The startup boom: A guide to funding new businesses

We have always been an entrepreneurial economy, but new startups are now accelerating at pace. Around 1.6 million new companies were registered with Companies House over the past two financial years. The UK Government have recognised this trend and are focusing on supporting the most ambitious of these companies, with their UKRI strategy and new tax reliefs such as Founders’ Relief.  

As an adviser to these companies, you may be sceptical. Many startups fail, often because they lack a clear strategy or the right skills. But some fail simply because they don’t have enough working capital, and that is where you can make a real difference.

With very little trading history, it has been difficult to source funding for startups in the past, as most traditional lenders prefer businesses with at least two years of trading history. But the market is changing, startups now have more funding routes than ever, which puts you in a strong position to help clients choose the right solution early. The first step is understanding how lenders assess a young business.

What lenders look for in a startup

A startup is usually a business that has been trading for less than two years, and some lenders also include businesses that have not yet started trading. With little financial history to assess, lenders look more closely at:

• The business plan and importantly, progress and traction to date, as this shows the plan is working in practice

• The founder’s personal credit score and industry experience

• Expected future income and strength of customer contracts, which show whether the business can afford repayments

Using a combination of Cloud Accounting and Open Banking, lenders can now assess more recent financial results and real-time transactions, not just historical performance. This gives them a better indication of risk and helps them make decisions quicker. 

The Government Start Up Loan Scheme

The Government backed Start Up Loan scheme, delivered through the British Business Bank, remains the starting point for most founders. From 6 April 2026, eligibility expanded to businesses trading for up to 60 months, up from the previous three year limit, so more of your clients may now qualify. Through this scheme, founders can each borrow between £500 and £25,000 as a personal loan, up to a maximum of £100,000 per business, at a fixed rate of 7.5% a year. Successful applicants also receive 12 months of free business mentoring, which can help close the strategy and skills gaps that cause many startups to fail.

High street and alternative lenders

High street banks such as NatWest, Barclays and HSBC have streamlined their small business loan products. They will typically expect a detailed business plan, a clear cash flow forecast and a good personal credit history. Clients who already bank with them may be offered pre-approved credit limits or small unsecured loans.

Where speed matters, alternative lenders use Open Banking to make decisions, often within 48 hours. Options include unsecured loans,  revenue based finance for e-commerce and retail clients and micro loans, often under £10,000, for immediate working capital needs.

Start with credit health

Whichever route your client chooses, their personal credit history will play a central role. With little business history to go on, lenders use the founder’s personal financial behaviour to judge how reliably they are likely to repay. They will also check the business credit score, which shows how the company has handled credit so far, such as paying suppliers on time. Even a short track record of good payment behaviour can strengthen an application. Strong personal and business scores can help your client secure lower interest rates and access larger loan amounts.

Practical tip: Check both business and personal credit health well before an application, so there is time to fix any issues.

How Capitalise can help

Knowing where to apply matters as much as being ready to apply. Through Capitalise, your clients can access a panel of over 130 lenders, including specialist startup providers they won’t find on the high street. We match each business with the lenders most likely to support its business model, and our funding specialists help make sure applications stand up to scrutiny.

If you have a startup client who needs funding, please contact your Partnership Manager or email partner.support@capitalise.com to get started. And who knows, your client could be the next unicorn!

For more information, see this article on startup lenders written by our Head of Funding, Nick Richardson.