Startup business loans
Written by Mark Hagan, Managing Director · Reviewed by Jamie Grimshaw, Chartered Banker
Last reviewed: August 2026
A startup business loan provides funding for a new business that hasn't yet built up a trading history. It can be used to cover launch costs, equipment, stock, or working capital during the critical early months.
In this guide, you'll learn how startup business loans work, what types are available, the potential benefits and risks, and how to decide whether one could be right for your new business.
What are startup business loans?
Startup business loans are designed specifically for businesses that are either pre-trading or in their first 1–2 years of operation. Because new businesses lack the trading history that traditional lenders require, startup loans often come from specialist providers or government-backed schemes rather than high-street banks.
The most well-known option is the government-backed Start Up Loans programme, which offers personal loans of up to £25,000 per founder to start or grow a business, alongside free mentoring support.
Other options include unsecured loans from specialist lenders, peer-to-peer lending, and asset finance for equipment purchases.
How do startup business loans work?
Once approved, you receive a lump sum that you repay with interest over a set term — typically 1 to 5 years. The amount you can borrow and the rate you're offered will depend on your personal credit history, your business plan, and the type of loan you choose.
Government-backed Start Up Loans are personal loans, meaning they're assessed on your personal credit and circumstances rather than business financials. Specialist lenders may take a more holistic view, considering your business plan and market opportunity alongside your credit profile.
What types of startup business loans are available?
Government-backed Start Up Loans
The Start Up Loans programme provides loans of up to £25,000 per founder (up to £100,000 per business) at a fixed interest rate, with 1–5 year repayment terms and free mentoring support. You'll need a viable business plan and a personal credit check.
Unsecured startup loans
Specialist lenders offer unsecured loans that don't require business assets as security. They may be quicker to arrange but could carry higher interest rates.
Asset finance for startups
If you need to purchase equipment, vehicles, or machinery, asset finance can spread the cost over time. The asset itself acts as security, which can make it easier to obtain than a general loan.
Peer-to-peer lending
Online platforms connect businesses directly with individual investors willing to lend. This can be a viable option for startups that struggle to access traditional bank finance, though rates may be higher.
Compare funding types
A side-by-side overview of the main business funding options. Click any column heading to read the full guide.
| Feature | Asset Finance | Business Loans | Invoice Factoring | Merchant Cash Advance | Commercial Mortgages | Bridging Loans | Working Capital |
|---|---|---|---|---|---|---|---|
| Typical amount | £1k – £500k+ | £1k – £500k+ | £10k – £5m+ | £5k – £300k | £50k – £25m+ | £25k – £10m+ | £1k – £500k+ |
| Speed of funding | 1–2 weeks | 1–5 days | 24–48 hours | 1–3 days | 4–8 weeks | 1–2 weeks | 1–3 days |
| Security required | Asset itself | Sometimes | Unpaid invoices | Future card sales | Property | Property | Varies |
| Repayment structure | Fixed monthly | Fixed monthly | Per invoice paid | % of card sales | Fixed monthly | Interest rolled up | Flexible |
| Funds used for | Equipment / vehicles | Any purpose | Cash flow gaps | Any purpose | Property purchase | Property / bridge | Day-to-day costs |
| Best for | Capital purchases | General funding | B2B businesses | Retail / hospitality | Buying premises | Quick property buys | Short-term gaps |
| You own the asset | Sometimes* | N/A | N/A | N/A | Yes | N/A | N/A |
| No early exit penalty | Varies | Sometimes | Usually | Sometimes | Rarely | Usually | Varies |
Asset FinanceTap to view
Business LoansTap to view
Invoice FactoringTap to view
Merchant Cash AdvanceTap to view
Commercial MortgagesTap to view
Bridging LoansTap to view
Working CapitalTap to view
* Ownership depends on the agreement type - e.g. hire purchase vs lease. Figures shown are typical ranges for illustration only and will vary by provider and circumstances.
What are the benefits?
- Access to capital — funding is available even without an established trading history.
- Mentoring support — government-backed schemes include free business mentoring.
- Fixed repayments — many startup loans offer fixed rates, giving you predictable monthly costs.
- Build credit history — repaying on time helps establish your business's credit profile for future borrowing.
- No equity dilution — you retain full ownership of your business.
What are the risks?
- Personal liability — government-backed Start Up Loans are personal loans, meaning you're personally responsible for repayment.
- Higher interest rates — startup loans from specialist lenders may carry higher rates than those available to established businesses.
- Repayment pressure — loan repayments begin immediately, which can strain a new business's cash flow.
- Eligibility restrictions — some schemes have age, sector, or trading-history restrictions.
- Impact on personal credit — late or missed payments could affect your personal credit score.
