Pros of Govt's start-up loans programme?

[Peter Swiers]

Hi everyone. Im currently researching into using the startuploans.co.uk

I have a few questions:

1) The startuploans website partners with a list of providers who work with them for example the princes trust, virgin start ups etc. Just wondering would it be better to just go to and apply to the providers themselves directly instead of through startuploans.co.uk. Do they take a cut?

2) Whats so special about using startuploans.co.uk or their providers ( eg princes trust). Is the main benefit that they offer a fixed 6% interest rate? Is that good? Are there other providers that arnt on startuploans.co.uk that provide lower interest rate? Im sure I saw another provider not on there offer 4.8% interest which is lower than the ones on startuploans.co.uk and was unbacked. So why not use another? Why arnt the others partnered with startuploans.co.uk?

Is is a case of wow your really lucky to get accepted by a startuploans.co.uk provider for 6% interest rate. Or is it a case of 6% interest isnt really anything special and their main USP is that they provide "support with making a business plan and cash flow forcast etc." In which case not very special at all.

Also start up loans co.uk say that they offer loans up to a maximum of 25k.....however the total of the separate providers combined is far above 25k. Eg princes trust is 5k, virgin start ups 10k.....

So wouldn't it be better to apply to them all Separately to be not bound by startuploans.co.uk 25k restriction? Im not saying one should.....but if they were 100% confident that the business would make a profit with every £1 borrowed one may wish to obtain as much as possible.

Also are these companies looking to only fund "trendy news worthy businesses" if you know what I mean. Eg a student sets up a cafe selling any mixture flavour fruit smoothies! All organic!!" (These are the kind of examples they show on their case study examples) but what about a more "boring business" such as "cleaning windows, power washing drives, being a sparky or a plumber". Not exciting by any means but many are just as profitable. Or perhaps they dont lend to sole traders?

 

[Mark T Jones]

1) If you apply direct, they will farm you out to one of their providers; it makes absolutely no difference. The rates & terms will be the same whichever channel you use - but some are more pro-active than others at getting deals done.

2) 6% is an exceptionally low rate for a start up loan (put in context, they anticipate default rate of about 40% which, in a nutshell means that they lose a fortune on it). Some dodgy brokers advertise lower rates - you won't be getting those rates as a start-up.

3) you can't make multiple applications. It's £25K per person, up to a maximum £70K per business.

4) They aren't looking for trendy business; they will judge your application on it's own merit and on the strength of your business plan.

Side note - they are pretty hot on personal credit history - if you have defaults or anything against you, you will probably be declined.

 

[Peter Swiers]

1) If you apply direct, they will farm you out to one of their providers; it makes absolutely no difference. The rates & terms will be the same whichever channel you use - but some are more pro-active than others at getting deals done.

2) 6% is an exceptionally low rate for a start up loan (put in context, they anticipate default rate of about 40% which, in a nutshell means that they lose a fortune on it). Some dodgy brokers advertise lower rates - you won't be getting those rates as a start-up.

3) you can't make multiple applications. It's £25K per person, up to a maximum £70K per business.

4) They aren't looking for trendy business; they will judge your application on it's own merit and on the strength of your business plan.

Side note - they are pretty hot on personal credit history - if you have defaults or anything against you, you will probably be declined.

Thanks thats great. If their default rate is 40% then my business plan could be to use the money to use the money to bet the lot on the roulette machine at the local casino. The chance of me doubling my money doing this would be around 48% meaning i'm improving their default rate by 8% =D

(Joking...but thanks anyway will be applying for my business)

 

[Mark T Jones]

Thanks thats great. If their default rate is 40% then my business plan could be to use the money to use the money to bet the lot on the roulette machine at the local casino. The chance of me doubling my money doing this would be around 48% meaning i'm improving their default rate by 8% =D

(Joking...but thanks anyway will be applying for my business)

If you want to get political, it's basically a job creation scheme.

It's heavy on bureaucracy (Government backed!) but ultimately the goal is to help people set up businesses - do it their way, not yours!

Good luck with the application.

If you don't have a preferred provider you could do me a small favour by applying through me affiliate link. https://transmitstartups.co.uk/ref/fof/

 

[mattk]

Side note - they are pretty hot on personal credit history - if you have defaults or anything against you, you will probably be declined.

What is the point of start up loans then? I can get a personal loan from my bank at a guaranteed 2.9%, so why would I pay these lot 6%?

 

[Mark T Jones]

Great explanation - do you mind me linking this as a reference point

be my guest

 

[Mark T Jones]

What is the point of start up loans then? I can get a personal loan from my bank at a guaranteed 2.9%, so why would I pay these lot 6%?

if you are offered a personal loan at that rate (and are comfortable with the minor fraud) then go for it.

 

[mattk]

if you are offered a personal loan at that rate (and are comfortable with the minor fraud) then go for it.

Why would it be minor fraud?

 

[nelioneil]

Why would it be minor fraud?

Personal loans should not be used for business purposes. I can guarantee that is very clear in their terms and conditions.

 

[Mark T Jones]

Why would it be minor fraud?

loan applications ask for a loan purpose. If the purpose given was starting a business , the loan would be declined

the default seems to be ‘home improvements’.

in many cases there is also deception around the nature of employment

 

[Mr D]

What is the point of start up loans then? I can get a personal loan from my bank at a guaranteed 2.9%, so why would I pay these lot 6%?

You presumably get the best rate you can in the circumstances. Shop around - there is no requirement for a lender to match what you can get elsewhere.
Even if by fraud.

Must admit I have never gone into a bank with a letter guaranteeing a set rate for a loan. They advertise a rate in posters and TV ads but that is not guaranteed, tends to be an ideal that is based on circumstances.

