What is a start-up loan?
A start up loan is finance available to a newly established business to help fund its launch or its early stages of operation.
New businesses can find it particularly challenging to secure funding from lenders as they are a perceived higher risk. Unfortunately, the failure rate of start-up enterprises is higher relative to more established businesses. That is not to say funding to support a start-up is not available.
Am I eligible for a start-up loan?
At a minimum you will need to meet the following criteria:
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Business owner over 18 years old
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Business registered in the United Kingdom
Ideally to support your loan application you will have;
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A business plan including financial forecasts
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your CV
A business plan includes an outline of your business objectives, strategies, marketing and financial forecasts. The financial forecast will outline the cash flow of your business enabling the lender to assess what are your funding requirements and will you be able to repay the finance. A lender will assess your business plan assumptions and may ask for clarification on how you arrived at them. Your CV will be used to assess if you have the skills and experience to successfully establish and grow your business.
Do I need a business plan to get a start-up business loans?
Yes, a business plan is a document that describes your business covering its objective, strategies, sales, marketing and financial forecasts.
A start-up lender will be able to use this document to better understand your business idea, your objectives and how the funding will be used and repaid. As an entrepreneur it is an important tool to help you:
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clarify your business idea
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Identify potential problems
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Set out your goals
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Measure your progress
If you have a business plan in place then there should not be much other administrative paperwork to deal with when applying for a loan.
What are the start-up finance options?
A new start business can find it challenging to secure the funding they need from lenders. The ability to obtain funding decreases with a limited trading history and lower levels of collateral. Nevertheless, there are many options to finance your start up. Some common types of finance options include:
Secured Business Loan - a loan that uses an asset such as property or another tangible asset as security for the borrowing. Given the asset security lowers the risk to the lender this form of finance charges a lower interest rate.
If you are a property owner, a great solution is Adelpha Capital’s Start-Up Business Loan. We take the time to look at the likely success of your business, the experience & calibre of the people behind it and make a decision based on the commercial merits of the lending proposal.
Key features include:
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Quick loan application turnaround with an approval in principle available within 48 hours
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Finance up to £150,000
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Loan is secured against suitable property (1st or 2nd charge) and not the business assets which keeps open other funding options in the future
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You pay a fixed interest rate Fixed interest rates so you know what you pay upfront
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Flexible repayments from one to five years that are tailored to your likely business cash flow or needs. This includes a loan option with no repayments for the first 2 years as the business gets established.
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Direct contact with your Account Manager so you know the status of your loan
Unsecured Business Loan - a loan that doesn’t require you to secure an asset against the borrowing. Given the lender does not have asset security, a higher rate of interest is typically charge on the finance
Bank Loan - Banks, the traditional go to source for finance, do offer small business loans. However, they tend to be more focused on established enterprises, have onerous application processes, strict lending criteria and low approval rates. Turnaround for a decision on a loan can take weeks to months.
Business Accelerator Programmes - From these programmes an entrepreneur can receive investment, business development support and training.
Angel Investment Networks and Crowdfunding - Here an investor is giving the start-up money in exchange for ownership. The money does not have to be paid back but it does dilute company ownership. To attract an angel investor or successfully raise funds through crowdfunding then a solid business proposal is essential. The angel will likely also place a lot of emphasis on the business team and you will need to agree on a valuation of the business.
How do I get a start-up business loans?
Applying for an Adelpha Capital Start-Up Business Loan is a simple straightforward process.
However, if providing property security is not an option, then our sister entity, Adelpha Finance, is a commercial finance broker who works with a wide range of lenders to find the right finance option for you. Their service charges no upfront costs and is offered on a zero-obligation basis.
What can a start-up loan be used for?
A start-up loan can be used for any business-related purposes. Funds can go to the cost of getting the business up and running which can be high given costs such as purchasing stock and equipment, marketing, recruitment, training and much more.