UK Government-backed Business Loans

If you’re a small business, you may feel discouraged to get a loan. When especially if a bank already rejected you in the past. The United Kingdom offers hope with its push to aid economically driving companies, including small businesses and startups. Thus, with several loan schemes and partnered lenders that can help you grow.

Government-backed loans are accessible for various purposes: scaling up workforce; marketing your brand; or buying an asset for operations, among several other reasons.

Start Up Loan Co.

Start Up Loan offers loans and free mentoring to individuals looking to start or grow a business in the UK.

You could borrow £500 to £25,000 with a fixed interest rate of 6% per annum. Repayment terms span from one to five years.

For the application process, they require you to state how much you want to borrow and how you’ll spend the money.

Then, with your consent, they run a credit check to determine if you can afford the loan. Start Up Loan does not impose application or set-up fees.

Once you get their nod, they will ask for your business plan, cash flow forecast and personal survival budget for a further assessment.

The approved applicant is given 15 hours of free mentoring across the first 12-months of your loan term. The applicant has the entitlement to access a range of exclusive business offers of Start Up Loans’ corporate partners. It includes discounted offers, reduced rates and free giveaways on a variety of leading business products and services.

The length of the application process varies. With those deemed prepared with their business idea taking two to three weeks, while those still at a nascent phase, longer.

The Start Up Loan is a wholly-owned subsidiary of British Business Finance Ltd. Which in turn is owned by the British Business Bank Plc, a development bank wholly owned by Her Majesty Government.

Enterprise Finance Guarantee

The Enterprise Finance Guarantee (EFG) is designed to enable banks to lend to small businesses. These business are unable to offer the security that the bank would otherwise require. This could be an excellent option if you’re looking to increase working capital funding and expand or diversify your business.

Under the scheme, the government gives the partner-lender guarantee on a portion of the loan. Thus, putting the government obligated to pay for the debt should the borrower default.

Meanwhile, the borrower repays the loan with interest and fees on regular commercial terms while also paying a quarterly fee to the government.

Interested entities should only approach one of the 40 EFG-accredited lenders which include Barclays, Metro Bank, NatWest, Santander, HSBC, the Bank of Scotland and the Bank of Ireland, among others.

Accredited lenders will review whether your small business can be financed on standard commercial terms or is qualified for support via EFG.

If deemed eligible for EFG support, the government will guarantee 75 per cent of the facility balance to the lender. However, the lender can only offer the finance facility once the small business meets all the criteria required by the former.

Small businesses that availed of the EFG should pay 100 per cent of the outstanding facility, plus the 2 per cent annual guarantee fee, which serves as a contribution to sustain operations of the scheme.

Support for exporters

The UK government’s credit agency, UK Export Finance (UKEF) helps UK-based firms in many exporting pursuits: clinching export deals by providing attractive financing terms to their buyers; fulfil orders by supporting working capital loans; get paid by insuring against buyer default.

The UKEF has various financing options which can be a loan, insurance or line of credit, among others.

For instance, those looking for access to working capital finance can tap the Export Working Capital Scheme. Under this scheme, the UKEF can provide lenders up to 80% of the credit risks, meaning UK exporters can be more capable of supporting an export transaction in circumstances where a lender lacks the risk appetite to provide the full amount requested.

The Export Working Capital Scheme is particularly useful in circumstances where a UK exporter wins an overseas contract that is higher in value than they can typically fulfil or succeeds in winning more overseas contracts than it has done before.

Also, you can approach the UK Department for International Trade (DIT) which can provide you with expert advice; research on the market size and structure of the export destination; support during overseas visits; identification of possible business partners; and preparation for exhibitions and events

Through a range of services, this UK agency can help you become familiar with overseas business practices as well as draw up a winning strategy when trading in foreign markets.

Loan tip

Besides loans, the UK government also has other means of extending financial support for small businesses, such as through grants or tax incentives.


A grant is a non-repayable fund that government and some companies reward, usually to small businesses with significant, viable and innovative solutions. Some grants also offer non-monetary support in the form of office space and equipment, among others.

The eligibility requirement for each grant scheme varies. But the larger the funding size, the more complex the criteria and the longer the process of applying. For example, a small startup may find it easier to secure a £1,000 grant while a team working on a research and development project may find it more challenging to get a £100,000 grant.

Several grants, however, require that the applying business have the capacity to at least raise, whether internally or via debt financing, a certain portion of the project’s total cost while the grant only fills in the gap.

Nevertheless, a grant is a good funding option for small businesses, whether developing or established as it removes the need for repayment.

Tax incentives

The UK offers several tax incentives which small businesses often overlook.

The R&D tax credit is one example. You may initially think R&D is exclusive to those working in science laboratories. But HMRC’s definition of R&D is broad and flexible. It is enough that even software developers and architects have benefited from this tax break. If you’re unsure, you can reach out to the DIT or an R&D credit expert to have your business model evaluated.

Accountancy services and tax advisory provider RJP LLP also offers a free test. It could help you determine whether you are eligible for R&D incentives.

The large pool of government-backed financing options out there sure makes it difficult to choose which kind of monetary support suits you best. Familiarising yourself with these financing options through research may be a first-step, and often a tedious process. It’s good to be reminded, however, that the government is willing to extend its helping hand to businesses, including small-sized ones and startups, aiming to boost the economy’s growth.