 

[mattk]

loan applications ask for a loan purpose. If the purpose given was starting a business , the loan would be declined

the default seems to be ‘home improvements’.

in many cases there is also deception around the nature of employment

I'll be honest, I've never had a personal loan, so I didn't know that they asked for a reason. Seems a bit strange that they even care, given they are unsecured.

 

[mattk]

You presumably get the best rate you can in the circumstances. Shop around - there is no requirement for a lender to match what you can get elsewhere.
Even if by fraud.

Must admit I have never gone into a bank with a letter guaranteeing a set rate for a loan. They advertise a rate in posters and TV ads but that is not guaranteed, tends to be an ideal that is based on circumstances.

My bank regularly sends me emails telling me I've been pre-approved for a loan of up to £20k at 2.9%. I assumed this was standard practice.

 

[Mr D]

My bank regularly sends me emails telling me I've been pre-approved for a loan of up to £20k at 2.9%. I assumed this was standard practice.

I wouldn't know, my bank never sends me spam.
Last loan I had from the bank was probably 20 plus years ago. There are other lenders these days.

 

[Karol B]

Pros easily available, cons high interest rate.

 

[Gordon - Commercial Finance]

Pros easily available, cons high interest rate.

Neither of those are true, fortunately.

 

[Mr D]

Pros easily available, cons high interest rate.

Judging by the people who report being turned down, not so easily available.
Then again, loans haven't been easily available for a decade or more.

 

[Gordon - Commercial Finance]

Judging by the people who report being turned down, not so easily available.
Then again, loans haven't been easily available for a decade or more.

Depends where you’re looking. But really a blanket statement like “loans aren’t easily available” just doesn’t quite cover it.
Unsuitable loans for unsuitable people are less readily available now. That’s a good thing.
Although just today in the news there has been plenty about unsuitable short term loans being far too readily available.

In the start up loans world, loans aren’t as readily available as other commercial funding opportunities, but that reflects the massive risk involved, as Mark points out above.

The rates might look big when compared with a mortgage, but compare apples with apples and 6% is an incredible rate for a brand new company who has a 40% chance of default.

 

[Mr D]

Depends where you’re looking. But really a blanket statement like “loans aren’t easily available” just doesn’t quite cover it.
Unsuitable loans for unsuitable people are less readily available now. That’s a good thing.
Although just today in the news there has been plenty about unsuitable short term loans being far too readily available.

In the start up loans world, loans aren’t as readily available as other commercial funding opportunities, but that reflects the massive risk involved, as Mark points out above.

The rates might look big when compared with a mortgage, but compare apples with apples and 6% is an incredible rate for a brand new company who has a 40% chance of default.

I agree, unsuitable loans for unsuitable people - back in the day loans were chucked at people like anything. Affordability appeared a lot less relevant.

 

[Peter Swiers]

I will use your link to apply no worries
Also just wondering would it increase my chances of obtaining the loan if I had some of my own money in the business I was aiming to get the loan for. Eg if it already owns say £15k of assets would they be more keen to lend as I have some of my own skin in the game. Or could this backfire on me and they think well this guys doing alright...he already has 15k worth of assets. Lets prioritize and lend to people with no money instead. (Like the princes trust who punish people who actually have jobs and incomes by not providing lending and rewarding people that don't work with nice loans).

Kind of reminds me of when my parents used to dole out money to my brother because he didn't bother to work. While I because of getting my ass in gear and working was rewarded with zero money from my parents. I should have just chilled on the sofa and ended up the same financially.

I will never do that to my children. 50/50 is what they will receive. None shall be rewarded more than the other due to laziness.

 

[Mark T Jones]

I'll be honest, I've never had a personal loan, so I didn't know that they asked for a reason. Seems a bit strange that they even care, given they are unsecured.

It's about risk assessment. though does depend on honest to to work). Home improvements is a low-risk activity. Debt consolidation is more risk, starting a business is probably marginally less risk than stocking up n crack cocaine for personal use.

 

[Mark T Jones]

I will use your link to apply no worries
Also just wondering would it increase my chances of obtaining the loan if I had some of my own money in the business I was aiming to get the loan for. Eg if it already owns say £15k of assets would they be more keen to lend as I have some of my own skin in the game. Or could this backfire on me and they think well this guys doing alright...he already has 15k worth of assets. Lets prioritize and lend to people with no money instead. (Like the princes trust who punish people who actually have jobs and incomes by not providing lending and rewarding people that don't work with nice loans).

Kind of reminds me of when my parents used to dole out money to my brother because he didn't bother to work. While I because of getting my ass in gear and working was rewarded with zero money from my parents. I should have just chilled on the sofa and ended up the same financially.

I will never do that to my children. 50/50 is what they will receive. None shall be rewarded more than the other due to laziness.

In the case of Start Up Loans, it really doesn't matter. Back when I did a bit of contract work with them, the big deal was attitude to debt. Other than that it really is about making them comfortable that you know what you are doing and are taking it seriously.

It's bureaucratic, but the aim is to lend money.

 

[Mark T Jones]

My bank regularly sends me emails telling me I've been pre-approved for a loan of up to £20k at 2.9%. I assumed this was standard practice.

In contract law, I believe it's called 'invitation to treat'. You've probably met a few pre-qualifiers eg 2 years filed accounts, not bouncing payments, but you will still have to go through the credit process. Whether you will be approved, and at what rate is anybody's guess.

At the crooked end of the broker market a favourite trick is to send out 'offer letter' - which aren't in any way offers, just an attempt to takea deal off the market