A small green plant grows out of a jar of money. There is a parcel tag on the jar that says small business.

Green shoots: Small businesses backed by Start Up Loans are more likely to survive and grow

Businesses that are backed by the government’s Start Up Loans programme have higher survival rates and create more jobs across the UK, an independent evaluation has revealed.

The programme has delivered more than 118,000 loans – worth more than £1.1billion in total – to UK start-ups and early-stage businesses since it was launched in 2012.

Most of those businesses were based outside London and the South East, helping to drive investment in less productive regions of the UK. Female founders and Ethnic Minority entrepreneurs were also more likely to benefit from Start Up Loans.

Professor Mark Hart, Deputy Director of the Enterprise Research Centre at Warwick Business School, measured the impact of loans to two cohorts of smaller business during the financial years 2018/19 and 2021/22

He said: “The Start Up Loans programme is an important and long-standing feature of the business support landscape in the UK.

“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 Lord David Young was the 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 vital for the growth of the UK economy.”

The evaluation, conducted with consultancy SQW, Qa Research, and The Data City, found that Start Up Loans delivered:

  • Economic impact. Every £1 spent generated between £5.50 and £5.60 of Gross Added Value for the UK economy.
  • Job creation. On average, one employee job was created for each loan (826 employee jobs across 804 loans). This was in addition to the employment for the loan recipient.
  • Business growth. Companies that received loans experienced stronger growth since incorporation than comparator businesses.
  • Improved representation. More than 40 per cent of Start Up Loans went to women, despite the fact that only one in five businesses with no employees are led by women. Across both cohorts, 18 per cent of recipients identified as being from and Ethnic Minority background. That compares favourably to four per cent of businesses with no employees that are led by people from an Ethnic Minority group.

Based on self-reported evidence from the loan recipients, 68 per cent of the funds they received would not have been available from mainstream finance providers.

This shows the programme addresses a gap in the market for under-served founders, providing them with vital start-up funding.

Richard Bearman, Co-Chief Banking Officer at the British Business Bank, said: “This evaluation is a very positive independent validation of the importance of Start Up Loans.

“It clearly shows that the Start Up Loans programme helps to 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, as well as those from typically underrepresented groups.”

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 grow, it can unleash a tidal wave of opportunity, providing jobs for local communities, boosting revenues and helping grow the economy.”

The Start Up Loans evaluation can be accessed via the British Business Bank website.