Small Business Guides / small business funding UK

Start Up Loans Explained for UK Small Businesses

A government-backed Start Up Loan is borrowing, not a grant. Understand who owes the money and how repayments fit your household and business before applying.

The personal commitment matters

The official scheme provides a personal loan for business purposes. A limited company’s separate legal identity does not remove your personal repayment obligation on a personal loan. Read the agreement and affordability requirements carefully.

At the date checked, GOV.UK describes a fixed annual interest rate of 7.5%, repayment over one to five years, and no application or early-repayment fee. Check the live official page for eligibility, borrowing limits and current terms before making a decision.

Work out the need first

1. List exactly what the funding will buy.
2. Obtain realistic cost evidence.
3. Subtract funds already available.
4. Put repayments into a month-by-month forecast.
5. Test a slower-sales case and consider personal affordability.

Prepare an application that agrees with itself

The business plan, cash forecast and use-of-funds schedule should tell the same story. If the plan says you can serve ten clients a month, the sales forecast should not assume fifty without explaining the additional capacity.

Separate spending needed before launch from costs that can wait. Borrowing more than you need can increase the repayment burden; borrowing too little can leave the project unfinished.

Compare the consequences

Self-funding uses your own reserves. A grant has project rules and conditions. Equity involves ownership. Borrowing creates repayments. Consider the whole effect rather than choosing solely by the advertised monthly amount.

Use the startup cost calculator and cash-flow template. Read how to organise funding evidence before submitting an application.

Explore Polar’s business tools or the connected business software for the next practical step.