Can I get Startup loan in the UK With Direct Lender?
The journey from being a start-up to a full-fledged business needs constant support of funds. As a business owner, you might confront expenses that you might not have estimated. Direct lender start-up loans can help in plugging such funding gaps.
Loan deals will be tailored to match your financial requirements and capabilities. You will be introduced to flexible funding solutions that can prove to be a game-changer for your business. Loanchester is one of the best start-up loan lenders in the UK.
Table of Contents
- What is a start-up loan?
- What are the repayment options and schedules?
- What criteria do direct lenders use to assess applications?
- What documents are needed for a start-up loan in the UK?
- How do direct lender start-up loans differ from other options?
- How start-up loans can benefit new businesses?
- How to apply for a start-up loan?
- How to increase the chances of start-up loan approval?
- FAQs
What is a start-up loan?
This is the financial support you can get to launch and scale up your new business. During the early phase of any business, access to funds can help to keep the cash flow intact. You can get them as unsecured start-up loans which are not backed by collateral.
The start-up loan amount limits start from £1000 to £25,000. Get an idea about the ideal amount by analysing this loan amount Vs start-up loan interest rates table.
| Loan amount | Interest rates (approx.) |
|---|---|
| £1000 to £5000 | 10% to 20% because of risk involved |
| £5001 to £10,000 | 8% to 15% provided you have fair credit |
| £10,001 to £25,000 | 6% to 10% needs you to provide the business plan |
What are the repayment options and schedules for these loans?
The term within which you must repay is usually from 1 to 5 years. The start-up loan repayment options accessible to you are:
- Scheduled instalments – A portion of principal amount you borrow and the interest will be paid off in the form of instalments after a regular interval.
- Automate payments – Set automatic transfer option so that the required amount gets debited on its own from your account on the given date.
What criteria do direct lenders use to assess applications?
The start-up loan eligibility criteria set by direct lenders to assess applications are:
- Age and residency: As a business owner, you should be 18 years old UK citizen and you must establish that you have right to work in the UK.
- Trading history: These loans have been made available for new businesses. However, you should be able to establish a trading history of at least 36 months.
- Viability of the business plan: It should outline your business model including details market analysis done by you. Most importantly, it should have financial projections that are more crucial for lenders.
- Affordability: The application will be validated to understand if repayments are affordable without making you dip into your savings.
What documents are needed for a start-up loan in the UK?
The required documents for start-up loans are as follows:
- A complete and detailed business plan
- Business and personal bank accounts
- Personal and business tax returns
- Proof of identity and address
- Financial forecasts
- Cash flow projections
How do direct lender start-up loans differ from other options?
Here, you will mainly have to understand government vs direct lender start-up loans.
| Government Schemes | Direct lender start-up loans |
|---|---|
| Get start-up loan support and mentoring | Get only financial assistance |
| The lending source would be banks | The lending source will online lenders |
| Approval might take a few weeks | You can expect speedy approval of funds |
| Personal credit checks are required | Affordability checks are performed |
| Purpose restriction is there | Flexibility in use will be provided |
How start-up loans can benefit new businesses?
The benefits of start-up loans for new businesses are numerous. These loans have features that makes borrowing a convenient process.
Usage liberty
You can get these loans to purchase new equipment for your business to improve its efficiency. Again, they come in handy to manage the cash flow challenges that can stop the business operations. Building inventory can be made easy with the help of these loans.
Enhance creditworthiness
By successfully managing and repaying these loans, you can build a stable credit history for your business. It will be beneficial when you will have to explore future opportunities for your venture.
Competitive price
You can pre-qualify with many lenders at the same time. No need to spend extra money to avail of this facility. You can collect the free proposals and compare prices to find the best loan offer.
Customizable repayment pattern
You can adjust the loan amount to get a desired repayment pattern. The lender will need you to repay monthly or weekly at your convenience. Repaying loans is going to be a flexible process for you.
How to apply for a start-up loan?
The start-up loan application process involves a few steps. You must complete them to get suitable funding for your new venture.
- See your eligibility to make sure that you can apply
- Prepare a well-defined business plan
- Keep all the necessary documents ready
- Fill out correct details in the online form
- Submit the form so that it can be further processed
How to increase the chances of start-up loan approval?
Start-up loans for new business owners will need you to take care of a few aspects to enhance the approval chances.
- Your business plan should be well prepared
- Create a detailed cash flow forecasts and sales projections
- Pledge collateral to provide loan repayment assurance
- Opt for a suitable amount that matches your financial capability
FAQs
How fast is start-up loan approval?
Start-up loan approval time is short as you will have to fulfil fewer formalities. Besides, the processing for pre-approval will take place online which saves a lot of time. If everything goes well with your application, you can even get a same day response.
Can I get a start-up loan without credit check?
When you are pre-qualifying for start-up loans, affordability checks matter the most. You have a new business which might have started generating revenue. In that case, this might not have built a credit history to establish financial potential.
What happens if I miss repayment or face financial difficulties?
While getting loans, it is your responsibility to make sure about repayment. Late payments will make the lender charge penalties. Besides, the active rate of interest will start accruing. You can try to discuss these issues in advance with the lender as it can help you get some buffer time.
Are there fees or penalties for repaying my loan early?
No, pre-paying loans will not make you pay additional fees. However, paying off the outstanding amount with interest upfront can put a huge financial burden on your shoulders. Check if the required amount can be arranged in advance or else you will have to struggle.
Can multiple business partners each apply for separate start-up loans?
Yes, each partner can apply for separate start-up loans. If you co-own this business with someone else, you can get external funding to support the venture separately.
John Milton is an experienced financial writer and personal loan expert with years of experience identifying the right category for people. He has been Chief Financial Expert at LoanChester in the UK and provides insights on the big deals of the lending institution. He is known for transforming the loan policies as per the unique needs of different borrowers. First, he focuses on what the borrowers require according to their favourable and adverse financial stances, and then he focuses on making a variety of personal loans affordable. John writes well-researched content on personal loans and also guides borrowers regarding their unique financial conditions. John holds a Ph.D. degree in banking and finance.
