Business loans for new businesses
There are few things more exciting than starting a new business. But while going into business alone can be deeply fulfilling, accessing the funds to get your business off the ground can be a little more frustrating.
Many lenders view start ups as riskier ventures, making them less willing to extend funding. But while some lenders are less keen, others have created loans just for new businesses. Here are some of the things you might like to consider if you’re applying for a new business loan.
Benefits of business loans for new UK-based businesses
5.6M private sector businesses contribute to the UK’s vibrant economy as of 2023 and business loans can help drive that success, giving businesses like yours the power to:
Maintain steady cash flow
A start up loan can help you maintain cash flow stability during the early stages of business growth.
Onboard the best talent
New business loans can be a helpful way to get access to the best talent by providing competitive salaries, benefits, and training opportunities.
Fuel marketing and sales efforts
A business loan for new businesses can help you pursue growth opportunities, activate marketing campaigns, and onboard sales talent.
Expand into new markets
By providing the funding needed to conduct market research, visit new geographical markets, and build an online presence, start up loans can be helpful for expanding into new markets.
Retain full control
Unlike many forms of external investment, business loans for new businesses keep you in the driving seat, exchanging funds today for repayment instalments rather than for a percentage of your business.
Mentoring
Some business loans, like the government’s start up loan scheme, offer mentoring opportunities and support creating a business plan.
Unsecured options available
Many start up loans, including the government’s start up loan scheme, are unsecured, meaning you don’t need to put up any personal or company assets as collateral for the loan.
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What types of business loans can I get for my new business?
Government backed start up loan
The government start up loan scheme offers up to £25,000 to businesses with less than 3 years’ trading history. There is a set interest rate of 6% and the loan can be repaid over a period ranging from 1 year to 5 years. It functions similarly to a personal loan, which means you’ll need to keep up the repayments even if your business closes down. Along with the funds, the government also provides successful candidates with mentorship and support with creating a business plan.
Secured business loan
There are a range of loan types that fit under the umbrella of a secured business loan, including bridging loans, invoice finance, and property development finance. A secured business loan requires collateral as security for the loan. This collateral can come in the form of personal assets, business equipment and vehicles, and even unpaid invoices.
Unsecured business loan
An unsecured business loan is a loan that does not require assets as collateral for the loan. However, at this early stage in your business, it’s quite likely you will be asked to provide a personal guarantee if you are seeking an unsecured business loan for new businesses. Bear in mind, an unsecured loan does not necessarily mean your assets are not at risk should you default on the loan.
Personal loan
Many new business loans are actually structured as personal loans, meaning you, as the business owner, take out a loan that is used for business purposes and make the repayments whether or not your business closes down. This becomes a less common loan structure as the business becomes more established.
Business lines of credit
Company credit cards and revolving credit facilities are two examples of business lines of credit. Lines of credit provide a pre-agreed sum of money that can be used, returned, and reused over and over, as needed. They’re a middle ground between taking out a loan, which is a sum that needs to be repaid over a set period in instalments, and going it completely alone. Lines of credit can be set aside during periods where you don’t need immediate access to funds, then used for things like purchasing inventory when a supplier offers a limited time deal or buying stock during a seasonal uptick.
Asset finance
Asset finance is another umbrella term, but this time it encompasses asset related finance. That can include purchasing a new piece of equipment on finance, leasing a company vehicle, or asset refinance, which involves selling a specific asset to a lender and then leasing it back from them.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
What is a start up loan for new businesses?
Financial support
A source of financial support for your growing business.
Repayment structure
That you can repay over a given period in regular instalments.
Flexible terms
With or without collateral to use as security for the loan.
What can I use a business loan for new businesses for?
Start up costs
A business loan for new businesses can be used to fund start up costs. For example, some physical commercial leases require a full year’s rent upfront along with a deposit, a business loan can be used to pay this upfront cost, along with the costs of renovating the property and buying inventory, so that you can open the doors to your business and start selling.
