Start Up Loans programme has positive impact on small business survival

The programme also supports a significantly greater proportion of smaller businesses outside London and the South East, as well as female and Ethnic Minority entrepreneurs.

The evaluation measures the impact of loans drawn down by two cohorts of smaller businesses who took out loans in financial years 2018/19 and 2021/22, and key findings include: 

Since the programme started in 2012, Start Up Loans has provided more than £1.1bn of start up financing to UK start up and early-stage businesses, across more than 118,000 separate loans.

Based on self-reported evidence from 804 loan recipients from the 2018/19 and 2021/22 cohorts, the evaluation estimates that just over two-thirds of the finance provided by Start Up Loans would not have been provided by mainstream finance providers – indicating the programme achieves its objective of providing vital support to UK start-up businesses and addressing a gap in the market for under-served founders. 

The evaluation shows that 804 loan recipients responding to the evaluation survey had created 826 net additional employee jobs in the last completed financial year. This means that in addition to the employment of the loan recipients themselves, on average just over one net additional employee job was created for every loan provided for the survey respondents from the two cohorts.

The evaluation found business owners with potentially more business and life experience fared better. The evaluation found enterprises set up by loan recipients aged over 30 years were more likely to still be operating, at the time of being surveyed, than those set up by younger entrepreneurs 18-30 years. The probability of survival was 70% for the former group vs 60% for the latter. Those aged 30 and under were more likely to report increased business and personal confidence than those aged over 30, and more likely to attribute their increased business confidence to the Start Up Loans programme. 

Female founders: Start Up Loans has a relatively high proportion of female beneficiaries. Across both cohorts, 59% of loan recipients were male and 41% were female. This is substantially higher than the 2022 Small Business Survey which reported that 20% of zero employee businesses were ‘women led’.

Ethnically diverse founders: The Start Up Loans programme has also attracted a relatively higher proportion of loan recipients from Black, Asian or Other Ethnic Minority backgrounds compared to the UK business owner population. Across both cohorts 18% of loan recipients identified as being from an Ethnic Minority background, compared to 4% of businesses with no employees being led by people of a Minority Ethnic group. 

Richard Bearman, Co-Chief Banking Officer, British Business Bank commented: “This evaluation is a very positive independent validation of the importance of Start Up Loans to financing and supporting UK start ups. The evaluation clearly shows the Start Up Loans programme helps support start up and early-stage businesses to survive longer, grow more and create jobs across the UK, mostly outside London and the South East. The programme also plays an important role in providing finance and support such as mentoring to those without family money to back them, or those from typically underrepresented groups.”

Professor Mark Hart, Deputy Director, Enterprise Research Centre, Warwick Business School said: “The Start-Up Loans programme is an important and long-standing feature of the business support landscape in the UK and this latest evaluation demonstrates that it continues to create significant value for those accessing the loans in terms of helping gain traction in their chosen markets. The late David (Lord) Young was the initial driving force behind this initiative in 2012 and these results show just how important his vision was in creating cohorts of more sustainable start-ups which are of crucial importance to the growth of the UK economy.”

Small Business Minister Gareth Thomas said: “That initial injection of cash is critical for any small business trying to get underway.

“When small firms get the chance to start up and grow, it can unleash a tidal wave of opportunity, providing jobs for local communities, boosting revenues and helping grow the economy.”