Call for changes to Start Up Loans Scheme

Call for changes to the Government ‘Start up Loans’ scheme

Tina Boden and Tony Robinson OBE, both independent business owners, with 50 years combined experience are co-founders of the Enterprise Rockers movement which backs micro enterprise everywhere. They believe Government should take immediate action to prevent Start Up Loans becoming a financial burden for many, as Student Loans have become.

Tina Boden, co-founder of the Enterprise Rockers, established January 2012, explains why: “We engage with hundreds of thousands of micro business owners on an informal basis - as peers. We don't sell our peers anything - not even membership. Yet, every week we get approached by government providers wanting us to help them generate leads for schemes they're selling to start ups and micro business owners.

The most hard sell initiative of these schemes is ‘Start up Loans’. Government is paying a fortune in provider fees, advertising, marketing and administration costs to get high take up. It's fabulous news that Government are backing start ups but there are dangers in the way it's being sold. Start Up loans probably average £6,000 per loan which is at least 3 times more than most micro business owners start up with. Although we do want Government to continue supporting new businesses and believe low cost loans are important, we say 'No' to these Government partners and providers. We would like to say ‘Yes we'll promote the scheme for you’.”

“My prediction is that at least 1 in 5 new business owners will default on repayments and 2 in 5 will get into financial difficulties because of taking a Start Up Loan’ says Tony Robinson OBE, co-founder Enterprise Rockers. The survival rate of start ups with a Start Up Loan will be no higher than those that have started without a loan but have sought free start up advice from their local Enterprise Agency. The intent behind the scheme is great but the timing is rubbish. We all know that 99% of start-up business plans are fiction because it’s only when the business has live, paying customers that it can get its offer right and start to predict future income.

Advisers and mentors in the scheme, see it as their job to help the new business owners get going, with a loan, as that is how the provider gets paid. Some advisers may not even be in a good place to understand the chances of success because they haven’t started and run their own business.

The new business owner often hasn't a realistic view of how much they’ll earn. it is why test trading is so important and we say don't give up any of your other income sources until you've test traded. We also recommend ‘bootstrap don’t borrow’ until you really know what you’re doing and how to grow your business.”

Boden and Robinson say the solution is to not allow anyone a Start Up loan until they have been trading or test trading for a minimum of 6 months. “We’d prefer if this was 18 months test trading and trading but we realise Government are not going to change the name of the scheme and 18 months makes it a 'New Business Loan' rather than a 'Start Up Loan'.”


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About TONY ROBINSON OBE

Tony Robinson OBE is the Micro Business Champion. He is an authority on enterprise and entrepreneurship and is a professional speaker, broadcaster and campaigner (#PayIn30Days). His Conference Keynote to leaders of all sizes of an organisation entitled 'Spirit of Enterprise - Do Not Bottle It' and a one hour 'Micro is Beautiful - business as if people cared' Show' suggesting to business owners there is a better way than the American Way to start up, survive and thrive. Tony founded the government recognised SFEDI Group in 1996 and co-owns. In 2012 he founded, with Tina Boden the annual #MicroBizMatters Day backed by all the national small business membership organisations, Tony runs his own businesses. He has an OBE for services to small firms (2001) and has received 2-lifetime awards for enterprise. He is Patron of the John Cracknell Youth Enterprise Bank, Judge for NatWest Great British Entrepreneur Awards. and Chair of Yorkshire in Business Ltd.