Growth enablement
Those first few years can be a whirlwind, but it all feels worth it when you get that first customer or client, the first time you’re able to pay yourself a full monthly salary, or the day you hire your first employee. Depending on your industry and the product or service you’re delivering, a business loan could help you get to those exciting milestones faster.
Manage working capital
Inconsistent sales, late payments from clients, seasonal fluctuations, and even the need to fund fast growth can all have an impact on working capital in the early stages of running a business. Business loans for new business can provide a helping hand in navigating these early challenges, ensuring there’s enough cash flow to keep the doors open.
Want to know more about business loans for new businesses?
Is a start up loan secured or unsecured?
Both options are available, just let us know which one you’d prefer and we’ll let you know if you’re eligible for an unsecured loan or a secured business loan.
How old does my business have to be to get a start up loan?
That depends a lot on the lender, your personal circumstances, and whether the loan includes a personal guarantee. Many lenders ask for businesses to have at least 6 months’ trading history, while some ask for 1 or 2 years. The government start up loan scheme can be applied for at any time in your business journey. To use Funding Options by Tide, your business must be at least 6 months old.
Can new businesses get asset finance?
Depending on the applying new business’ eligibility, asset finance options are available for younger businesses. Asset finance can be a helpful bridge to gaining funding as a business since, with an option like hire purchase, the item itself is used as collateral for the loan, and so funding can be easier to gain access to.
Are there any government schemes that provide start up loans?
Yes. Specifically, the government start up loan provides businesses under 36 months old with funding not surpassing £25,000. They also provide mentorship and support in creating a business plan.
How can I ensure I repay my loan on time?
Careful planning, a properly crafted budget, and an emergency fund can help you ensure repayments are made in a timely, consistent manner. If you ever feel like you might be unable to meet your repayment obligations, reach out to the lender to let them know as soon as you can.
Will a start up loan for new businesses affect my company’s credit score?
Yes, it’s highly likely that a new business loan will impact your company’s credit score, but that isn’t necessarily a bad thing. In fact, it can be a positive feature of loans that they can help create a financial track record that future lenders can look at when deciding whether they want to extend funding.
This is particularly helpful in the early days of starting a company as your history with finances as a business is likely to be limited. By making regular repayments and always staying within your credit limit, a new business loan could have a positive impact on your businesses credit score.
What about my personal credit score – will a start up loan affect that?
Whether or not your start up loan will impact your personal credit score depends a lot on the type of loan you take out. But, given that many start up loans require personal guarantees (and some are even personal loans), it’s quite likely that the loan will impact your score, particularly if you default on the loan.
Can I start a business without taking out a business loan?
Yes, as long as you have access to a little bit of money, you can absolutely start a business without taking out a loan or gaining any further sources of financing. In fact, depending on the type of business you’re running, it’s entirely possible to start a business for only £14.99, if you use Tide’s company registration service to incorporate your UK limited company while securing a business bank account at the same time.
What are the drawbacks to start up loans for new businesses?
There are several potential drawbacks and risks to taking out start up loans, including, but not limited to:
Personal guarantees
Many business loans require personal guarantees, but start up loans, in particular, feature them. If you don’t want to make a personal guarantee, a new business loan might not be right for you.
Fewer options
While there are still a range of business loan types to choose from, there are not as many available options as there are for established companies that can draw from a wider pool of loan types, including unsecured short term loans and merchant cash advances. While it is possible for newer businesses to secure these types of loans, it’s harder to get approved.
Interest rates
Interest rates, fees, and repayments can all eat into profitability, which can make early growth trickier.
Should I take out a new business loan?
That’s a very personal question and the answer depends heavily on your unique circumstances, but here are some questions you might want to ask yourself before applying:
Can I meet the repayment obligations?
Am I prepared to repay the loan even if my company closes down?
Will this start up loan help me grow my business?
How much do I really need?
Am I overextending myself financially?
Is my business plan in place?
Ultimately, it is your choice, but if you’re ready to hit apply, and you’ve been trading for longer than 6 months, consider getting a quote from Funding Options by Tide. We can let you know if you’re eligible for a loan between £1,000 and £20M without affecting your credit score.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
