Business loan vs a grant for startups

2 min read

Free but scarceStartup grants

Fast but servicedStartup loans

Trading historyThe eligibility hurdle

The startup funding squeeze

New companies face a chicken-and-egg problem: they need funds to grow, but lack the trading history lenders and investors like to see. Startup grants are appealing because they need no repayment and no track record, but they are scarce, competitive, slow and narrowly scoped. Startup loans are faster and more flexible, but the company must be able to service them, which is harder without established revenue. See our startup loan guide and grant vs loan.

Weighing them for a new company

	Grant	Loan
Repayment	None	Must be serviced
Speed	Slow, competitive	Faster, if you qualify
Track record	Not needed	Helps a lot
Scope	Narrow, scheme-defined	Flexible

A grant, if you can win one and wait, is free money worth pursuing. A loan gets you moving now if the company can service it. As with established businesses, the two work well in parallel — borrow to move, chase grants to reduce the borrowing.

The realistic path

Many startups begin with a mix: founder cash, a modest loan the company can service once trading, and grant applications running alongside. Avoid taking on borrowing you cannot service on realistic early revenue — for a pre-revenue venture, that may mean equity or grants are the only options until the business can stand on its own. See loan vs equity.

The Credicorp view

Credicorp assesses limited companies on recent trading rather than years of accounts, which can help a young company that is already trading and can service a facility — no personal guarantee. For pre-revenue ventures, grants or equity may fit first. See our business loans or register to apply. Educational content, not financial advice.

Frequently asked questions

Should a startup get a grant or a loan?

If you can win a grant and wait, it is free money worth pursuing. A loan gets you moving now, provided the company can service it on realistic early revenue. Many startups use both — a modest loan to move and grant applications running alongside to reduce the borrowing.

Can a new company get a business loan?

It can be harder without trading history, but some lenders, including Credicorp, assess limited companies on recent trading rather than years of accounts. That can help a young company already trading and able to service a facility. For pre-revenue ventures, grants or equity may fit first.

Is it risky for a startup to borrow?

It is risky to take on borrowing you cannot service on realistic early revenue. For a trading startup that can comfortably cover repayments, a modest loan is a reasonable way to move faster. For a pre-revenue venture, equity or grants are usually safer until the business can stand on its own.