If you are considering a UK Start Up Loan before your business has reliable revenue, budget for the monthly repayments from the date they begin, not from the month you hope sales will improve. The crucial test is whether your personal finances and business cash flow can withstand a slow launch without using money needed for rent, tax or essential operating costs. A fixed rate makes repayments predictable, but it does not make early income predictable.
This guide covers the UK government's Start Up Loans scheme, rather than US SBA loans or ordinary commercial business loans. Figures reflect the scheme terms available in November 2026; your signed agreement determines your actual repayment schedule.
What will a Start Up Loan cost each month?
Under the current UK Start Up Loans rules, eligible applicants can borrow between £500 and £25,000, repay over one to five years and pay a fixed interest rate of 7.5% per annum. There are no application fees or early repayment fees. The scheme offers business-planning support and up to 12 months of free mentoring.
The 7.5% rate applies to successful applications under the terms introduced on 6 April 2026, when the scheme also expanded its trading-age eligibility to businesses operating for up to 60 months. Older loans agreed at 6% generally keep that fixed rate; a new application should not be budgeted at the old 6% figure. See the programme's interest-rate and eligibility change explanation.
Most important: this is an unsecured personal loan for business purposes. It is not a grant, and government backing does not pay the debt for you if the business fails. You remain personally responsible for the repayments, even if trading stops.
Here is the programme's indicative repayment comparison for a £10,000 loan at 7.5% per year, using its official loan repayment calculator:
| Term | Monthly | Total interest | Total to repay |
|---|---|---|---|
| 24 months | £450.00 | £799.90 | £10,799.90 |
| 36 months | £311.06 | £1,198.24 | £11,198.24 |
| 60 months | £200.38 | £2,022.77 | £12,022.77 |
Figures are indicative values published by Start Up Loans, not a personalised offer. Small differences can arise between rounded monthly amounts and the total repayment shown.
The 60-month option lowers the displayed monthly payment by £110.68 compared with 36 months, but increases total interest by £824.53. That trade-off matters if your income is uncertain: a lower instalment can protect monthly cash, while a longer term increases the overall cost.
Start Up Loans advises that the first monthly payment begins soon after the loan is drawn down. Do not assume that repayment waits until you make your first sale. Confirm the precise first payment date and collection arrangements in your loan agreement.
Build two budgets, not one optimistic sales forecast
Before applying, prepare a business cash flow forecast and a separate household budget. Start Up Loans calls the second document a Personal Survival Budget. The scheme requires both because company viability and the borrower's personal affordability are different questions.
1. Business cash flow: can the venture stay liquid?
Start with money actually expected to reach the business account, not orders, bookings or invoices that customers have not paid. Then deduct supplier payments, stock, premises, utilities, insurance, staff costs, marketing, taxes and other committed spending. The official 12-month cash flow forecast template can help you organise these items.
Show loan proceeds as a financing cash inflow, not as sales revenue or profit. Identify startup purchases funded by the loan separately from ordinary weekly running costs. Build in real payment delays: an invoice issued in February may not produce spendable cash until March or later.
2. Personal survival budget: can you keep paying if the business cannot?
List dependable personal income after tax, followed by rent or mortgage costs, food, household bills, childcare, existing debt payments, transport and other essential commitments. Then include the proposed Start Up Loan instalment. The official Personal Survival Budget guidance explains how the lender reviews this calculation.
Do not automatically treat projected business profit as income available to your household. Cash may be tied up in stock, taxes, customer payment terms or the next payroll run. If you expect the business to support your living costs, show when cash can realistically be paid to you and account for the business structure and any tax consequences.
Avoid double counting: if the business transfers money to you to fund a personal loan payment, show that transfer in both accounts for reconciliation, but do not treat it as two separate combined cash costs. The loan instalment is one external payment. The business and personal forecasts should tell the same story.
The four-month repayment stress test
A simple way to expose repayment risk is to assume the business cannot transfer any money to you for the first four months. Then test what happens if the income you were relying on is lower than expected. This is an illustrative scenario, not a typical borrower profile, approval criterion or forecast of business performance.
Suppose a founder has the following finances after paying any planned business setup costs. Business operating costs are covered in a separate forecast, and tax money has already been excluded from the personal reserve.
- Proposed Start Up Loan: £10,000 over 36 months at the scheme's current fixed 7.5% rate.
- Indicative monthly loan payment: £311.06.
- Accessible personal cash reserve: £5,000.
- Reliable personal income from outside the new business: £1,400 per month.
- Essential household spending, excluding this new loan: £1,650 per month.
- Minimum cash reserve the founder wants untouched: £2,000.
- Business-to-household transfers: £0 for four months.
In the base case, the monthly household shortfall is £1,650 + £311.06 − £1,400 = £561.06. Over four months, the reserve supplies £2,244.24, leaving £2,755.76.
Now assume that outside personal income is 25% lower throughout those four months, falling from £1,400 to £1,050. Everything else stays the same. The monthly gap grows to £911.06, using £3,644.24 of savings and leaving only £1,355.76.
| Four-month test | Base case | 25% income drop |
|---|---|---|
| Monthly outside income | £1,400 | £1,050 |
| Monthly household costs + loan | £1,961.06 | £1,961.06 |
| Four-month cash shortfall | £2,244.24 | £3,644.24 |
| Reserve left from £5,000 | £2,755.76 | £1,355.76 |
| £2,000 reserve floor protected? | Yes | No |
The base case passes the founder's own £2,000 reserve rule, but the downside case fails by £644.24. This is not an automatic reason for a lender to refuse the loan. It is a clear reason for the founder to revisit the amount, term, launch timetable, spending plan or source of reliable income.
