Start-Up Loans

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Start-up loan

A start-up loan is a business loan that funds the launch of a new company, financing essential requirements like recruiting employees and buying equipment.

Why do you need a start-up loan?

You might want to get initial funding to buy stock or equipment, lease a premises, or recruit your first couple of employees. Don’t forget new businesses may also need funding to pay for market research or hire a PR or marketing expert to create a unique brand to promote your products or services.

Whatever your reason for a small business start-up loan, do the research first since you need a team that can fill in any knowledge gaps you have. Therefore, you need to choose an arrangement that best fits your business.

Frustratingly, start-up loans are sometimes hard to come by. Traditional British business banks have tougher regulations, and they will need to see your sales history, balance sheet, business plan, and scaling methods while showing how you can adapt to the evolving risk landscape. As you have just started out, your lack of assets to use as security and sparse business credit history may make this challenging.

Not all is lost, though. Alternative finance providers take a more flexible approach, exploring other aspects of a business before making a decision. This makes things easier for young SMEs looking to borrow.

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What small business start-up loan is best for you?

To help you track down the most suitable start-up funding, you need to ask yourself a few questions to help refine your search.

What do you want to achieve with the loan?

Your lender will require details of your business idea, so prepare answers to their questions carefully and be as precise as possible about your planned use of the money. You might also find alternative lenders that fund the very area you need to invest in.

How much do you need to borrow?

The best way to determine how much you need to borrow is to brainstorm what you need the funds for and how much funding you need to make it happen. This will steer you in the right direction to sourcing the funds you need. There are many lenders on the market who can help fund your business to fuel your growth.

Read on to understand the different funding options you have available to you.

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Alternative finance offers non-equity start-up funding

The range of funding options available is really varied—reward crowdfunding, equity financing, peer-to-peer lending, and specialist lenders all provide cash for start-ups.

Better still, if you want to keep control of your business and avoid giving away equity, there are still many choices. Let’s look at a few options that don’t involve giving away those precious shares.

Unsecured loans

An unsecured loan is ideal for start-ups who want to access money relatively quickly but might not meet the banks' strict criteria. Alternative lenders like Fleximize offer a quick and easy online application process, which saves business owners a lot of time.

When you apply, to make the process as efficient as possible, make sure you have all relevant documents handy and ready for essential background checks. If you apply with Fleximize, a relationship manager will tell you what you need after you’ve submitted the initial application.

To qualify for a Fleximize business loan, you must have a trading history of at least six months. However, if you're just setting up your venture, you may qualify for a smaller credit facility.

Reward crowdfunding

Reward-based crowdfunding is a popular way for start-ups to raise cash, providing another way for new SMEs to boost their budgets.

An essential factor to note is that your business needs to stand out from other start-ups on the sites that also raise money online from investors. You’ll need to create a very persuasive pitch to catch people’s attention so they choose to give you their cash in return for a reward. Whether it's a first-edition product you're developing or a VIP guest pass to your launch party, offer exciting incentives to encourage investors to help fund your venture.

Pension-led funding

In this case, you're lending from yourself in a roundabout way. Entrepreneurs can dip into their pension pot by investing the cash into their own start-ups. Around £2.5 trillion is sitting in UK pension schemes, with £200 billion estimated to belong to business owners or people about to start up.

Pension-led funding lets you and other directors access that pension money and transfer it into a self-invested personal pension (SIPP) or a small self-administered scheme (SSAS). Both schemes allow business owners based in the UK to decide where the money is invested – in this case, into their own venture.

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