Smaller businesses backed by the Start Up Loans programme have higher survival rates finds independent evaluation

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Smaller businesses backed by the government’s Start Up Loans programme have higher survival rates than other businesses, finds an independent evaluation, conducted by SQW working in partnership with Professor Mark Hart, Qa Research and The Data City.

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:

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Economic impact: For every £1 in economic costs of the programme, between £5.50 and £5.60 of additional Gross Value Added (GVA) is generated for the UK economy

Richard BearmanRichard Bearman
Richard Bearman

Job creation: In addition to the employment of the loan recipients themselves, one additional employee job was created for each loan, on average.

Business growth: Loan recipients’ businesses experienced stronger growth since incorporation than comparator businesses

High proportion of female founders: 41% of Start Up Loans recipients are women compared to 20% of zero employee businesses being women-led.

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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.

Serving under-served UK start ups

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 (68%) 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.

Job creation

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.

Supporting under-represented business owners

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.

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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.”

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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.”

Case studies

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Armed Forces veteran, PJ Farr, founded UK Connect with the support of a Start Up Loan in 2014. The telecoms business now has 60 full-time employees. The business has a turnover of more than £8m and is on track to hit a £3m EBITDA.

PJ Farr, Managing Director, UK Connect said:

“As one of the inaugural recipients of an X-Forces Start Up Loan, this invaluable opportunity not only furnished us with essential capital at an attractive rate but, more importantly, connected us with exceptional mentors like Ren, Martin, and their dedicated team. The supportive community we encountered has been instrumental in our journey to success.”

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

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