The government has announced the launch of the StartUp Loans scheme.
Having been trailed for some months, the scheme is now finally in operation and applications will soon be open. The StartUp Loans are considered to be a central plank of the government’s business support package – but what does the scheme entail, and who qualifies?
What are StartUp Loans?
StartUp Loans are personal loans of up to £2,500 intended to help young people get a new business off the ground. They are available to those older than 18 but younger than 24. They are currently only available to those living in England.
What the terms?
It is important to understand that, as the name suggests, these are loans rather than grants. You will be required to pay them back, even if your business fails – and you will be charged interest.
However, StartUp Loans are cheaper than most commercial loans of a similar size. The interest rate is currently set at 3 per cent plus RPI, which is currently running at 3.5 per cent. It is vital to understand that the cost of your loan will change as the rate of inflation changes. You should ensure that you factor this into your financial projections, and that you have sufficient cash to meet any changes to your repayments arising from increases to RPI.
It is also important to understand that the loans are not provided by one central provider. Instead, applicants will seek a loan from one of a number of different lenders, the identities of which are yet to be revealed. Specific terms may differ between lenders.
How do I apply?
The application process will differ depending on the lender to which you are applying. The distribution partners for StartUp Loans are set to be announced in the coming weeks. Regardless of the lender you choose, though, you can expect to be required to provide a business plan and financial forecasts. You may also have to attend an interview at which you will be asked to talk through your plans.
What else does the scheme provide?
In addition to loans, the scheme aims to give practical advice and support to young business owners. Expert mentoring will be available, along with a free copy of the StartUp Loans Kit. This publication provides guidance on running a small business, as well as access to a range of offers on items like business cards and computers.
Finally, remember that StartUp Loans are not the only option available to young people looking to get their businesses of the ground. Read more about financing your business.