If you’re an entrepreneur in need of finance to launch a startup in the U.K., the first thing you should explore is whether there are any grants for which you can apply. Unlike loans, grants are non-repayable. If you do qualify, it means you could get your new business started without having to worry about debt from the off. However, obtaining a grant is no easy thing.
In this article, we look into the grants that are available to entrepreneurs, but, as they’re so difficult to get, we also examine affordable business loans and the best way of tracking them down.
Startup and Small Business Grants
If you’d like to browse through some of the small business grants and funding programs available in the U.K., check out the Entrepreneur Handbook website. There, you’ll find the Top 226 grant options listed.
Many of them are very specific in terms of the industries for which they are available, and some only cover certain categories of expenditure, such as apprenticeships, the Gigabit Broadband Voucher for businesses that install a gigabit-capable internet line or connection, and the Prince’s Countryside Fund, which finances family-run farm businesses.
Business Loans in the U.K.- Traditional Banking vs the Alternative Finance Sector
The majority of U.K. startups find that navigating the business grant application process is extremely challenging. The unhelpful attitude of the traditional banking network is well known.
The process of applying for business loans for U.K. startups from banks is just as challenging as applying for grants. The complexity of the business data required by traditional banks is daunting, and the time it takes for applications to be reviewed and decisions made is, in most instances, far too long.
The Rise of the Alternative Finance Sector
The barriers that entrepreneurs face not only make it problematic for startups to obtain the funding they need, but the complex and time-laden application process when applying for grants or loans from traditional banks creates a bottleneck, which is also strangling the U.K.’s innovative potential when compared to some of its European neighbours.
Under pressure from the new, disruptive alternative finance sector, the traditional banks are trying to improve, but they’ve already lost their majority share of the startup market.
According to the British Business Bank, the gross amount of funding to the UK SME sector was £62.1 billion. Of this, £37.3 billion was provided by the challenger bank and alternative finance sector. That’s 60% of the overall amount loaned, exceeding the share claimed by the Big 5 UK Banks for the 4th year in succession.
The State of Business Loans for Startups in the United States and the Netherlands
In terms of the Global startup landscape, according to the Startup Ranking website, the U.S. leads the race in terms of numbers. In 2024, it launched 84,048. Second was India with 17,722, third was China with 11,500, and fourth was the U.K. with 7,676. But national populations have a big bearing on these stats. If you analyse the scenario per capita, it’s a different story. This is how it looks (courtesy of the Crunchbase.com website)
Singapore – £1,398 per capita
Israel – £959 per capita
Estonia – £915 per capita
United States – $808 per capita#
Sweden – $700 per capita
United Kingdom – $472 per capita
Netherlands – $358 per capita
By their very nature, startups are businesses that don’t have established track records or credit histories, which is why trying to obtain business loans from the traditional banking network is often a no-go scenario. However, lenders in the alternative finance sector are better geared and more prepared to offer loans once they’ve evaluated an application.
The Best Way for Startups to Obtain Business Loans
Although the alternative finance sector in the U.K. is the best source when it comes to seeking business loans for U.K. startups, this branch of the fintech sector is vast. It comprises:
- Angel investors
- Challenger banks
- Crowdfunding platforms
- Cryptocurrencies
- Invoice factoring
- Peer-to-peer lending platforms
- Venture capital companies
The thing that most of the above have in common is that typically, they are online platforms or networks leveraging digital technology. But knowing which type of lender to approach is not that easy, which is where using a loan brokering or comparison service comes into its own right. All you have to do is complete one business loan application from your chosen loan comparison site, and within 24 hours, you’ll be given a list of loan offers from as many as 20 different lenders.
How Startup Funding Compares in the Netherlands and the United States
When it comes to the number of startups launched annually, the country that stands out head and shoulders above the others is the U.S. Yes, the population is significantly higher than say the U.K. or the Netherlands, but even so, they outperform countries with larger populations than their own – e.g. 84,048 347 with a population of 347,275 million, vs India’s 17,722 with a population of I.41 billion.
As far as the Netherlands is concerned, its population is only 18,315,806. It’s why they rate so highly on the per capita list shown earlier.
All three countries – the U.K., U.S., and Netherlands also have cities with excellent startup ecosystems as indicated on the Startup Genome website. Throw into the mix the fact that all three countries are also heavily invested in the alternative finance sector, and it points to the best way that startups can access business loans in 2025.
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