Can you get a loan for a new business that is 5 - 6 months old?

14 Oct 2021

Starting a business is an exciting and busy time, so when it comes to finding the right funding it can sometimes feel overwhelming. Navigating the different types of business loans available to start-up businesses can be time-consuming and when you’re trying to run a new business, time is money! We explore whether a business that’s just 6 months old can apply for finance and the types of funding available.

Can new businesses apply for funding

Applying for a start-up business loan 

The definition of a start-up business is a very new business venture running for just a few months, usually with just one or two people handling all operations.

Start-up loans are a type of funding designed for companies that are in the early stages of their business journey. Whether you’ve been running a business for 6 months or a year into your journey, you could be eligible to apply for a business loan or start-up finance package.

Unlike other types of business loans that are typically based on the previous turnover of the business, start-up loans are based on projection and a business plan, as well as other financial considerations like personal savings. To qualify for a start-up loan, you’ll need a business bank account and likely a business plan, but the lender own requirements which can vary.

The most significant requirement will be having set up a business in the last few months, as either a sole trader, self-employed, Limited company (LTD) or Limited liability partnership (LLP). Depending on the lender, you’ll most likely need a personal guarantee unless you can offer another kind of security such as property or assets.

What to prepare when applying for a loan for a new business

Traditionally, loans for new businesses have been harder to secure as traditional big banks are more reluctant to offer finance for start-ups due to the risk. However, there are now plenty of other lenders that can offer alternative business finance for businesses that have been trading for just a few months.

Instead of reviewing a business’s credit rating, lenders will typically check your personal credit rating and may want to see a business plan with financial projections. Your business plan should also have your idea and the goals you’ve set for the business, as these will help the lender understand how you’ll use the funding.

Start-up loans typically have higher interest rates and shorter repayment periods as these types of loans are at higher risk for lenders, so it’s important to consider these factors before applying. Check for early repayment options too, so that if you are in a situation where your business is booming,  have the option to repay the loan back quicker.

Types of funding for 6-month-old businesses 

Thanks to a broader lending market, there are now more options for funding start-ups than ever before, offering business owners more options to fund their new business ventures. Aside from the more standard business loans that lenders can offer, there are some other options you can consider:

  • Government start-up loans - The UK government has a specific unsecured start-up loan option available for new businesses that have been trading for less than 24 months. They also offer free mentoring for successful applicants and the amount of loan available ranges from £500- £25,000 which is a great cash injection for those needing it!

  • Business credit cards - Another great option for new businesses that need a quick cash injection and can pay it back swiftly, credit cards are the fast and reliable option for instant funding. Obviously, they’re restricted by their credit limit which will be based on your credit rating and checks the lenders will have conducted. 

  • Crowdfunding- A more recent way to raise funding has emerged in the business world, the concept of crowdfunding. Crowdfunding involves asking the public to donate or contribute smaller amounts of money online to help fund a business. This is another great option for start-up businesses particularly if the business idea is popular or considered unique. Crowdfunding has become a popular way for start-up businesses to quickly secure the finances they need in an easy way, with fewer risks for investors.

Here at Funding Options, we work with over 120 lenders including lenders who are able to help start-up businesses. As proud sponsors of the Great British Entrepreneur Awards, we’ve watched many start-up businesses on their journey to success, and every one of them has been different!

If you’ve got a brilliant business idea that needs funding, or want to know what options are available for your start-up business, why not start your application with us today.

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Simon Cureton

Chief Executive Officer

Simon has been Chief Executive Officer at Funding Options since 2019, spearheading its transformation into a leading fintech with the launch of its Funding Cloud platform. Simon has over 27 years of experience in financial services, having held senior posts at some of the biggest players in the industry all over the world.

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