Estimate your repayments
Use our business loan calculator below to estimate what a startup loan might cost. Adjust the amount, term, and interest rate to see how your monthly repayment changes — then speak to Jamie for a personalised comparison across the market.
Business loan repayment calculator
Estimated monthly repayment
£1,038
This calculator provides an estimate for illustration only, assuming a fixed-rate loan with equal monthly repayments and no fees. Your actual repayments will depend on the lender, your business circumstances, and any associated fees. Always check the full cost of borrowing before proceeding.
Is my startup eligible?
Eligibility criteria vary between lenders and schemes. Government-backed Start Up Loans are available to individuals aged 18+ who are starting or growing a business in the UK. You'll typically need a viable business plan and a satisfactory personal credit check.
Specialist lenders may consider your business plan, market opportunity, and personal credit history rather than requiring years of trading accounts. Some lenders may also require a personal guarantee.
How do I choose a lender?
- Compare the total cost of borrowing, not just the headline interest rate.
- Check whether the lender is authorised and regulated by the FCA.
- Understand any fees, charges, or penalties for early repayment.
- Consider whether a government-backed scheme offers better terms than a commercial lender.
- Read reviews from other businesses and consider seeking independent advice.
How can I learn more?
The British Business Bank and GOV.UK provide free, impartial resources on startup finance.
You may also find our guides on small business loans, unsecured business loans, and business loans helpful.
Looking for startup funding?
Jamie can help you compare startup finance options across the market — free and without obligation.
How funding types compare
Visual comparisons across speed, cost, flexibility and more. The chart highlights the current option.
Strength comparison (score out of 5)
- Asset Finance
- Business Loans
- Invoice Factoring
- Cash Advance
- Comm. Mortgages
- Bridging Loans
- Working Capital
Scores out of 5 - higher is better for the business. The current option is highlighted; others shown faintly for reference.
Typical maximum funding (£ thousands)
Maximum typical amount available. Actual offers depend on your business circumstances and the provider.
Compare funding types
A side-by-side overview of the main business funding options. Click any column heading to read the full guide.
| Feature | Asset Finance | Business Loans | Invoice Factoring | Merchant Cash Advance | Commercial Mortgages | Bridging Loans | Working Capital |
|---|---|---|---|---|---|---|---|
| Typical amount | £1k – £500k+ | £1k – £500k+ | £10k – £5m+ | £5k – £300k | £50k – £25m+ | £25k – £10m+ | £1k – £500k+ |
| Speed of funding | 1–2 weeks | 1–5 days | 24–48 hours | 1–3 days | 4–8 weeks | 1–2 weeks | 1–3 days |
| Security required | Asset itself | Sometimes | Unpaid invoices | Future card sales | Property | Property | Varies |
| Repayment structure | Fixed monthly | Fixed monthly | Per invoice paid | % of card sales | Fixed monthly | Interest rolled up | Flexible |
| Funds used for | Equipment / vehicles | Any purpose | Cash flow gaps | Any purpose | Property purchase | Property / bridge | Day-to-day costs |
| Best for | Capital purchases | General funding | B2B businesses | Retail / hospitality | Buying premises | Quick property buys | Short-term gaps |
| You own the asset | Sometimes* | N/A | N/A | N/A | Yes | N/A | N/A |
| No early exit penalty | Varies | Sometimes | Usually | Sometimes | Rarely | Usually | Varies |
Asset FinanceTap to view
Business LoansTap to view
Invoice FactoringTap to view
Merchant Cash AdvanceTap to view
Commercial MortgagesTap to view
Bridging LoansTap to view
Working CapitalTap to view
* Ownership depends on the agreement type - e.g. hire purchase vs lease. Figures shown are typical ranges for illustration only and will vary by provider and circumstances.
Important information
This guide is for general information only and does not constitute financial advice. It's a good idea to seek independent professional advice before entering into any finance agreement.
Compare Your Funding is a trading style of TGL Solutions Limited. TGL Solutions Limited is not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. We may receive a commission when we introduce you to a funder - see our how we make money page.
Related guides
What is asset finance?
Spread the cost of equipment, vehicles, and machinery over time.
Read guideWhat are business loans?
Borrow a lump sum and repay it over a set period with interest.
Read guideSmall business loans
Compare loan options for UK small businesses, from £1,000 to £500,000.
Read guideUnsecured business loans
Borrow without putting up business assets as security.
Read guideNot sure which funding is right for you?
Answer a few simple questions and Mark will personally review your situation and get back to you with impartial guidance.
Jamie Grimshaw
Expert ReviewedCommercial Finance Director · Trading since 2013 · £250m+ secured for UK businesses