Do I need a deposit for a Start Up Loan? No, and here is what unsecured means

Section 01

Do I need a deposit for a Start Up Loan?

No. You will never be charged a fee for applying, and you will never be asked for a deposit.

The same goes for fees of every kind. Other than your monthly repayments, you will never be asked for any other payment.

So why do so many founders expect to need a deposit?

Because most other finance works that way. A commercial mortgage usually needs a deposit. Asset finance is secured on the equipment you buy. Many bank loans ask for security or a personal guarantee.

A Start Up Loan is different, and the difference is worth understanding before you apply.

Section 02

What does unsecured mean?

An unsecured loan is one with nothing pledged against it.

The difference is simple. A secured loan is backed by an asset, such as a property. If the loan is not repaid, the lender can take the asset. An unsecured business loan has no asset behind it, but many lenders still ask for a personal guarantee.

A Start Up Loan requires neither collateral nor a guarantor. You remain personally responsible for repaying it.

Put another way, you do not have to use your house or any other asset as security to receive the money.

That is the whole point of the scheme. It was created for people who have struggled to get finance from traditional lenders. A lack of security is one of the common reasons a bank says no.

The loan itself works like this.

Co-founders can each apply. We cover the limits in our guide to how much you can borrow with a Start Up Loan.

Section 03

Can you get a Start Up Loan without collateral or a guarantor?

Yes. Neither is asked for.

But unsecured does not mean without responsibility. A Start Up Loan is a personal loan, taken out in your name rather than your company's. You are liable for the repayments even if your business plans change.

Missed repayments will affect your credit file. That is the trade-off for borrowing without security.

The personal loan model also matters if you trade on your own. We explain how a sole trader borrows for the business in a separate guide.

Section 04

What the scheme checks instead of a deposit

With nothing pledged against the loan, the assessment rests on you and your plan. Your bizbritain adviser reviews the finished application and carries out the full assessment. It covers three things.

Every approval and every decline gets a second internal review. Those three documents do the job a deposit does elsewhere. They are your evidence.

You do not need to write them from a blank page. Our free myplan tool builds the plan, the forecast and the survival budget by asking plain questions. The workbook itself takes around 30 minutes rather than days or weeks.

Section 05

When a deposit or security is normal

A Start Up Loan is not the right tool for every purchase. Once you need more than the scheme can lend, you are into finance that usually does come with security.

• A commercial mortgage usually needs a deposit and is secured on the property.
• Asset finance is usually secured on the vehicle or equipment itself.
• A larger business loan may need a charge over an asset or a personal guarantee.

None of that is a reason to be put off. It is simply a different product for a different job. In our experience, the common mistake is applying for the wrong one first.

If your plan needs more than a Start Up Loan can cover, a broker can look at the deal across a wider range of lenders.

Section 06

Where bizbritain fits in

We are a Start Up Loans Business Support Partner. The documents, the adviser and the assessment all happen with us. Approved applications go to our Start Up Loans finance partner, which runs its final checks, issues the loan agreement and provides the funds.

Because there is no deposit to raise, the part you control is the paperwork. That is what myplan is for. It is free for every bizbritain applicant. Most applicants who submit a finished application are approved within one to two weeks, provided they reply promptly to anything the adviser asks for. The fastest can be approved in as little as a week. Timing depends on any further work the documents need, prompt replies to information requests and the finance partner's final checks. Once approved, the loan can be drawn down within 24 hours.

Our eligibility check takes about a minute and involves no credit search. If a Start Up Loan fits, the first step is applying for a Start Up Loan with us.