Yes, there are available government-funded loans for small businesses in the United Kingdom. Aside from the vast range of options available, you can also find UK government-funded loans meant specifically for businesses in certain industries or community groups.

Just as with any other place, small businesses in the UK need a source of funding to expand, purchase new equipment, improve cash flow, and even for other projects. Government-funded business loans tend to work the same way as commercial business loans provided by banks and other lenders, just that these loans are funded or guaranteed by the UK Government.

Have in mind that this type of loan makes funding available to new and existing business owners. These government-funded business loans shouldn’t be confused with government grants as loans are repayable, while grants are not. Also, note that government grants are limited and fewer applications tend to be accepted.

Available Government Funded Loans for Small Business in UK and How to Apply for Each

For small businesses who need a little boost to expand or grow, there are lots of government-funded or backed loans available to apply for in the UK. Here are the best government-funded loans available for small businesses in the UK.

  1. The Enterprise Finance Guarantee

Noted as one of the UK government’s flagship business loan programs, this loan program is designed to provide funding (up to £1.2m) to businesses that would otherwise be denied funding may be because they have insufficient security to meet a lender’s requirements.

This loan program tends to provide lenders with a government-backed, partial guarantee that can ensure businesses get the funding they need. The government-owned British Business Bank is tasked with administrating the program.

How to Apply

To apply, you need to approach one of the 40+ EFG accredited lenders with your borrowing proposal. After going through your proposal, the EFG lender can make available finance on normal commercial terms without the need to make use of EFG. However, in a situation where the small business has a viable borrowing proposal but no, or insufficient security, the lender will then consider the small business for support via EFG.

  1. Recovery Loan Scheme

The government’s Recovery Loan Scheme (RLS) is funded by the government to support UK businesses as they recover from the Covid-19 pandemic, with a lending of up to £2m.

Originally meant to run until the end of 2021, subject to a review, the government announced in the Autumn Budget 2021 that it would be extending the scheme until June 2022. This new RLS scheme began on 1 January 2022, with a lower maximum amount available to businesses (£2m) and a lower government guarantee (70%).

How to Apply

To access the scheme, you will have to choose a lender and apply directly with them. Note that the list of accredited lenders and more information about the Recovery Loan Scheme is available on the British Business Bank’s website. There are now more than 70 accredited lenders, offering to lend for up to six years.

  1. Start-Up Loan

A Start-Up Loan is a government-backed personal loan provided to individuals eager to start or grow a business in the UK. Aside from just the funding, successful applicants also get 12 months of free mentoring and exclusive business offers to help them succeed.

Have it in mind that this loan is unsecured; therefore there won’t be any need to put forward any assets or guarantors to support an application. Also note that all owners or partners in a business can individually apply for up to £25,000 each, with a maximum of £100,000 available per business.

How to Apply

To apply, you only have to submit an initial application online. Note that you will be assigned a business adviser to ensure you complete the full application. The Company will also embark on a personal credit check and you will be expected to supply some of your business documents for assessment. Once approved for a loan, you’ll also be offered funds and also 12 months of free mentoring.

  1. Funding Circle

Funding Circle is provided by the Government-owned British Business Bank to make available business loans of £25,001 to £350,000 under the Recovery Loan Scheme (RLS).

Funding Circle is noted as the biggest online small business loan provider and one of the best-capitalized lending platforms in the world. According to reports, as the leading global provider for small business loans, they have helped over 122,000 small businesses access more than £13.7 billion in finance.

How to Apply

To apply, you just have to visit the Funding Circle platform and make details about yourself and your business available on the website. Once approved, you’ll get the funds in your account more or less the following day.

  1. Cornwall & Isles of Scilly Investment Fund

The Cornwall & Isles of Scilly Investment Fund (CIOSIF) is backed by the UK government and the European Regional Development Fund, in alignment with the Cornwall and Isles of Scilly LEP. They offer funding to small businesses in two very notable modes.

First, Debt finance, which more or less includes small business loans from £25,000, and debt financing options from £100,000 to £1 million for businesses with up to 250 employees that can show viable growth potential. Secondly, Equity finance involves selling a stake of your business to an investor, or group of investors, in return for funds.

How to Apply

You can assess this funding via one of the CIOSIF’s allocated fund managers. These can be found on the CIOSIF website.

  1. Northern Powerhouse Investment Fund

The Northern Powerhouse Investment Fund (NPIF) is an agreement between the British Business Bank and 10 Local Enterprise Partnerships (LEPs) and combines funding from the UK government, the European Regional Development Fund, the British Business Bank, and the European Investment Bank. This loan program focuses on businesses in North West, Yorkshire and the Humber, and the Tees Valley.

How to Apply

To apply you have to first locate an NPIF fund manager operating in your local area. You can do this on the NPIF website.

  1. Midlands Engine Investment Fund

Just as with the NPIF, the Midlands Engine Investment Fund (MEIF) is an agreement between the British Business Bank and 10 Local Enterprise Partnerships across the West Midlands, and East and South East Midlands. Note that it is also backed by the UK government, the European Investment Bank, the British Business Bank, and the European Regional Development Fund.

How to Apply

To obtain funding, you will have to apply through one of the MEIF’s allocated fund managers. These can be found on the MEIF website.

Conclusion

You can leverage government-funded business loans at various stages of your business’s development, from its start-up phase, through the early stages of expansion, to solidifying and maintaining growth. If you are unable to find or secure a government business loan, there are other forms of funding you may want to consider.