Start Up Loans: how it works and what it costs

A government-backed personal loan for young businesses, up to £25,000 per owner at 7.5% fixed, with free mentoring.

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How it works

Start Up Loans is a government programme run by the British Business Bank. Despite the name, it is not a business loan. It is a personal loan that you take out in your own name and put into your business. Each owner can borrow between £500 and £25,000, and a business can receive up to £100,000 in total if several owners each apply.

You do not apply to the British Business Bank itself. Applications go through its delivery partners, and they will want three documents: a business plan, a 12-month cash-flow forecast and a personal survival budget. That last one shows how you will pay your own bills while the business finds its feet. Templates for all three are provided, so you are not starting from a blank page.

This is not a quick process. Expect weeks, not days. The paperwork gets reviewed properly, and because the loan is personal, the assessment looks at you as well as the business idea. If you need cash this month, this is the wrong product.

If approved, you repay over 1 to 5 years at a fixed interest rate of 7.5% a year, with no application fee and no early repayment fee. As a rough guide, £10,000 over 5 years at 7.5% a year works out at around £200 a month and roughly £2,000 in interest over the full term. Repay early and you simply pay less interest, with no penalty for doing so.

Once the loan is in place you also get up to 12 months of free mentoring. For a first-time founder that can be worth as much as the money. It is one of the few products in this directory that comes with a human attached.

One thing to be clear-eyed about before you sign. Because the loan is personal, you owe the money whatever happens to the business. If the business folds, the debt does not fold with it. That is an even more direct commitment than a personal guarantee on a business loan, and it is the price of getting funded while the business is still young.

What it really costs

Start Up Loans quotes a "fixed interest rate of 7.5% per year". It also states: "No application fee and no early repayment fee." At the time of checking, that is the published cost: interest, with no application fee and no early repayment fee.

Fixed means fixed. The rate is set when you sign and your monthly payment does not move for the life of the loan, whether that is 1 year or 5. As a rough guide, borrowing £10,000 over 5 years at 7.5% a year costs around £200 a month and roughly £2,000 in interest in total. Borrow the full £25,000 over 5 years and total interest comes to roughly £5,000.

Note the recent change. The rate rose from 6% to 7.5% for new applications on 6 April 2026, so anything you read quoting 6% is out of date.

With a fixed rate, no application fee and no early repayment fee, two numbers describe the whole cost: the exact monthly payment and the total amount repayable over the term. The delivery partner handling the application can confirm both before anything is signed.

Check the current figuresLenders change pricing without notice. The representative example on Start Up Loans's own site is the number that counts.

Who can apply

• Aged 18 or over, living in the UK with the right to work
• Business fully trading for less than 5 years (extended from 3 years on 6 April 2026)
• A business plan, a 12-month cash-flow forecast and a personal survival budget (templates provided)
• Willing to take the debt on personally, because this is a personal loan, not a business one

Good for

• New and young businesses (under 5 years fully trading) that commercial lenders turn away
• Owners who want a fixed rate and a predictable monthly payment
• First-time founders who would actually use up to 12 months of free mentoring
• Anyone planning ahead who can wait weeks rather than days for the money

Watch out for

• It is a personal loan. If the business fails, you still owe every penny in your own name.
• The process takes weeks, not days. It is the wrong product for an urgent cash gap.
• The rate rose from 6% to 7.5% for new applications on 6 April 2026. Older articles quoting 6% are out of date.
• You need a business plan, a 12-month cash-flow forecast and a personal survival budget before anyone says yes. The paperwork takes real time.
• £25,000 is the ceiling per owner. Reaching £100,000 needs several owners each applying for their own loan.

How Start Up Loans compares

Start Up Loans sits apart from the commercial lenders in this directory. It is aimed squarely at businesses fully trading for less than 5 years, including ones barely off the ground, and the trade it asks for is time, because the process runs to weeks rather than days. Commercial lenders such as Funding Circle and iwoca set their own pricing and timescales, covered on their own pages. For a young business that can wait a few weeks, the draw here is a fixed 7.5% a year with no application fee and no early repayment fee. For a cash gap that needs filling this week, it is not in the running.

Put Start Up Loans side by side with another lender →

Common questions

Regulation and status

Start Up Loans is a government-backed programme run by the British Business Bank, not a commercial lender. Applications go through its delivery partners rather than to the bank directly.

Start Up Loans is a government programme. FundSpeed has no referral or affiliate relationship with it and earns nothing if you apply. Facts checked on 7 September 2026 against the sources below. Spotted a change? Tell us and we will fix it.

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