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Government business loans

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 4, 2023

Fact Checked By:
David Nicholson - Finance Editor

Government business loan guide – What is available and how to apply for one today

You can get loans for your business from the government at all stages of your business development.

These include the start-up loan phase, expansion early on for UK businesses, and establishment and maintenance of growth for UK businesses.

We can help get you approved for a Government-backed business loan, start now below:

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Government business loans – Overview:

  1. What are the options for a government loan?
  2. Types and amounts of government small business loans
  3. What is a government start-up loan?

You may require funding or a small business loan to help you start, grow, or expand your business. A Government loan for businesses is one way to achieve this.

Changes in the country, such as new budgets and governments, can impact what loans are available to businesses from the government.

There will be deadlines or eligibility requirements for many Government lending programs, such as a business plan.

We will examine the various types of funding available to businesses, how they differ from grants, and what loans are best for.

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What are the options for a Government loan for a business?

Government business loans typically allow you to access a variety of opportunities, such as:

  • Start-up loans can finance your business or provide capital for it.
  • Finance your business expansion or growth
  • Covering the cost of running your business, including purchasing equipment and stock, as well as paying employees’ wages
  • Helping your business recover from the effects of the Covid-19 pandemic

Types and amounts of government small business loans

Here is a list of current government-backed loans and funding for businesses.

Business Recovery Loan Scheme (COVID-19)

The Recovery Loan Scheme was introduced in April 2021 and extended until June 2022. It is intended to assist businesses in dealing with the effects of the Covid-19 pandemic.

Eligible organisations can now apply for up to £2 million per business since the rule was changed on January 1, 2022.

The Government guarantees 70% of any loan under this scheme. If a borrower defaults on a loan, the Government will reimburse the lender 70%, however, the borrower is still responsible for 100% of the loan.

Northern Powerhouse Investment Fund

The Northern Powerhouse Investment Fund is a collaboration between 10 Local Enterprise Partnerships and the British Business Bank.

It combines funding from the UK government and the European Regional Development Fund with the British Business Bank.

It focuses on the North West, Yorkshire, the Humber, as well as the Tees Valley.

There are three types of funding options:

  • Microfinance: loans for small businesses between £25,000 to £100,000. This loan is for those who are looking to start a business or expand an existing business and require financial support. You must prove that you have not been successful in applying for a traditional loan scheme to be eligible.
  • Business loans: business loan scheme between £100,000.00 and £750,000 to established and early-stage businesses with growth potential.
  • Equity financing: early or late-stage equity financing, starting at £50,000 and ending at £2 million for established businesses or start-ups with high growth potential. In return for financing, you may sell a portion of your business to investors or groups of investors.

You will need to locate an NPIF manager in your area to apply for any of these benefits. This can be done on their website.

Midlands Engine Investment Fund

The Midlands Engine Investment Fund is a partnership between the British Business Bank (BBB) and 10 Local Enterprise Partnerships in the West Midlands, East and South East Midlands.

It is supported by the UK government, the European Investment Bank, the British Business Bank, and the European Regional Development Fund.

There are four types of funding that businesses can access:

  • Small-Business Loans: from £25,000 to £150,000. Available to start-ups and established SMEs that have had difficulty getting financing through traditional lenders.
  • Business loans: starting at £100,000.00 to £1.5million for companies with 250 or more employees that have demonstrated growth potential.
  • Equity financing: later stage equity funding up to £2 million. In return for funding, you will sell a portion of your business to investors or groups of investors.
  • Proof of Concept: early-stage equity financing up to £750,000 to help you get your product or business up and running.

You will need to submit your application through one of the MEIF’s allocation fund managers to secure funding. These are available on the MEIF Website.

Investment Fund Cornwall & Isles of Scilly

The UK government and European Regional Development Fund support the Cornwall and Isles of Scilly Investment Fund. They work with the Cornwall and Isles of Scilly LEP.

These are the two types of funding available through the CIOSIF:

  • Loan finance: comprises small business grants starting at £25,000 and debt financing options starting at £100,000.00 to £1,000,000 for businesses with 250 employees or more that have growth potential.
  • Equity financing: funding circle starts at £50,000 and goes up to £2,000,000. In return for funds, you may sell a portion of your business to investors or groups of investors.

You can access this funding through one of the CIOSIF’s allocation fund managers. These are available on the CIOSIF Website.

Other government loans

You can find the full range of available Government business loans and other forms of Government-backed funding using the Department for Business, Energy & Industrial Strategy’s search tool.

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What is a government start-up loan?

The government-backed Start Up Loans scheme is for entrepreneurs who want to start or expand their business. It can provide funding starting at £500 and ending at £25,000 at a fixed interest rate of 6% a year.

Each owner or partner can apply individually for a Start-Up Loan up to £100,000.

The loan is structured as an unsecured personal loan. You don’t have to provide collateral in order to get the loan. And you are responsible for its repayment.

Read more on personal loans vs business loans to figure out which is the most suitable for your circumstances.

Are loans for government businesses the same as grants?

A business grant does not require repayment. However, a business loan will have to be repaid with interest.

Before you apply for a loan from a lender, whether it’s a government loan or a traditional loan, you need to be sure that you can repay the loan on the agreed-upon terms.

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What happens if I don’t qualify for a Government loan?

There are other funding options available if you are not able to get a loan from the government.

Apply for a traditional loan

Apply for a business loan from traditional lenders if you have not been able to get a government-issued loan.

You must meet the eligibility criteria of your provider to be considered successful. This includes satisfying credit checks.

You may need to look in to bad credit business loans if you have impaired credit.

Bank Referral Scheme

If you fail to qualify for a traditional loan for your business, you can be referred through the Bank Referral Scheme to an online lending platform. To be referred, you must have applied through a bank that is a participant.

These platforms may review your data and match you with funding solutions if they have your consent.

Increase your business credit score

You can increase your chances of getting business financing by increasing your business credit score.

Your business credit score is similar to your personal credit score for your personal finances. It reflects your company’s financial health and creditworthiness.

There are many steps you can take in order to improve your credit score for the business. These include paying your bills on time, filing complete accounts at Companies House and only applying for credit (such as for business loans) when absolutely necessary.

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