How to Get a Loan to Start a Business in the UK

How to Get a Loan to Start a Business in the UK

Starting a business takes guts — and money. Whether it’s a side hustle from your spare room or a full-scale launch with staff and premises, you’ll need some level of startup capital. That’s where a business loan often comes in. But if you’re just starting out, getting approved for a loan isn’t always straightforward.

Lenders want to know they’ll get their money back, which means they look for more than just a good idea. They want a plan, proof you’re serious, and a bit of financial common sense. If you don’t have assets, trading history, or a long credit record, you’ll need to be smart about how you approach it.

Here’s what you need to know about getting a loan to start a business in the UK — including where to look, what to prepare, and how to improve your chances.

Can You Get a Loan Before You’ve Started Trading?

Yes, but it’s harder. Most high street banks and private lenders prefer businesses with at least six to twelve months of trading history. That’s how they judge whether you can repay the loan. But there are startup loans available — you just need to go through the right channels.

The UK Government-backed Start Up Loans scheme is one of the best-known options. It offers unsecured loans of up to £25,000, with fixed interest and support like free mentoring and business planning advice. You don’t need to have started trading, but you do need a solid business plan and realistic financial forecasts.

Outside of that, you might also consider community development finance institutions (CDFIs), credit unions, peer-to-peer lending platforms, or startup-focused finance companies. The key is knowing which lenders work with early-stage businesses and tailoring your application accordingly.

What Do You Need to Apply?

No matter where you apply, lenders will want to see that you’re not just winging it. That means a clear, well-thought-out business plan — including what your business does, who it serves, how it will make money, and why it has a good chance of success. You’ll also need to include detailed financial forecasts, showing expected income, expenses, cash flow, and break-even points.

Lenders also look at your personal credit history. If you’re new to business, they’ll judge you based on your own financial behaviour. A poor credit score won’t automatically disqualify you, but it can limit your options or lead to higher interest rates.

Some lenders will ask for security — like a personal guarantee or collateral — but not all. Start Up Loans, for example, are unsecured. Still, it’s worth knowing that some forms of finance will put your personal assets on the line.

How Much Can You Borrow?

That depends on the lender, your plan, and how much risk they think is involved. With government-backed Start Up Loans, you can borrow up to £25,000 per director. So if you have two co-founders, you could potentially access £50,000 in total.

With private lenders or banks, the amount varies more. Some might offer small business loans starting at a few grand, while others go into six figures — but you’ll usually need to show trading history, assets, or some kind of revenue to get approved for larger sums.

Be realistic about how much you need. Borrowing too little can leave you short. Borrowing too much can put you under pressure. You’ll need to explain exactly what the funds will be used for — from equipment to stock to marketing — and show how they’ll help the business generate revenue.

What If You’re Not Approved?

Don’t panic — lots of business owners don’t get a loan on the first try. It doesn’t mean your idea is bad. It usually just means you need to strengthen your plan, fix gaps in your finances, or explore other options.

You could consider bootstrapping — starting small with your own savings, part-time income, or support from friends and family. You might also look at grants, especially if your business is in a specific sector like tech, green energy, or youth enterprise.

Another route is crowdfunding, where you pitch your idea to the public in exchange for donations, early access, or equity. It’s not guaranteed money, but if your idea captures attention, it can be a powerful way to raise funds and build buzz.

Summary

Getting a loan to start a business in the UK is possible — but you need to be prepared. Lenders want to see a strong business plan, clear financial thinking, and evidence that you’re serious. Government-backed options like the Start Up Loans scheme are a great starting point, especially if you’ve never run a business before.

If you get turned down, don’t give up. It might just mean you need to tighten your plan, clean up your credit, or try another route. Starting a business is a journey — and securing funding is just one step of many. Do it right, and you’ll be on your way with the backing you need to get your idea off the ground.