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Only 13% of Start-ups Seek Loans from Banks With the Majority Relying on Personal Finances

New research from the UK Startup Awards has revealed that bootstrapping has become the most common way of funding a new endeavour. Eighty-five per cent of start-ups in the last three years have relied on personal capital to kickstart their businesses. Meanwhile, only 13 per cent of respondents said they took out a loan at the bank. 

The report, titled Ambitious UK Start-Ups: The Future of UK Business, also showed that support from friends and family (20 per cent) was also more likely to take place than a start-up going to get a bank loan. The data was gathered from over 1,200 firms that took part in the 2023 National StartUp Awards. This is a programme that celebrates the best new firms under three years old, delivered in partnership with Starling Bank.

Dylan Jones-Evans OBE, founder of the UK StartUp Awards
Dylan Jones-Evans OBE, founder of the UK StartUp Awards

Discussing the report, professor Dylan Jones-Evans OBE, founder of the UK StartUp Awards, said: “Self-funding their businesses allows entrepreneurs to maintain full control and ownership of their company and avoid debt. By relying on sales rather than external funding for income, bootstrapped businesses will be more customer-focused and have greater freedom to develop without outside interference.

“The study reveals that while 59 per cent of new businesses have one founder, 41 per cent have two or more entrepreneurs involved in starting and managing the business.

“By gender, 49 per cent of new businesses with more than one founder consist of all-male teams, and 36 per cent have mixed-gender teams. Just 15 per cent of team-based ventures are all-female.”

Habitual entrepreneurs and the role of parents

Four out of ten start-up founders (41 per cent) have had previous experience of starting their own business. Of those, 47 per cent have launched two or more enterprises before getting involved in their current business, bringing valuable knowledge, transferable skills, and resilience gained from previous ventures.

Thirty-nine per cent of founders had parents who were entrepreneurs, exposing these individuals to business concepts, challenges, and opportunities from an early age. Furthermore, forty-two per cent of female entrepreneurs who are the lead founders of their business had entrepreneurial parents. This is compared to 36 per cent of their male equivalents.

Regionally, those founders based in the more prosperous areas of the UK (42 per cent) were more likely to have a father or a mother who were entrepreneurs than those in the rest of the UK (36 per cent).

Commenting on this, Jones-Evans said: “By being exposed to business concepts from an early age, having co-founders who complement each other, and knowledge gained from previous ventures, entrepreneurs are maximising the opportunities for success at a time when there are real economic challenges facing all businesses.

“Start-ups make an enormous contribution to the UK economy and the findings of this study should provide insights to help boost support for new firms and accelerate growth and competitiveness in all sectors.”

Challenger banks are the preferred choice for start-ups

Although traditional banks have served businesses for decades, start-ups are accessing
finance in a very different way. Two-thirds of all start-ups (67 per cent) have accounts with challenger banks or new fintech firms. Starling Bank is the most favoured banking partner for UK start-up founders in this study (31 per cent), followed by NatWest (10 per cent) and Barclays (nine per cent) in the top three.

Business support for new firms

According to the report, over half of new businesses will need support over the next 12 months. The biggest issues facing start-ups include access to finance (62 per cent), marketing and sales support (57 per cent), access to talent (56 per cent), and having access to new markets (52 per cent) for international expansion.

Harriet Rees, CIO at Starling Bank
Harriet Rees, CIO at Starling Bank

Cautioning reliance on the use of personal funds Jones-Evans added: “An over-dependence on the founder’s personal funds, or contributions from family or friends, can also limit growth due to a lack of long-term financial resources, and it is not surprising to find that access to finance is rated as the biggest challenge when it comes to support for new ventures over the next 12 months – especially as financial institutions consider start-ups as high risk ventures with a lack of any proven track record or market presence.

Harriet Rees, CIO at Starling Bank, said: “Founders risk a lot to build a successful business from the ground up, and they have to overcome all kinds of hurdles in their first few years of trading. Start-ups have faced a particularly tough environment in the last few years, first with the pandemic and now with higher interest rates and the uncertainties of the cost of living crisis. Many have demonstrated incredible resilience.

“This report gets to the heart of the entrepreneurial community in the UK. It captures inspirational stories from founders, while also shedding light on what support is needed as their start-ups evolve – whether that be increasing access to capital, strategic advice, or better understanding of business finances.”


  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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