About loans

A loan that is available without the normal security demands placed on borrowers by clearing banks and other commercial lenders. They usually allow some concessions to the borrower on either security requirements, or on interest rates charged. Payment of little or no interest may be a condition of the loan, and in addition, in some cases borrowers can organise payment holidays.

Why not a normal loan?

First – a bit of background. Borrowing money from the bank is the most common form of financing available to businesses. In most cases this is through either a loan or an overdraft, or some combination of the two. Banks will demand that the business can demonstrate some form of security against defaulting on its loan payments, and many small businesses are unable to successfully apply to receive loans.

Who gives them and why?

Available either directly from the government, or from local authorities and other bodies, soft loans can help promising businesses who cannot provide such security. They are often considered as a funding scheme of last resort after other avenues of potential financing have been exhausted.

What does a loan pay for?

Are loans available for specific purposes?

The role of soft loan schemes is to help boost local and national economic development. Thus each scheme is likely to have been designed with a specific purpose in mind, such as the creation of local jobs. Loans are far more likely to be available for businesses creating employment and undertaking capital development within the general process of business start up and business growth/development.

Do I need to put any of my own cash in?

As with grants, most businesses will not be eligible for loans unless they can show that they are themselves willing to commit finance to a particular project.

Does the government support loans?

Yes, the Government has demonstrated support for various loan initiatives – especially so where they can contribute to the economic development of local areas.

Who else offers loans?

Soft loans can be available from non-government organisations, especially in areas of economic hardship. A number are available from trusts set up with an initial contribution of capital – the capital is used to cycle through businesses: loans are made available and as the repayments are received new loans can be issued.

How do I find out if my company is eligible?

What can I do with the money I borrow?

Although each loan scheme will have its own specific criteria, there are a number of key areas that a business will have to satisfy to be eligible for any particular scheme. In virtually all cases the business must identify a specific project, with identified deliverables, for which it is seeking loan funding.

Does it matter where I am?

Different schemes will be available to you in different locations – particularly if you are entering or operating in an area of economic deprivation.

Does what I'm doing make a difference?

Yes. The majority of loan schemes favour specific industry types, with a general bias towards industries such as manufacturing and technology services. The major schemes can be flexible in terms of the industries supported.