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Government Funded Start-up Loans Program Racks Up A Quarter Billion Of Lending Since 2012

Budding British-based entrepreneurs have benefited from £250m of loans provided through the British Business Bank’s Start Up Loans scheme since it was launched in 2012, according to a note published by the UK Department for Business, Energy & Industrial Strategy at the end of August.

The government says that every pound lent returns £3 to the economy, and that, as at the beginning of 2016, the UK was home to record number of SME businesses, 5.4 million, who between them have created over 15 million jobs, and contributed £1.8 trillion to the economy.

Of funds lent to entrepreneurs between the ages of 18 and 24, half go to those who are not in full-time employment, education or training, so-called NEETs. 1 in 5 loans go to some of the UKs most deprived areas.

Greg Clark, the Business and Energy Secretary, described British entrepreneurs and small businesses as “the backbone of our economy”, and promised that “the government will build on the success of Start Up Loans to give entrepreneurs the support and opportunities they need to start a business, grow it in Britain and turn it into a global success story.”

The Minister for Small Business Margot James said that “small businesses play a vital role in local communities, bringing them together and giving millions of people good jobs and livelihoods – they are one of the many tools we have to build an economy that works for all.”

The Start Up Loans company offers fixed rate loans of up to £25,00, plus a free network of support and mentoring to help first time founders find their feet, and more experienced business people jump-start their business growth.

The note makes mention of several businesses that have benefited from the scheme, from Pocket High Street, a London based start-up that lets users see what is available in high street stores and make purchases online for click and collect, who borrowed £10,000 and have since raised hundreds of thousands more through private investment, to The Palm Caye, Camarthen, an artisan gelato making business that took out the full £25,000 loan to purchase specialist ice cream making equipment from Italy, in order to create a “piece of tropical paradise for the people of Camarthen, inspired by the Caribbean.

The Start Up Loans company charges interest of 6.0% and offers a 1-5 year repayment term, plus pre-loan support with business plans and cash-flow forecasts, 12 months of free mentoring, and “exclusive business offers.”

Applicants for the loans must first register before being contacted within 3 business days by a “Delivery Partner”, who help to complete the application form and run a standard credit check to ensure candidates meet the required criteria.

After that, applicants must submit their business plans, cash-flow forecasts and personal survival budget before a “loan assessment” takes place, and if successful, a loan agreement is signed and a mentor is assigned.

The first repayment date is usually set for 30 days after the date of the loan being paid out.

There have never been so many financing options in the UK

Obtaining funding for start-up business, despite the governments best efforts, can often seem a bewildering business in itself, with no shortage of enterprising finance providers offering every form of lending under the sun, from equity crowdfunding sites, to lenders who will secure their loans against entrepreneurs property or belongings, from yachts to comic book collections.

The British Business Bank was founded in November 2014 and, according to the government, already “supports” £3.1bn of finance to more than 48,000 smaller businesses, as well as participating in a further £4.4 billion of finance to small mid cap businesses.

The organisation recently published a “Business Finance Guide”, in collaboration with the Institute of Chartered Accountants of England and Wales (ICAEW) which helps “wantreprenuers” explore their options, and is also backed by the British Business Angels, Innovate UK, the London Stock Exchange, the Institute of Directors and many others.

Weighing in at 32 pages, entrepreneurs certainly can’t complain they no longer have any financing options; the mental gymnastics involved in picking the right one; seed-funding, angel investment, loans, or a crowdfunding campaign, may be a decent indicator of whether a would-be founder has what it takes to succeed in the world of business.

Just so long as you pay back 3 times more than you borrow, everything should be fine.


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