Thinking about a business start up loan? Read this article

It is quite easy to qualify for a business loan when you have a good history of business success. Finding a start up business loan itself can be tricky especially when you need the loan to get your business off the ground. When a business loan is difficult to obtain it is quite natural to consider a personal loan and using those funds as the capital to finance your startup. The main question you should ask yourself is; Should I take a business start up loan?

Do You Qualify for a Business Startup Loan?

Perhaps the most difficult question you will ask yourself is whether you qualify for a startup loan or not. Having a good credit score perhaps is one of the minimum requirements a bank or alternative loan giver will consider, what if you have zero or very low credit score? If your credit score is moderately high and you can show proof of a viable business that can maintain a reasonable profit margin for a long period of time, then you should consider a startup loan. If Your credit score is lower and you are venturing into a business for the first time, then you should probably consider other funding options instead of applying for a startup loan.

The UK government and the private sector do have a number of business incubation programs for individual entrepreneurs trying to start new businesses. You will have to pass through stages of business tutoring and development in order to reach the stage where you will qualify for government grants and loans. Perhaps these types of financing are more reasonable and safer than taking startup business loans from banks when you are venturing into a business for the first time.

In addition to a high credit score, your lenders for startup loans will also consider your bank statements, Tax returns, and previous loans taken.

Consider the Interest Rates

When in search of business financing, you should first consider how much you can raise as a person, maybe from your savings, family, and friends, before considering other sources of funding.

You need to ask yourself the question; How long have I been in business? If you have some years of established business history, then a startup loan makes sense because you have an understanding of how the business works. Since business startup loan can be used for essentially any aspect of business funding, using your startup loan could function similarly to investing your own personal capital.

If a small amount of capital is all you need for a startup business, taking a personal loan may be worth exploring because there are fewer requirements involved, but you can spend it on your startup. You need to consider the fact that banks in the United Kingdom can be hesitant when it comes to offering business loans in smaller amounts, hence they often slam higher interest rates. Banks may lower interest rates and extend the repayment period for a loan of higher amounts.

Perhaps you should also consider the numerous documentations involved in business startup loan when making an application.

When You should go For Business Financing for a Startup

If you don’t have a track record in running a business successfully for the long term, you shouldn’t go for a business startup loan. On the other hand, if you have been in business for a while and it has been profitable, you should probably pursue a startup business loan. It doesn’t have to be a bank loan, you can consider other options such as business equity finance where the creditor owns a stake in the company and gets a significant percentage of your profit on regular basis.

It makes a lot of sense to pursue a business financing first if you have a strong track record in the business startup you are planning. Whether you need a business loan to finance an inventory such as equipment, or cover some other expenses a business startup loan will be better in every sense than a personal loan.

You should also consider a startup business finance if you are patient enough to wait for its lengthy process. It is not enough to qualify for a startup business loan because banks in the United Kingdom can take several weeks or months to approve your loan application. If you are not in a hurry to use the startup loan and you have a healthy business plan plus credit score, then the startup loan may be your best choice.

Business Startup Loan Will Boost Your Credit Score for the Future

One other benefit you will derive from Getting a business start up loan is that it will boost your credit score, which means you can take up even bigger loans in the future to expand your business. Taking Short-term loans may boost your credit score also, especially if you repay within the time frame, a longer-term business startup loan will further boost your credit score if you don’t default in payment.

Start up entrepreneurs and young business owners may find it more difficult to qualify for long term business loan especially if they don’t have a strong credit rating. Taking smaller loans and paying back within a short-term frame will steadily boost credit score and eventually, you will qualify to take a long-term business finance loan. Taking short-term loans repeatedly can help you build a long-lasting relationship with a bank or other lender provided you are repaying the loans on time and you have a strong profit margin records.


Now that you are aware of the main components of business startup loans in the United Kingdom, it is important to speak to a financial adviser before you make up your mind about the type of startup loan you should go for. A steady approach to a startup loan often recommended whereby you take several small loans to advance your business and make repayments within the stipulated time frame- this will eventually boost your minimum credit score and help you qualify for the bigger long-term business loans to finance the expansion of the business.