Start Up Loans up to £25,000: how the UK scheme works and how to prepare a strong application (2026)

Finding the money to turn a business idea into a working business can be one of the biggest challenges when starting out.

Equipment, stock, insurance, premises, websites, marketing and other startup costs can quickly add up, often before the business has generated its first meaningful income.

 

The UK government’s Start Up Loans programme is designed to give eligible entrepreneurs another funding route. It combines an unsecured personal loan for business purposes with application support and mentoring.

There were important changes to the scheme from 6 April 2026, including a new interest rate and expanded eligibility for businesses that have already started trading.

 

Here is how the Start Up Loans scheme works in 2026, what you need to apply and how to prepare a strong, realistic application.

 

What is a Start Up Loan?

A Start Up Loan is a government-backed personal loan for business purposes.

Eligible applicants can currently borrow between £500 and £25,000, with repayments spread over one to five years.

The current fixed interest rate is 7.5% per year.

There are no application or setup fees and no early repayment fee. Successful applicants also receive access to 12 months of free mentoring and business support.

 

The key points are:

• Borrow between £500 and £25,000 per applicant

• Fixed interest rate of 7.5% per year

• Repayment term of 1 to 5 years

• No application or setup fee

• No early repayment fee

• No assets or guarantors required as security

• 12 months of free mentoring for successful applicants

• Application support and business-planning resources available

It is important to understand that this is not a grant. The money must be repaid.

 

What changed in April 2026?

Two significant changes took effect from 6 April 2026.

 

The interest rate increased to 7.5%

New successful applications are now offered at a fixed interest rate of 7.5% per year, replacing the previous 6% rate.

Once the loan is agreed, the applicable rate remains fixed for the lifetime of that loan.

 

Eligibility expanded to businesses trading for up to five years

Previously, first-loan applicants generally needed to have been trading for no more than 36 months.

From 6 April 2026, businesses can apply for their first Start Up Loan if they have been trading for less than 60 months – five years.

That opens the scheme to a much wider group of early-stage businesses that have already launched but now need funding to develop or grow.

 

Who can apply?

The current basic eligibility requirements include being:

• aged 18 or over

• entitled to work in the UK

• starting a new business or operating a business that has been trading for less than five years

• seeking funding for an eligible UK business purpose

Applicants must also go through a personal credit check and affordability assessment.

Meeting the basic eligibility requirements does not guarantee approval.

The application also needs to demonstrate that the proposed business is viable and that taking on the loan is affordable.

 

It is a personal loan – not a loan to your limited company

This distinction is important.

Although the money must be used for your business, a Start Up Loan is made to you personally.

It is unsecured, so you do not normally need to put forward property, equipment or another asset as security. However, you personally remain responsible for making the repayments.

If the business performs worse than expected or closes, the personal obligation to repay the loan does not simply disappear.

That makes affordability just as important as the strength of the business idea.

 

What can the money be used for?

The funding is designed to help with the costs of starting and developing a business.

 

Depending on the business, this could include areas such as:

• equipment and tools

• initial stock

• machinery

• business premises

• website development

• marketing and advertising

• vehicles required for the business

• technology and software

• working capital

• other legitimate startup or development costs

Your application should explain clearly what you intend to spend the money on and why those costs are necessary.

Avoid simply requesting the maximum £25,000 because it is available. A stronger application starts with the actual costs of building the business and works backwards to the amount of funding genuinely required.

 

What can’t a Start Up Loan be used for?

There are restrictions.

The scheme states that Start Up Loan funding cannot be used for purposes including:

• repaying existing debt

• training, qualifications or education programmes

• investment opportunities that are not part of an ongoing sustainable business

Certain business activities are also excluded from the scheme.

Check the latest eligibility criteria on the official Start Up Loans website before building your application around the funding.

 

What documents will you need?

This is one of the most important parts of the process.

 

Current guidance says applicants must provide:

• a Business Plan

• a 12-month Cash Flow Forecast

• a Personal Survival Budget

• three months of bank statements that support the information in the personal budget

You will also need appropriate evidence of identity, address and your right to work in the UK.

These documents work together.

The assessment is not simply asking whether the business idea sounds good. It needs to establish whether the business is credible, whether the financial forecasts make sense and whether you can realistically afford the personal loan repayments.

