Starting up
Start Up Loan vs business loan: which fits your business?
Start Up Loan vs business loan: rates, security, personal guarantees and amounts compared, and how to tell which route fits a business under five years old.
A Start Up Loan is a government-backed personal loan for business purposes: 7.5% fixed, unsecured, no personal guarantee, and £500 to £25,000 per founder. A standard business loan is lent to the business itself. It usually needs trading history, and often security or a personal guarantee. Which fits depends on your stage.
Section 01
Start Up Loan vs business loan: the real differences
- Who borrows. A Start Up Loan is in your name, for business purposes. A business loan is in the company's name.
- Trading history. The scheme takes pre-launch businesses and anything trading up to 60 months. Most business lenders want accounts, often two years of them.
- Security. A Start Up Loan is an unsecured personal loan. Business loans frequently want a personal guarantee, and sometimes a charge over assets.
- The rate. 7.5% fixed for the whole term, set by the scheme. Business-loan rates vary with the lender, the risk and the market, and many are variable.
- The amount. £500 to £25,000 per founder, up to £100,000 per business. Business loans go far higher.
- The extras. Every approved Start Up Loan includes 12 months of free mentoring. A commercial loan includes a repayment schedule.
Section 02
Where a Start Up Loan wins
Early. If you are pre-launch or in your first five years, the scheme was built for you. The high-street banks mostly were not: they want trading history a new business cannot have yet. Around two-thirds of Start Up Loans go to founders the mainstream banks turned down, by the British Business Bank's own evaluation. The fixed rate also makes the first year plannable. Your repayment never moves.
Section 03
Where a standard business loan wins
Scale and structure. If the plan needs more than the scheme's caps, a business loan is the route. If the business has accounts, assets and turnover, it may also price well. And borrowing in the company's name keeps the debt off your personal file, though a personal guarantee often puts you behind it anyway. Read the guarantee terms before you sign. Always.
Section 04
Which one fits your business?
Ask two questions. How old is the business, and how much does the plan actually need? Under five years old and under £25,000 per founder: start with the scheme. Check whether you qualify in our guide to the 2026 eligibility checklist, or go straight to our Start Up Loans page and take the 60-second check. Bigger or older than that: talk to a broker about the commercial market. bizbritain is an FCA-authorised finance broker and a Start Up Loans Business Support Partner, with a panel of 100+ lenders. We route each founder to the door most likely to open.
Weighing a grant as well? Read Start Up Loan or a grant: how to choose.
This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.
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