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Start Up Loans Explained: Everything Founders Need to Know
Back to NewsIf you’ve landed on this page, chances are, you’re either wanting to start a business and researching your funding options, or you’ve already launched and you’re looking for the funding to grow.
Whether you're launching a side hustle, opening your first shop, or building the next big thing, funding is often one of the biggest hurdles founders face.
That's where Start Up Loans come in.
Start Up Loans are a government-backed funding option from the British Business Bank, designed specifically for new and early-stage businesses in the UK. Alongside funding, they also provide access to expert support, helping founders turn ideas into sustainable businesses. This support can be the real difference that doesn’t only help a business to survive, but to thrive.
In this guide, we'll explain what Start Up Loans are, how they work, who can apply, and whether they're the right funding option for your business.
What is a Start Up Loan?
A Start Up Loan is a government-backed personal loan designed to help people start or grow a business.
The scheme is delivered through the British Business Bank and its network of Business Support Partners, including Virgin StartUp. As a National Business Support of the scheme, Virgin StartUp supports and fund founders from all over the UK.
While the loan is a personal loan, it must be used for business purposes. This allows founders who may not qualify for traditional business finance to access funding and support.
Start Up Loans are designed for:
New businesses
Early-stage businesses
Founders looking for startup funding in the UK
Entrepreneurs who need funding and support to get started
Existing business owners looking for funding to scale
Many founders use Start Up Loans to cover startup costs, purchase equipment, invest in marketing, or support business growth.
Want to take out a Start Up Loan? You can apply here today.
What's the difference between startup loans and Start Up Loans?
You'll often see both terms used online, but they don't mean exactly the same thing.
When people talk about "startup loans", they’re most likely speaking generally about a loan for a startup.
However, a "Start Up Loan" is the name of the the government-backed scheme delivered through organisations such as Virgin StartUp.
In short:
Startup loans = a general category of funding
Start Up Loans = a specific government-backed funding scheme
This distinction is useful because many founders discover the Start Up Loans programme while researching startup funding more generally.
Who can apply for a Start Up Loan?
Eligibility depends on your circumstances, but in general, Start Up Loans are available to:
UK residents aged 18 or over
Anyone with a business idea looking to get started
Businesses already trading for less than 60 months
A personal credit check forms part of the application process. Some founders worry that a less-than-perfect credit history automatically means they won't qualify. That's not always the case, and applications are assessed individually.
If you’re not sure, don’t count yourself out.
For full eligibility requirements, it's worth checking the latest guidance or speaking to a friendly member of the Virgin StartUp team.
How much can you borrow?
One of the most common questions founders ask is how much funding they can access.
With a Start Up Loan, you can borrow between £500 and £25,000 per co-founder.
For example, a business with two eligible co-founders could potentially access up to £50,000 in total funding.
The amount you apply for should be based on your business needs and how the funds will be used.
What can a Start Up Loan be used for?
A Start Up Loan can be used for a wide range of business purposes. Some common examples include:
Equipment
Buying machinery, technology, tools, or specialist equipment needed to operate your business.
Stock
Purchasing inventory before launch or supporting increased demand.
Marketing
Investing in advertising, branding, social media, PR, or customer acquisition.
Website and digital development
Building a website, ecommerce platform, or digital product.
Launch costs
Supporting the initial costs associated with starting a business.
As part of the application process, you'll need to explain how the funding will be used and demonstrate how it supports your business plan.
What support comes with a Start Up Loan?
One of the biggest differences between a Start Up Loan and many other funding options is the support available alongside the funding.
Dedicated business advisor
Virgin StartUp provides access to experienced business advisors who can help you prepare your application and business documents.
Mentoring
Founders who are funded through Start Up Loans are eligible to receive 12 months of post loan support from the scheme’s dedicated Post Funding Support Partner.
Founder community
When applying through Virgin StartUp, you'll have the opportunity to connect with other entrepreneurs through the founder Community.
Events and learning opportunities
Virgin StartUp regularly hosts events, webinars, and founder-focused opportunities to support business growth.
For many founders, this support can be just as valuable – if not more than - the funding itself.
What are the repayments for a Start Up Loan?
Before taking on any form of funding, it's important to understand the repayment terms.
Start Up Loans currently offer:
A fixed interest rate of 7.5% per year
Repayment terms between one and five years
No early repayment fees
A fixed rate means you'll know exactly what your repayments are throughout the term of the loan, making it easier to plan your finances.
Because there are no early repayment fees, founders also have the flexibility to repay the loan sooner if they wish.
Start Up Loans vs other funding options
There are several ways to fund a business, and each has advantages depending on your circumstances.
Grants
Business grants do not need to be repaid, but they are often highly competitive and may come with strict eligibility requirements.
Bank loans
Traditional bank loans can provide larger amounts of funding, but often require stronger trading history and are more suitable for more established businesses.
Alternative lenders
Fintech lenders can offer fast access to funding, but costs and terms vary significantly.
Investment
Equity investment can provide substantial capital but usually involves giving away a share of your business to Venture Capital firms or Angel investors.
The right option depends on your goals, stage of growth, and appetite for risk.
Is a Start Up Loan right for your business?
A Start Up Loan may be a good fit if you are:
Starting a new business
Growing a business that has been trading for less than 60 months
Looking for startup funding in the UK
Interested in support as well as funding
Looking for a government-backed funding option
Many founders choose Start Up Loans because they combine funding, mentoring, and practical support in one place.
Some of the businesses who have received Start Up Loan funding from Virgin StartUp include:
DASH Water
OddBox
UpCircle Beauty
AKT London
Love Corn
... so you’ll be in good company! You can check out some of the incredible businesses that have been funded or supported by Virgin StartUp here.
If you're unsure, speaking to a member of our founder support team can help you explore whether it's the right route for your circumstances.
You could also attend one of our regular free founder webinars hosted by our business advisors, that explores funding for startups in depth.
Ready to explore your funding options?
Whether you're just starting out or looking to grow your business, understanding your funding options is an important first step.
If you're considering a Start Up Loan for your business, Virgin StartUp can help you understand what's available and guide you through the process.
Begin your Start Up Loan application today!
Frequently asked questions
What is a Start Up Loan?
A Start Up Loan is the name of a government-backed personal loan, designed to help people start or grow a business in the UK.
How much can I borrow?
When taking out a Start Up Loan, you can get between £500 and £25,000 per co-founder.
Can I get a Start Up Loan with bad credit?
A poor credit history won’t necessarily prevent you from getting a Start Up Loan.
There is a credit check as part of the application process, but each application is assessed individually.
How long does the process take?
Many applications are completed within three to eight weeks, although this can vary.
The more prepared you are with completing documents, the faster the process will be.
What documents do I need?
Typically, you'll need a business plan, cash flow forecast, and supporting information about your business. But don’t worry, we have the templates ready for you to make sure we get all the information needed.
Can I repay early?
Yes. There are currently no early repayment fees for Start Up Loans
What happens if my application is declined?
After a period of 6 months, you will be able to reapply. During this period, it’s recommended to review and improve any areas of your application that prevented you from securing the loan previously.
Do I need a business account?
You don’t need a business bank account to take out a Start Up Loan, as the funds are paid into the applicant’s personal bank account.