 

Your Business Plan

Your business plan should provide a clear picture of what you intend to build and how it is expected to operate.

 

A strong plan should normally explain areas including:

• what the business will sell

• who its customers are

• the problem or demand the business addresses

• the market you are entering

• competitors and your position within the market

• pricing

• how customers will find the business

• startup requirements

• operating costs

• how the loan will be used

• financial expectations

• the practical steps involved in launching or developing the business

The figures in the business plan should also agree with the figures used elsewhere in the application.

If the plan says you need £15,000 to launch but the cash flow forecast, startup-cost calculations and funding request tell completely different stories, that inconsistency can weaken the application.

 

Your 12-month Cash Flow Forecast

A cash flow forecast shows the money you expect to enter and leave the business over the coming months.

For a Start Up Loan application, you need a 12-month forecast.

 

This typically includes expected:

• sales income

• startup expenditure

• stock or materials

• rent and premises costs

• insurance

• marketing

• software and subscriptions

• transport

• wages where applicable

• loan repayments

• other operating costs

The aim is not to produce spectacular sales figures.

The aim is to produce figures that are realistic, explainable and consistent with your business plan.

If you expect 100 customers a month, for example, your plan should give a credible explanation of where those customers are expected to come from.

 

Your Personal Survival Budget

The Personal Survival Budget is different from the business cash flow forecast.

It focuses on your personal finances.

It records your normal personal income and expenditure to establish how much money you have available after essential living costs.

 

This can include items such as:

• salary or other personal income

• rent or mortgage

• council tax

• utilities

• food

• childcare

• personal borrowing

• transport

• insurance

• other regular household costs

This matters because the Start Up Loan is a personal loan. You remain responsible for the repayments regardless of how well the business performs.

Be accurate here.

Underestimating personal living costs to make affordability look stronger is not a good strategy. Your bank statements also need to support the information being presented.

 

The credit check

A personal credit check forms part of the application process.

The current government guidance suggests checking your credit record before applying, correcting any errors, making sure your electoral-register details are accurate and avoiding unnecessary new credit applications around the same time.

Certain financial circumstances can prevent eligibility, including some active insolvency and formal debt arrangements.

A business plan cannot overcome a failed eligibility or credit assessment, which is why it is worth checking your financial position before investing significant time in the full application.

 

How the application process works

The exact journey can vary depending on the Business Support Partner handling the application, but the broad process is straightforward.

 

Step 1 – Check your eligibility

Make sure you meet the basic requirements and that your business and intended use of the money are eligible.

 

Step 2 – Decide how much you genuinely need

Build a detailed startup or growth-cost calculation rather than automatically applying for £25,000.

Know exactly where the money will go.

 

Step 3 – Apply and complete the credit check

You provide your personal and business details and undergo the required credit assessment.

Current guidance states that a credit check is normally valid for 90 days, so avoid unnecessarily delaying completion of the remaining application.

 

Step 4 – Prepare the supporting documents

Complete your:

• Business Plan

• 12-month Cash Flow Forecast

• Personal Survival Budget

• supporting bank statements

The Start Up Loans programme provides its own free templates if you want to prepare these yourself.

 

Step 5 – Work with the business adviser

Applicants are matched with a business adviser who can provide support and help refine the required documents.

The adviser will also be involved in assessing the application, so the support does not mean approval is guaranteed.

 

Step 6 – Assessment and decision

The application is assessed based on the information you provide, including the business proposition, affordability and supporting financial information.

If successful, loan documentation is issued for completion.

 

How to prepare a stronger application

There is no wording or business-plan format that can guarantee approval.

A stronger application is one where the business, numbers and funding requirement all tell the same credible story.

 

Be specific about how much money you need

Instead of saying:

“I need £20,000 to start the business.”

build the figure.

For example:

• equipment – £6,500

• vehicle setup – £4,500

• stock – £2,500

• insurance and licences – £1,000

• website and branding – £1,500

• launch marketing – £1,500

• working capital – £2,500

Total funding requirement – £20,000

That shows there is a reason behind the request.

 

Research your market

Do not simply say:

“There is a lot of demand.”

Explain:

• who the target customers are

• where they are

• what they currently buy

• who the main competitors are

• typical local pricing

• how your business will compete

• how customers will find you

Good market research gives the financial forecast something to stand on.

