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Starting a Business when there is no bank of mum and dad

By rotide
Created 08/09/2024 - 05:58
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Despite a backdrop of challenging economic conditions and a perception that fear of failure could stifle entrepreneurial activity, a recent report by the Global Entrepreneurial Monitor [1], has found there has been an increase in early-stage entrepreneurial activity in the UK. To ensure these emerging companies can establish themselves and grow, it's important that their founders can secure access to the funding needed to accelerate their business.

Start Up Loans [2]. Start Up Loans’ purpose is to finance those who might struggle to set up a business via other means and those from underrepresented groups. It’s essential that we are able to give everyone with a viable business idea the opportunity to access capital and support, so they can create jobs in their local area and boost the economy. This can help improve local areas, in some cases boost the high street and make sure setting up a business is equitable and not dependent upon family wealth.

Start Up Loans provides an essential financial resource for small businesses, offering unsecured loans of up to £25,000. With a fixed interest rate of 6% per annum and flexible repayment terms ranging from one to five years, these loans present a viable option for start-up founders. The fixed payments facilitate easier budgeting and financial planning, all without the requirement of putting up a home as collateral, making it an accessible choice for entrepreneurs from various backgrounds, including renters.

Liang Zhang, co-founder of Robin Valley said: "As a founder who doesn't own property in the UK, securing funding was a major hurdle. Start Up Loans was an obvious choice as a renter, as it offers finance without needing to put up a property as collateral. The fixed interest rate and clear repayment plan made financial planning straightforward, allowing me to focus on growing my business."

When considering the options available for accessing finance, there is a whole range of tailored financial products available to founders, from traditional debt facilities to equity finance. 

For start-ups, the British Business Bank’s intermediaries found the most popular form of finance is term loans, with 53% of founders of SMEs looking for this type of finance. Term loans have a predetermined repayment schedule, typically spread over several months or years and usually come with a fixed interest rate and set payments. This makes them popular among small business owners as the monthly repayments are predictable and easier to account for when undertaking business planning and budgeting.

Term loans can broadly be categorised into two types, secured and unsecured loans. Secured loans are a type of credit that is backed by property or assets, such as a house. Unsecured loans do not require an asset to be put up as collateral.

The nature of secured loans can present obstacles for those who rent their homes, as they usually lack property to use as collateral. In the UK, with approximately 19%, or 4.6 million, homes being privately rented this means a significant number of potential entrepreneurs could be excluded from accessing finance that requires property as collateral.

Given this context, it's vital to have unsecured loan options available for start-up businesses. This inclusivity ensures that the full potential of this boost in entrepreneurial activity can be harnessed, regardless of whether the business owner is a renter or a homeowner.

The rise in early-stage entrepreneurial activity in the UK is a positive sign of a resilient and innovative spirit amidst economic challenges. To nurture this growth, it is imperative to provide diverse and accessible financial solutions. Start Up Loans offers unsecured term loans that cater to a broad spectrum of entrepreneurs. Ultimately, Start Up Loans stands ready to back solid business ideas, regardless of the entrepreneur's background, ensuring that everyone has the chance to turn their entrepreneurial dream into reality


Source URL:
https://www.newbusiness.co.uk/articles/starting-a-business/starting-a-business-when-there-no-bank-mum-and-dad