The skinny on Start Up Loans

Lord Young talks MT through the nitty gritty of Start Up Loans. Here's why he believes the scheme, modest as it is, could change the fortunes of the nation.

by Rebecca Burn-Callander
Last Updated: 21 Nov 2013

Growth scheme Start Up Britain, launched by a consortium of entrepreneurs and supported by government, has made a few small moves in the enterprise space since it was set up in March. But Start Up Loans is without a doubt the venture's most ambitious initiative to date. The campaign’s organisers have convinced the authorities to cough up £82.5m to lend out to some 30,000 18-24 year-olds over three years. The loan package also includes a long-term mentoring scheme, as well as a host of other business benefits provided by corporate partners. But could these tiny advances (an average of £2,500 per start-up) really make a difference to UK start-ups?
MT was skeptical, so we got Lord Young of Graffham on the phone. Lord Young is the ‘originator’ of the initiative, according to the Start Up Britain website, although he freely admits the idea was ‘cribbed from the Prince’s Trust’. What does he really think Start Up Loans can achieve for UK entrepreneurship? ‘It is an acorn,’ he says. ‘Just an acorn for now. But I am hugely ambitious for this scheme. In time I truly believe it could transform the economy.’
This is more than empty rhetoric. Lord Young, who first joined government more than 30 years ago, knows a thing or two about enterprise initiatives. He launched Thatcher’s Enterprise Allowance Scheme back in the eighties and over 250,000 businesses accessed finance through the scheme over three years. ‘Some of them are in the FTSE 250 now,’ he says. ‘Warehouse, the fashion chain, for example. And Superdry. They both raised finance through the EAS.’
But that was three decades ago. The world has moved on. Can the same poultices staunch the wounds of the modern economy? Project Merlin failed to hit its targets. The banks are swearing blind that they are trying to lend but small businesses don’t want to borrow. The Bank of England has just launched its Funding for Lending initiative – do we need another loans scheme?
‘It’s very odd this recession,’ admits Young. ‘It’s totally unlike the one in the early nineties. Last time, SMEs were way underwater. This time, they’re in credit. They’re just not spending their money because of a lack of confidence. Everything that’s going on with the euro has spooked them. But we’re not trying to help those kinds of businesses. We want to help young people. And no bank will lend money to someone without a track record – we will.’
Start Up Loans isn’t just going to lend to young entrepreneurs, it’s offering them a reasonable rate too. Loans must be paid back over a three to five year period. The interest is fixed at 3% APR, plus RPI (which currently stands at 3.5%). Considering the risk assumed by SUL – applicants put up no collateral of their own – this is pretty attractive.
The ‘loans’ provided by start Up Loans go far beyond the cash, however. ‘The mentor is far more important than the money,’ says Lord Young. ‘Many won’t necessarily need the cash – they’ll ask their families or save up. But the mentoring scheme is key. That’s what made all the difference to me when I was starting out.’
And here’s how the mentoring bit works. Start Up Loans has partnered with various enterprise initiatives across the country, from The Prince’s Trust to University entrepreneur societies. These partners will scout out or, more likely, be approached by young people with enterprising ideas. The would-be entrepreneurs will then be paired with a mentor to prepare a business plan, and flesh out the details of their venture. They will then appear before the judging panel – ‘We’ll be much friendlier than the Dragons’ Den,’ insists Young – and up to £2,500 will be awarded based on the entrepreneur’s personal merit.
After that, the mentor will devote several hours a month to the start-up, and some other perks kick in: for example, Regus has offered Start Up Loans a £20m sponsorship package that gives its start-ups access to a full virtual office package. That means a phone number and receptionist, a postal address for the business, and access to Regus’ 1,200 business lounges across the UK. And there are a host of other partners being announced next month, when the programme officially launches – ‘once all the running, jumping, and hurdling is out of the way,’ explains Young. MT would put its money on a mobile phone operator offering cheap or free business contracts, and a major advertiser offering marketing and PR support too…
MT is looking for a catch, but is struggling to find one. It’s may be that the £82.5m is coming from the taxpayer but that's where its reliance on the public sector ends. Start Up Loans gets no manpower from government, it is powered purely by help from voluntary organisations. ‘When I did this last time time, I had 24,000 civil servants to whom it was their bread and butter,’ says Young wryly. ‘Now we have none.’
Lord Young’s enthusiasm is infectious. And it’s not just MT who’s caught the bug. He and his comrade-in-arms, Supper Club founder Duncan Cheatle, have managed to convince 12 young entrepreneurs, including Student Beans founder James Eder and boss Ruben Kostucki, to come on board as ambassadors. All of the ambassadors started their ventures with under £2,500 – they are blueprints for the success of the scheme. ‘They have also all agreed to be mentors,’ adds Young. ‘They all want to be involved with helping the start-ups too.’
No one is safe from Young’s powers of persuasion. ‘I took a taxi across the West End recently and by the time I got out five minutes later, I has signed up the taxi driver,’ he laughs. ‘He had a 19 year-old at home who wanted to set up mobile car valeting business. I hope one day you’ll get your car cleaned by him.’
Young’s ambitions stretch far beyond the scheme’s three-year lifespan. ‘I’m hoping this will evolve into a student loan type scheme, which gets paid back as a surcharge on their income tax,’ he says. ‘I would like to see a world where it is every young person’s right to get help from the state to start a business.’ His commitment to this vision has seen Young return to No. 10. Something he thought he would never do, after quitting over his ‘we’ve never had it so good’ remarks back in 2010. ‘I only came back to get this programme going,’ he says fervently. ‘It’s the only reason I’m there. And I’m doing while I’m still young enough to see it grow.’ Does he have the support of the Prime Minister? ‘I have his complete support. And the Chancellor’s too,’ he says.
Somehow, MT doesn’t think he’ll need it. 

Find out more about Start Up Loans

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