 

Keep the numbers realistic

A common mistake is assuming the business reaches full capacity almost immediately.

A credible forecast normally allows time for:

• marketing to begin working

• customers to discover the business

• repeat business to develop

• operations to become established

Optimistic forecasts are not automatically strong forecasts.

Explainable forecasts are stronger.

 

Connect the funding to growth

The assessor should be able to understand what the loan actually enables.

For example:

£8,000 of equipment allows the business to provide the service from launch.

£3,000 of initial stock allows the shop to open with the required product range.

£2,000 of launch marketing provides the planned route to the first customers.

Each major cost should have a business purpose.

Make the documents agree with each other

If your business plan says one thing, your cash flow says another and your funding request says something else, the application becomes difficult to believe.

Check the whole package before submitting it.

 

How much should you borrow?

The maximum is £25,000 per eligible applicant, but that does not mean £25,000 is automatically the right amount.

Every additional pound borrowed creates additional repayments.

 

Use a realistic startup budget and ask:

• What must be purchased before launch?

• What could be delayed?

• How much working capital is genuinely required?

• Is there money you can contribute yourself?

• What repayment can you comfortably afford?

• Does the expected business cash flow support the borrowing?

The official Start Up Loans website provides a repayment calculator that can help applicants understand the likely monthly and total repayments at the current 7.5% fixed rate.

Borrowing enough to properly fund the business is important.

Borrowing more than the business needs simply increases your personal financial commitment.

 

Can several people in the same business apply?

Yes, potentially.

Where a business has multiple eligible owners or partners, each individual can apply for their own Start Up Loan.

The current scheme allows up to £25,000 per individual, subject to a maximum of £100,000 across one business.

Each applicant is individually responsible for their own loan and must satisfy the relevant application requirements.

 

What happens if the application is declined?

A declined application is not necessarily the end of the business idea.

Current government guidance says applicants can appeal within 30 days if they believe the decision was incorrect.

Alternatively, a declined applicant can normally wait six months before making a new application.

If you are declined, understand the reason before simply submitting the same application again.

The issue might relate to affordability, credit history, eligibility, the business model or the supporting financial information.

 

What support comes with the loan?

The scheme is more than just the money.

Successful applicants receive access to 12 months of free mentoring, along with business support and resources.

That can be particularly valuable during the first year, when new business owners are dealing with decisions around customers, pricing, marketing, finances and growth.

Make use of it.

 

How StratoWrite can help you prepare

A strong funding application starts with a clear understanding of the business you are trying to build.

StratoWrite Custom Business Plans are built around your specific business idea, market, goals, budget and circumstances, combining research, financial forecasting and step-by-step planning into one structured plan.

 

If you are preparing for a Start Up Loan application, your plan needs to reflect your actual business and figures. A funding decision will also depend on the lender’s own eligibility, credit, affordability and viability assessments, so no business plan can guarantee approval.

 

Our Ready-Made Business Plans can also be useful earlier in the process if you are exploring a particular business idea and want to understand how it could operate, typical startup requirements and the steps involved in getting started. However, a Ready-Made Plan should not simply be submitted unchanged as a personalised funding application.

 

The official Start Up Loans programme also provides free Business Plan, Cash Flow Forecast and Personal Survival Budget templates for applicants who want to prepare the required documents themselves.

 

The practical takeaway

The Start Up Loans programme remains one of the main government-backed funding routes available to people starting and developing younger UK businesses.

In 2026, eligible applicants can borrow from £500 to £25,000 at a fixed 7.5% annual interest rate, repayable over one to five years. First-loan eligibility now extends to businesses trading for less than five years.

But the most important part of the application is not simply filling in forms.

 

You need to show:

• what business you are building

• who will buy from it

• how it will generate income

• what it will cost to operate

• exactly how the funding will be used

• why the financial forecasts are realistic

• and that the loan repayments are personally affordable

Build those pieces properly and you will have a much stronger application – as well as a stronger foundation for the business itself.

 

Important: Start Up Loan eligibility, interest rates and application requirements can change. Check the latest information directly with the official Start Up Loans programme before applying. Borrowing creates a personal repayment obligation, and you should consider whether taking on finance is appropriate and affordable for your circumstances.