fit for you.
Will I Be Personally Liable for a Startup Loan?
Possibly. This may depend on your status as a business and even limited liability company directors may be asked toprovide personal assurances when obtaining a startup loan. Different lenders will have different terms but many will ask for a personal guarantee.
For sole traders or partnerships, a business loan of this nature will always involve personal liability.
Is There Government Help for Startup Loans
Yes. The UK government has multiple schemes for helping new businesses, one of which is the government-backed Start Up Loans program, which offers loans at a fixed 6% interest per year.
Any government-backed plans will have specific criteria. For example, the Start Up Loans scheme is limited to one loan of up to £25,000 per applicant per business and is considered a personal loan with all the liabilities therein.
If you have any questions about our services or want to start making things happen please contact us
