Start Up Loans are the best deal that you will get if you need a cash injection to get your new business off the ground. But it’s not a fast or simple process. Read our tips before you start applying to save yourself time and energy.
What are Start Up Loans
Start Up Loans is a Government programme open to new businesses in England, Wales, Scotland and Northern Ireland. the scheme offers loans of up to £25,000 (the average loan is £7,200). The interest rate is a very reasonable 6% p.a., with repayment loans of 1-5 years and no additional fees.
What’s more you’ll be provided with a business adviser to help you to improve your application and a mentor to support you in the early days of the business.
The Start Up Loans scheme process can be quite slow and cumbersome. The guidance says the application process should take from 4 to 8 weeks, but we know of some applications that have taken over 6 months. The sooner you can present a good business plan, the faster the process will be.
While your business is still at the idea stage you may be feeling a bit hesitant and unsure. Be prepared for your motivation to fluctuate and some days you’ll wake up feeling like a complete idiot and that the whole idea is a waste of time.
So how do you stay motivated? Meetings with your business adviser or mentor should help. Also find other people on the same journey. Join a business network or one of the many online communities of entrepreneurial folk. There are dozens of Facebook groups for new businesses and women in business – look around to find the one that best gels with your approach.
The other best way to stay motivated and indeed build motivation is to keep working on your idea to make it real. Often people develop an idea in their head and are almost scared of exposing it to actual potential customers. But of course you need to do just that. You will need to show that you have done some market research if you want to get your loan, so get started as soon as you can. Effective market research is at the heart of a good business plan. It will massively cut down the time the application process takes too.
Market research doesn’t need to be fancy. Innocent smoothies market research consisted of two bins at the end of a stall where they sold smoothies. Above the bins was a sign asking ‘Should we give up our jobs to sell these smoothies?’ One bin said ‘yes’ the other ‘no’. At the end of the day the yes bin was full of empty cups and they went ahead with the business.
Is there some way you can test your business concept with a pop-up event? How can you get in front of potential customers and get feedback, or even better some sales, to prove that there is real demand. Could you put together an online survey, stand outside the potential retail unit and count footfall, test some online adverts? Get real and get hungry and make sure that you write up the results, ideally with some nice graphs!
The application process
There are 3 stages to the application process and a few things to think about in advance.
Stage one, personal details, will ask ‘how much finance are you thinking of applying for?’ Don’t worry about being precise for now, you can estimate and change the amount later if necessary.
If you are currently on a visa, you will be asked to supply your visa expiry or renewal date – please have this to hand before you get started.
Stage two is the credit check. For this you will need your personal bank account details. The credit check takes just two minutes. It says that “you will not be able to proceed with the application until this stage is complete”.
In practice though, your preferred delivery partner will have been forwarded your details when you complete stage one – and they may be in touch. We tested the system and abandoned the application at this stage – the delivery partner still called the next day with an offer of free meetings and support to help us develop our application.
If you want to do your own credit check first, you should be able to do a free check via the 2 main credit reference agencies Equifax and Experian.
Stage three, business details. This stage asks for more information about your business idea. It also asks for a business plan, cashflow forecast and personal survival budget. Bear with us here. First up, there are some very good templates you can use from the Start Up Loans website. The Business Plan template is quite short and straightforward and simply asks you a few questions about your business. Give it a go.
For an introduction to how to put together a Cash Flow forecast, see our free tutorial, including video and template.
Having worked with hundreds of business startups over the year, we know very well that those forms and figures freak out some of the most entrepreneurial people out there. Successful entrepreneurs, especially creatives, are disproportionately likely to be dyslexic for example – and large numbers of dyslexic people have an aversion to this kind of paperwork. It does not make them any less likely to succeed in business.
Whether you are dyslexic or form phobic, do not fear. Start Up Loans provide support in the form of a business adviser or mentor, who should be able to help you with the paperwork. You can usually access this support when you submit the application form and you DO NOT need to upload the business plan and cashflow yet. It would help if you do or even if you do so partly – it may speed things up and will help your business adviser to more effectively work with you. But we’re informed by the Start Up Loans Company that you can still submit and move ahead to being allocated your business adviser or mentor, without uploading those forms yet. “Your first submission doesn’t have to be final – any information you provide will help your Business Adviser guide you forward.”
About Delivery Partners
The Start Up Loans Company sub-contracts more locally based, and some online, business support providers around the country to help loan applicants to develop more effective proposals and succeed in the application and business.
The Delivery Partner will help you improve your Business Plan and Cashflow forecast. They will also connect you with a mentor if your loan is approved. And they are also responsible for assessing your loan application.
You get to choose your preferred Delivery Partner at stage one of the application. You cannot change the Delivery Partner at any time after this, not even if your loan application is declined and you want to start again. So take the time to check out your short-list as much as you can. Review their website, maybe call them up and ask how their process works.
While all Delivery Partners work within the Start Up Loans Company guidelines, we’ve found that there are some differences in approach. For example some use volunteer mentors while others only use paid business advisers. Some are able to offer additional free services like training workshops, while others offer a largely online service. It’s also worth checking out the cultural feel of the provider to see what feels like the best fit for your style of business.
So, are you Eligible for the scheme?
The Start Up Loans scheme is open to all UK residents who are aged 18 or older, who are starting a new business or have been trading for up to 24 months. (You can also apply if you’re buying a business that’s been trading for more than 2 years as long as your ownership of it is less than 2 years).
The business needs to be based in the UK and you need to have the right to work in the UK. It’s also in principle a loan of last resort, meaning that you should be unable to secure finance from other sources (no evidence is needed though, you can self-declare).
Eligibility will also be checked via a personal credit check. A poor credit history won’t necessarily be a barrier to applying, see here for more details.
What you want to spend the funds on is also an issue. In general it can cover a broad range of the costs of starting and developing a business. That could include, for example, the purchase of equipment or stock, marketing collateral like branding or a developing a website, salaries, expert advice including accountancy. It can also include cash flow costs before your business starts to make a profit. But Start Up Loans will not fund debt repayment, training or professional development qualifications or investment opportunities that aren’t part of an ongoing sustainable business.
Is your business eligible?
There’s a list of business types that are excluded, mostly those that are focused on sensitive areas like gambling, drugs and pornography. That’s not surprising as this is Government funding and they don’t want to be associated with potentially disreputable businesses. In addition you can’t get funding for tricky areas like banking or money transfer, property development of as an agent for a third party, where you only earn commission. (Not to be confused with franchising – you can borrow to start a franchise). S
You need to be able to pass three key criteria:
- The Credit Check
- That you will have the means to repay the loan
- A viable Business Plan
Who does the assessment? The Delivery Partner does the assessment. Usually this will be your Business Adviser and at least one qualified other person. The application will not be submitted for assessment until both you and your Business Adviser feel that it is ready.
The vast majority of people who apply for and receive a loan from the Start Up Loans Company are very satisfied with the process. Those who have a good business plan already in place can and do go through the process in 3 weeks or less.
Our concern here at Prowess is that very, very few of the people who are referred from this website go on to submit an application. Lots look into it, but few see it through. Statistically we’d expect the conversion from interest to action to be much higher. We hope that this short guide helps more of you to make the leap!