Start-up loans scheme to help young people launched
An £82m loan scheme for young people wanting to create a business has been launched by David Cameron.
People aged between 18 and 24 can apply for funds, expected to typically be about £2,500.
Mr Cameron said he hoped the initiative could lead to 30,000 more start-ups and give a boost to economic growth.
The loans must be repaid within five years, and interest will be charged at the level of the Retail Prices Index plus 3%.
Mr Cameron said he wanted young people to have the confidence and support to turn "that spark of an idea into the next global brand".
It came as an enterprise review said the UK would have 900,000 more businesses if it had the same rate of entrepreneurship as the US.
The review, by former Conservative minister Lord Young of Graffham, said that "many don't realise the opportunities that enterprise offers".
He told BBC News that the money from the government was necessary because young entrepreneurs did not have many sources of funding.
"A bank would not give it to a young person without any track record," he said.
"It's more than money," he added. "What they're getting are mentors - it's advice that really counts."
The Prince's Trust, which provides grants of about the same amount to young people wanting to start businesses, will also be involved in the new scheme.
"We know from our experience at The Prince's Trust that supporting young people into self-employment can help turn their lives around," said Alan Kennedy, its director of operations.
"We're really pleased to be a part of this initiative as it will enable us to help even more disadvantaged young people through our popular Enterprise Programme."'So-called recession'
Back in November 2010, Lord Young was rebuked by Mr Cameron for claiming most Britons had "never had it so good" despite the "so-called recession".
Reza Moaiandin, 23, from Leeds, says he will be applying for the scheme:
"At this time of recession few banks allow you to take out a loan, especially if you don't have a good credit history because you are young.
"I have been looking at borrowing money from family or friends for a business that has already caught the attention of one of the largest pharmacy chains in the UK.
"I hope to design software to help recruitment in the pharmaceutical industry."
Lord Young, who served in Margaret Thatcher's cabinet in the 1980s, said on Monday that small businesses "are the engine room of our economy and critical to future economic growth."
He added: "But we cannot be complacent. Now, more than ever, we have got to get behind our small businesses and encourage even more people to seize the opportunities and support that there is to start up on their own."
The StartUp Loans scheme will be chaired by entrepreneur and Dragons' Den participant James Caan, and administered by groups that already work with young people.
"One of the reasons I'm being involved is I am an entrepreneur, I have built a business before, I understand the challenges," he told BBC News.
"As chairman of the StartUp Loans company my challenge is to ensure that these funds are distributed without red tape, and give young people the opportunity that I absolutely believe they need."
Mr Cameron said: "I want this to be the year where people can think: yes, I can do it; that we can get as many viable businesses as possible off the ground, that people can have a go and that we see a whole new wave of entrepreneurs who start small but think big."
The interest rate of RPI +3% is reasonable compared with the alternatives available to small businesses, according to a business loans expert.
RPI in April stood at 3.5%.
"It's a very realistic and manageable rate for small businesses as opposed to credit cards and overdrafts which would be much more expensive," said Eddy Weatherill, chief executive of the Independent Banking Advisory Service.
Young entrepreneurs would find unsecured business loans "difficult to come by from banks", he added.