Small businesses including contractors and freelancers have become a driving force in the UK. The latest figures by IPSE – the Association of Independent Professional and the Self Employed, puts the number of self-employed at 4.8 million, who contributed £275 billion to the UK economy in 2018.
If you’re desperate to leave your job to join the growing ranks of independent contractors, or, if you’re already a contractor who is looking to raise cash to expand your business, here are some grants and loans which are available to help you get going.
Start Up Loan
A Start Up Loan is a government-backed scheme which helps individuals to start or grow a business. On the application, you must state how much you want to borrow and detail what you’ll use it for. Along with this, you must provide a Business Plan, Cashflow Forecast and a Personal Survival Budget.
If your application is successful, you could borrow up to £25,000, but the average loan awarded is around £7,000. Interest is fixed at 6% per annum and the loan term available is between one to five years.
In addition to this, you also get access to 12 months of free business mentoring.
The downside is that it can be difficult to qualify for a Start Up Loan and like with any loan if you don’t keep up with repayments, your assets could be at risk.
Most local authorities or institutions provide schemes for the self-employed. What is available depends on the type of business and where you’re located. Visit Gov.uk Finance Finder to see what is on offer in your area.
New Enterprise Allowance
The New Enterprise Allowance is another government-backed scheme which aims to help the long-term unemployed back into work by offering support on setting up their own business.
You must be over 18 years of age and be getting certain benefits, like; Universal Credit, Jobseekers Allowance or Income Support.
There’s a belief that because you’re a self-employed contractor you can’t get a business loan. This isn’t true, but you may find that fewer lenders are willing to loan you money. This is because they take the view that lending money to the self-employed is risky.
Most high street banks and building societies offer business loans. However, you may find that lenders require your business to be operating for a specific time before they’ll lend to you.
A slightly different offering to others mentioned here, Funding Circle is a peer-to-peer lending platform. Effectively, it connects you with investors who are willing to loan you money.
Founded in 2010, in the last nine years Funding Circle has helped facilitate loans in excess of £7 billion.
Through the platform, you can apply for an unsecured ranging from £10,000 up to £500,000. Interest starts at 1.9% per annum (plus fees) and there’s no penalty for early repayment.
Virgin Start Up Loan
The Virgin Start Up Loan is only available to businesses under two years old, and for EU residents or UK passport holders.
The amount available ranges from £500 to £25,000, but the average loan awarded is £10,000. The interest rate is fixed at 6% per annum and the loan term is from one to five years.