Would a five-year term fix the problem?
Not completely. The same £10,000 over 60 months has an indicative payment of £200.38. Under the four-month downside scenario, the monthly cash shortfall would be £1,650 + £200.38 − £1,050 = £800.38. Four months would consume £3,201.52, leaving £1,798.48, still below the intended £2,000 reserve floor.
Extending the term reduces the monthly strain but cannot repair a weak underlying cash plan on its own. It also adds approximately £824.53 in total interest compared with the three-year example. A realistic alternative may be to delay non-essential spending, establish more reliable outside income or start with a smaller, viable launch.
Turn the test into a 12-month cash calendar
The official application requires a 12-month forecast, but a weekly view of the first 13 weeks can reveal a shortfall hidden by monthly totals. For example, a customer may pay on the 28th while the loan instalment, rent and supplier bill fall during the first week. A profitable month on paper can still contain an unaffordable payment date.
- Choose a likely loan drawdown date. Place the first expected repayment soon after it, then replace that estimate with the date in your agreement. Do not invent a grace period.
- Record confirmed cash available. Separate unrestricted savings, money set aside for tax, and loan funds committed to approved business spending.
- Schedule money in. Use customer settlement dates, not invoice dates. Mark uncontracted sales and unconfirmed funding as uncertain.
- Schedule money out. Include materials, wages, subscriptions, rent, VAT where applicable, other tax payments, insurance and any owner income needed for household bills.
- Insert the loan payment once. Reconcile the business forecast with the personal account that will ultimately fund the instalment.
- Run three versions. Calculate a realistic base case, a slower-sales case and a late-payment case. Add any seasonality specific to your venture.
- Find the lowest closing balance. Ask whether you can make every scheduled payment without consuming protected emergency money or relying on another unapproved loan.
For a simple monthly view, use: opening accessible cash + cleared cash receipts − actual cash payments = closing accessible cash. Carry that closing balance into the next month. Profit and cash flow are not interchangeable: money invoiced but unpaid cannot cover a direct debit.
If your income is seasonal, repeat the check across the weakest expected trading period, not only the launch. A café, freelance studio, local service or inventory-based shop can experience very different cash cycles even when annual sales look similar.
Choose the loan amount and term from the cash need
Borrowing the maximum £25,000 is not automatically the most useful choice. First list the specific business purchases and growth activities the loan will fund. Separate essential equipment and stock from spending that can wait until customers pay. The scheme restricts certain uses of proceeds, including debt repayment, so do not build a plan that depends on borrowing simply to service existing debts.
| If your forecast shows... | A sensible next move |
|---|---|
| All repayments work in a slow case, with reserves intact | Compare the shortest affordable term against total interest. |
| The base case works, but one delayed payment breaks the budget | Reduce committed spending, improve cash reserves or revise the timing. |
| Repayment requires sales to take off immediately | Consider postponing the loan or changing the launch plan. |
If the need is a specific purchase with a long useful life, a scheduled loan may fit. If the problem is recurring payment delays, compare other suitable working-capital arrangements, supplier terms or a slower rollout. Their eligibility, total cost and risks may differ, and alternatives may not be available to a new venture. Do not choose an expensive short-term product merely to avoid revising an unrealistic launch budget.
The scheme does not charge an early repayment fee, which provides flexibility if cash improves later. However, base the decision on payments you can afford today rather than assuming you will be able to overpay in a successful future month.
What to prepare before applying
According to official application guidance, applicants should prepare a business plan, a 12-month cash flow forecast, a personal budget and three months of bank statements consistent with that budget. Personal creditworthiness, affordability and business viability all matter. The loan also requires a personal credit check and approval is not guaranteed.
Before submitting, make sure you can answer these five questions in writing:
- What exact business expenditure requires borrowing, and what can wait?
- How much will I repay each month, starting on what date?
- How long could the business operate without making a transfer to my household?
- What is the lowest cash balance in both my base forecast and my stressed forecast?
- What specific change will I make if sales or customer payments arrive two months late?
What if the first repayments become difficult?
If you think you might miss a payment, contact the finance provider named in your loan agreement immediately. The programme's loan repayment guidance advises contacting the provider before a missed payment, rather than waiting for a default notice. Any change to repayments requires discussion and agreement; do not assume that a payment holiday or reduced amount is automatic.
Missed payments can affect your credit file and may lead to collection activity or legal action. If personal or business debts are becoming difficult to manage, consider free impartial help from Business Debtline or National Debtline. Avoid taking new debt simply to disguise an unaffordable repayment schedule.
The decision before you sign
A Start Up Loan can fund a sound business plan, but it cannot make a fragile cash flow forecast reliable. Work backwards from the repayment date: calculate the instalment, separate business costs from household essentials, identify the lowest bank balance under delayed revenue and keep a reserve for the unexpected.
Your next step: enter the amount you actually need into the official repayment calculator, then place those monthly payments into the scheme's cash flow and personal survival budget templates. If the downside forecast breaches the cash reserve you need to protect, adjust the launch or borrowing plan before signing.
This article is general educational information for UK readers, not personal financial, lending, legal or tax advice. Scheme terms and individual agreements can change; confirm current eligibility, permissible use of funds and repayment dates with the programme and your finance provider.
