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Startup lending has a chicken-and-egg problem. Lenders price risk on trading history, and a startup is defined by not having one. This guide walks through what a UK startup — meaning an incorporated limited company or LLP in roughly its first two years — can realistically borrow, from whom, at what stage, and what the paperwork looks like at each step.
The trading-history problem, stated plainly
When a lender assesses a limited company it wants to see money moving: bank statements, filed accounts, VAT returns, invoices paid on time. A company incorporated last month has none of that, so the lender either declines, prices for the unknown, or shifts the risk onto the founder personally through a personal guarantee. Every startup funding option is a different answer to that same problem.
Pre-revenue: the company cannot yet borrow, but you can
Before the company has income, business lenders have nothing to lend against. The main route at this stage is the Start Up Loans programme from the British Business Bank: a personal loan of up to £25,000 at 6% fixed, with twelve months of free mentoring attached. Note the word personal — you owe the money as an individual whether or not the company survives. Grants (Innovate UK, local Growth Hubs, sector programmes) are the other pre-revenue route, and the only one that costs nothing, but application timelines run to weeks and success rates are low.
Six to twenty-four months in: the company can start borrowing in its own name
Once a company has been trading for around six months, short-term working-capital lenders can read its bank activity and lend to the company itself. This is where Credicorp sits: we lend to UK incorporated limited companies and LLPs with at least six months of trading, and we do not take personal guarantees. The facilities are deliberately small and short — a business loan of £50 to £500 over 14 to 84 days, or a credit facility you draw against as needed. That is a tool for a specific, dated cash gap, such as stock for a confirmed order or a supplier bill that lands ten days before a customer pays.
What a small short-term loan actually costs
Illustrative example. A one-year-old design studio needs £300 of card stock and packaging to fulfil a confirmed wholesale order. The customer pays 30 days after delivery. The studio borrows £300 for 35 days at 0.25% per day: interest is £26.25, plus a £5 establishment fee, so it repays £331.25 when the customer's payment lands. The order is worth £1,100, so the £31.25 cost of borrowing bought a £1,100 sale that would otherwise have been declined or delayed. Representative example: borrow £200 for 30 days, repay £220.
Asset finance from day one — if the asset earns
Vehicles, machinery and equipment are a partial exception to the trading-history problem, because the asset itself is the security. A new company can often get hire purchase or a lease on a van or a piece of kit where an unsecured loan of the same size would be refused. The trade-off is direct: miss the payments and the asset goes back. Only finance an asset that starts earning immediately.
What startups should not do
Three patterns cause most of the damage we see in first-year accounts. First, funding day-to-day losses with borrowing, when debt can only ever bridge a gap between two known points. Second, personal credit cards used as working capital, where the interest compounds quietly and the debt sits against the founder, not the company. Third, stacking: taking a second short-term facility to repay the first. If you cannot repay from trading income, the answer is to restructure the costs, not to re-borrow.
Getting the company ready to borrow
A startup can shorten its path to credit deliberately. Open a dedicated business bank account on day one and run everything through it, because those statements are the first thing any lender reads. File confirmation statements and accounts at Companies House on time — late filings are public and lenders check. Pay suppliers on the agreed date, since trade payment data feeds commercial credit files. And register for VAT when required rather than at the last moment, because the returns give a lender another independent record of real trading. Our guide on how business credit works covers this in more depth.
The sequence that works for most founders
For a typical UK micro-startup the funding ladder runs: personal savings and a Start Up Loan to launch; grants where the fit is genuine; six months of clean trading through a business account; then small, short company borrowing for specific gaps, scaling up as the trading record deepens. Bank overdrafts and larger term loans usually arrive around the two-year mark, once there are filed accounts to underwrite. If your company has been trading six months or more and has a defined gap to bridge, you can apply online — checking eligibility first takes about a minute and leaves no mark on any credit file.
Frequently asked questions
- Can a brand-new limited company get a business loan?
- Rarely in its own name. Most business lenders, Credicorp included, need to see at least six months of trading before lending to the company. Before that point, the practical routes are a Start Up Loan (a personal loan of up to £25,000 at 6% fixed from the British Business Bank), grants, asset finance secured on equipment, or personal investment from the founders.
- Does a startup loan require a personal guarantee?
- It depends on the product. A Start Up Loan is personal by design — the founder is the borrower. Bank term loans and many online lenders routinely require a director's personal guarantee for young companies. Credicorp does not take personal guarantees: we lend small amounts to the company itself, and our assessment is based on the company's trading record.
- How much can a startup borrow from Credicorp?
- Between £50 and £500 on a fixed-term business loan repaid over 14 to 84 days, or the same range on a revolving credit facility, provided the company is a UK incorporated limited company or LLP with at least six months of trading. These are deliberately small facilities for short, specific cash gaps — not growth or launch capital.
- Will applying for a business loan affect my personal credit score?
- A loan made to the limited company is recorded against the company, not against you personally, unless you sign a personal guarantee. Checking eligibility with Credicorp uses a soft search that leaves no footprint on either file. A Start Up Loan, being a personal loan, does appear on your personal credit file.