Starling Bank: Offering Loans Or Not?

Starling Bank offers business loans to small- and medium-sized enterprises (SMEs) in the UK. The loan amount ranges from £25,001 to £250,000 and can be borrowed for one to six years. To be eligible, businesses must be registered as a limited company or limited liability partnership in the UK and must have been trading for at least 24 months. Starling also offers overdrafts on its business bank accounts, ranging from £1,000 to £50,000. Starling's loans and overdrafts can be applied for online or through their app.

Starling Bank business loans

Starling Bank offers business loans to small- and medium-sized enterprises (SMEs) in the UK. The loans are unsecured and range from £25,001 to £250,000, with terms from one to six years. To be eligible for a Starling business loan, you must run a limited company or limited liability partnership in the UK, and your business must have been trading for at least 24 months.

You don't need to have a Starling Bank business account to apply for a loan, but if your application is successful, you will need to open an account and transfer your primary business banking to Starling. During the application process, you will need to provide personal and business information, including your company registration number and information about your business accounts, such as your latest profit and loss statement and a balance sheet. You will also need to provide the previous six months' worth of bank statements if you don't currently bank with Starling.

Starling requires a personal guarantee as security for its business loans. This means that if your business is unable to repay the loan in full, it will become your personal responsibility to do so. There is also a one-off arrangement fee, currently 4% of the loan amount, payable when you receive the funds.

Starling also offers overdrafts on its business bank accounts, ranging from £1,000 to £50,000, which also require a personal guarantee.

Interest rates and fees

Starling Bank offers business loans to small- and medium-sized enterprises (SMEs) in the UK. The bank offers unsecured business loans ranging from £25,001 to £250,000, with loan terms of one to six years. The interest rates are fixed for the duration of the loan, meaning monthly repayments remain unchanged.

Interest rates are tailored to each applicant and are influenced by the company's unique circumstances. A full credit assessment is completed on all applications, which includes a check on whether the business can afford to repay the debt.

There is a one-off arrangement fee of 4% of the loan amount, payable on the date that the funds are received. This fee is separate from the interest rate and is a one-time charge for setting up the loan. Starling Bank also offers a business overdraft facility, which charges interest at a rate that is communicated to the borrower beforehand and can be viewed in the mobile app.

Additionally, Starling Bank provides a 1-year Fixed Saver account, which offers a fixed interest rate of 4.05% AER/gross interest with a minimum deposit of £2,000. This account is not available to all customers, and eligibility is determined by the bank.

Application process

Starling Bank offers small business loans to limited companies and limited liability partnerships. The loan amount ranges from £25,001 to £250,000, with a fixed interest rate and a term of 1 to 6 years.

The application process for a Starling Bank small business loan involves several steps, including credit checks, fraud checks, submission of financial documentation, and a credit assessment. Here is a detailed breakdown of the process:

• Credit and Fraud Checks: Starling Bank will undertake comprehensive credit and fraud checks on all applicants. This includes verifying the creditworthiness of the business and its directors or PSCs (persons with significant control). They will review the business's payment history, including any missed direct debit or loan repayments, defaults, or County Court Judgements. Additionally, they will assess whether the directors or PSCs have been associated with insolvent businesses in the past.
• Financial Documentation: Starling Bank requires applicants to submit various financial documents. These include the latest filed accounts for the business, such as the Profit and Loss statement and balance sheet. If the business uses a non-Starling Bank account, the last six months of statements will be needed. Having up-to-date accounts and confirmation statements on Companies House is essential for a successful application.
• Credit Assessment: A full credit assessment is conducted on all applications. This assessment evaluates the business's ability to repay the loan, including interest and arrangement fees. It considers the financial health and stability of the company, ensuring it can meet its debt obligations.
• Personal Guarantee: Starling Bank may require a Personal Guarantee from the individuals running the business. This means that if the company defaults on its loan or overdraft payments, the guarantor agrees to assume responsibility for those payments.
• Eligibility and Requirements: Starling Bank has specific eligibility criteria for their small business loans. The borrower must be based in the UK and carry out trading activity within the UK. Additionally, the business must be active and not dormant on Companies House.

It is important to note that the application process may involve additional steps or requirements, and Starling Bank's lending team is available to provide support and guidance throughout the process.

Overdrafts

Starling Bank offers overdrafts to its customers. Overdrafts are intended to act as a short-term safety net for those who need financial support. Starling Bank offers interest rates of 15%, 25%, or 35% EAR* (variable) for arranged overdrafts, based on a range of factors, including information from multiple credit reference agencies. The bank does not charge additional fees.

When you open an account with Starling Bank, you can apply for an overdraft in the app. This will be subject to a credit check and an assessment of your personal circumstances. Your credit score may be impacted if you go over your limit or don't pay when asked, and this could affect your chances of borrowing in the future. The bank will also remind you of scheduled payments and let you know if you have insufficient funds.

Starling Bank offers business overdrafts of £1,000 up to £50,000. If you provide a Personal Guarantee, you are agreeing to act as a Guarantor for the debt obligations of the company. This means that if your company defaults on its loan or overdraft payments, you will be responsible for paying instead.

Some people have reported being turned down for a Starling Bank overdraft, even with good credit history. It has been suggested that this may be due to a lack of income history. If you are turned down, the bank may ask you to wait 365 days before reapplying.

Pros and cons

Pros

Starling Bank offers business loans to small- and medium-sized enterprises (SMEs) in the UK. The bank provides unsecured loans ranging from £25,001 to £250,000, with loan terms between one and six years. Starling Bank's business loans have a fixed interest rate, meaning monthly repayments remain consistent throughout the loan term.

Additionally, Starling Bank offers business overdrafts ranging from £1,000 to £50,000. The bank also provides personal loans to its current account customers, with loan amounts of up to £5,000 and an APR starting at 11%. Starling Bank's loan application process is convenient, allowing customers to apply instantly through their bank account or smartphone app.

Cons

One significant drawback of Starling Bank's loans is the relatively high-interest rates compared to other lenders, especially for larger loan amounts. The interest rates can result in higher overall costs, as evident in the example of a £5,000 loan with a 2-year term, where the total interest paid to Starling Bank is significantly higher than that of a competitor offering a lower interest rate.

Furthermore, Starling Bank's loan process requires a personal guarantee, making individuals personally liable for the loan if their business cannot repay it. Additionally, for those without an existing Starling Bank account, the loan application process may be more complex as it involves providing six months' worth of bank statements and transferring primary business banking to Starling if the application is successful.

Frequently asked questions