Evaluation of Start Up Loans: Year 3 Report

About the programme

• The Start Up Loans programme offers loans, alongside business support and mentoring, to individuals across the UK looking to start a business or to develop a recently-established business. From its launch in 2012 to May 2018, the programme had lent over £420m, through over 56,000 loans.
• The programme is managed by the Start Up Loans Company (SULCo), and funded by the Department for Business, Energy and Industrial Strategy (BEIS). On 1st April 2017, SULCo became a subsidiary of the British Business Bank.
• The underlying case for the programme is that banks and other mainstream finance providers do not meet the demand for loans for start-up companies owing to the lack of collateral, credit history and/or trading history amongst applicants, and the low margins associated with low value loans. In addition, there can be barriers to accessing appropriate external advice for people looking to start a new business. Further, there is an equity argument, because enterprise and self-employment can be a way to improve individuals’ economic prospects.
• The programme involves three main stages: initial ‘pre-application support’ to help individuals to develop a business plan; a personal loan to start-up/develop a business; and mentoring support to help develop and grow the business. SULCo uses a network of Delivery Partners to deliver the programme.

The evaluation

• SQW Ltd, working with BMG Research, was commissioned by the British Business Bank in 2014 to undertake an evaluation of the programme. The main aim of the evaluation was to assess the economic impact and value for money of the programme. In addition, the evaluation was to assess the extent to which different degrees of take-up of the preapplication and mentoring support affected business and individual outcomes, and the characteristics of those individuals that benefited the most from the programme.
• The evaluation of impact included comparing the performance of a group of individuals that had drawn down a Start Up Loan from June to December 2014 (the beneficiary group) to a matched group of individuals also looking to or recently starting a business that had not been supported by the programme (the comparison group). This comparison was based on analysis of data from surveys of the two groups. This analysis was completed for the first two years of the evaluation that reported in 2016 and 2017, and was planned for this final year. However, the lower-than-expected number of survey respondents amongst the comparison group in Year 2 meant that a third wave of the survey of the comparison group was not considered viable. The final year of the evaluation therefore comprised a third wave of the survey with the existing beneficiary group (referred to in the report as the ‘2014 Year 3 sample’) alongside evidence from a survey of a new group of beneficiaries from the population of individuals that had drawn down a loan from January to June 2016 (referred to in the report as the ‘2016 sample’).
• This Year 3 report sets out evidence on the impact and value for money for both the ‘2014 Year 3 sample’ and the ‘2016 sample’. The assessments cannot be directly compared, given changes in the delivery of the programme leading to the characteristics of the two groups being very different, and the different period of time that has occurred following support. However, the evaluation has reviewed differences in the evidence for both cohorts, in order to provide comment on how the benefits of the programme (and their distribution) and the value for money have changed over the lifetime of the scheme.
• Year 3 of the study also considered two further issues of interest to the British Business Bank that reflect changes in the policy and delivery landscape and the need for the evaluation to help inform the future of the programme. The issues were: the extent to which outcomes were different across different regions of the UK and how regional and local issues have influenced delivery; and the needs and experiences of beneficiaries in accessing finance after they have been supported by the programme.