Since 2012 Startup Loans UK have given out 45,618 loans to aspiring entrepreneurs dreaming of creating the next big thing *(As of February 2017). On average 30.2% of entrepreneurs will default on their loan repayments. In other words, roughly 14,000 aspiring entrepreneurs are now in debt.
Founded in 2012 by Lord Young, and backed by David Cameron’s Conservative government, Startup Loans U.K. provide small business loans to business owners up to £25,000.
According to Startup Loans, seven out of ten recipients of the Startup Loan wouldn’t have received a loan from elsewhere. Meaning simply that banks don’t feel comfortable giving loans to these aspiring entrepreneurs, but the government does.
The status quo tells us that to start a business you need funding; ‘it takes money to make money’. This is what schools, colleges and universities teach us. However, since 2011 a business school called Pop Up Business School has been travelling across the United Kingdom teaching people the opposite. This is namely that you actually don’t need funding to start a business and that anyone can start a business and begin making money doing what they love.
Pop Up Business School believes that entrepreneurs should begin by selling their value before they create it. This means that instead of taking on debt to turn your idea into a reality, you should get people to pay for it upfront.
Despite their unconventional approach, the results of Pop Up Business School speak for themselves and their methods clearly do work. At a recent event in Reading, 34% of students started a business during the two-week course and 38% of the students made a sale during the two weeks.
At a recent Pop-Up Business School event, they found 50% of students believed a lack of cash stopped them from starting their own business. Other factors included a lack of confidence and knowledge.
The Pop Up Business School doesn’t get everyone to start a business. There are plenty of people who attend and do not start businesses. However, Pop Up Business School would rather they realised business is not for them instead of getting them into debt. Whilst its primary mission is to help people start businesses, 98% of participants experience a significant boost to their confidence in attending the course. Many of those attending come from lower income backgrounds as the PopUp Business School does a lot of work with those on unemployment benefits, ex-offenders and single parents.
Co-founder, Alan Donegan said “The government shouldn’t be giving loans to people to start up businesses, especially to people on the New Enterprise Allowance Scheme who are starting out from scratch. They should not be putting people into debt at the most vulnerable point in their business, especially with a 30% default rate and a far higher
Co-founder, Simon Paine said “Startup Loans kill more businesses ideas than they start. They are unnecessary, they increase the risks and stop thousands of people from getting started. They are like a cancer to the entrepreneurial spirit in the U.K.”
Jourdan Lamomtagne, an Entrepreneur, who took a Startup Loan in 2012, said “I took a loan to fund my business as I couldn’t get investment. However, because my business didn’t make any money I now have to repay my loan along with my university debt, which isn’t ideal”
Carly Ward, Entrepreneur, who took a Startup Loan said “I took a Start-Up Loan of £20k to help me with my business. It really helped with cashflow at the time but has caused longer-term cashflow issues. I think it’s a good scheme for people starting up but many people may not think of the cashflow issues it could cause later down the line”
Risi Chowdhury, Founder of IncuBus took a Startup Loan “”I received a startup loan to buy a double-decker bus when starting IncuBus Ventures, whilst we were raising our crowdfunding round via Seedrs. It suited our needs at the time which was a short-term loan we knew we could payback from the crowdfunding money before interest charges kicked in. We were supposed to receive mentoring but were not impressed by the level of mentors available.”
Muhammad El Dharrat, Entrepreneur, was promised a Startup Loan “I was promised a loan but they rejected my application three times. They pretended everything was rosy and I’d get one, they just gave me the runaround and I felt like I was there to tick some boxes for them.”