The Government has released the details of a pilot scheme announced in this year’s budget to provide start-up business loans to young people. The move aims to tackle the paradoxical situation that makes it much easier to get a loan to study business at degree level than to get the money to actually start a business. Anyone aged between 18 and 24 with a feasible business idea could be eligible for one of the loans, which will be on average £2,500 from a fund totalling £9m. The loans will have a 12-month repayment holiday, a loan period of three-five years and an interest rate equal to the RPI plus three percent (the same as the interest on a student loan for graduates earning over £41,000).
After the Labour Government’s push to get more young people to university in their 2001 manifesto, this initiative seems like a positive step towards righting some of the wrongs of that policy, as well as a proactive means of boosting the economy and helping young people with an interest in business. The scheme is supported by the National Youth Enterprise Working Group, a nationwide network which includes the Prince’s Trust, Virgin Media Pioneers and the Institute of Directors, which is working towards coordinated support for young entrepreneurs.
Richard Branson said of the initiative, “This has the potential to transform the prospects of thousands of young people. The entrepreneurs of today will be the job creators of tomorrow so I’m delighted that the Government has listened to those at the very start of their careers.”
“The country is full of gifted and enterprising people so this pilot, which crucially has business mentoring and support at its heart, will help prevent a lost generation of talent.”
As well as the loan, successful applicants will receive access to business mentors and training, hopefully giving recipients a greater chance of success. Though pitched as an alternative to studying at university, there currently seems to be no condition on the loan excluding anyone with a degree, so one of these loans may also be an interesting alternative to facing the tough graduate jobs market for this year’s graduates (aged up to 24).
Up until 2nd May the Government was seeking expressions of interest from businesses and consortiums that could help support the scheme. Further details of the scheme are expected in the next few weeks. The pilot scheme will run from May 28th 2012 until March 31st 2013.
