My flatmate Bryan Gibson (who is a PhD candidate at the London School of Economics) and I worked on a proposal for entrepreneur loans.
From student to entrepreneur
Similar to the student loan systems that most countries already have, an entrepreneur loan should provide capital to help a start-up to kick off, especially in regions more neglected by established venture capitalists.
Student loans have a certain threshold until which the money stays interest free, after which interest rates go back up to the market standard (or the ECB rate).
Building on the comments below, the enterpreneur loan could work as an extension of the student loan system to enable people to start their own company right out of school.
Incentives for growth
With the entrepreneur loan this can be a similar time span of 3 years, but the challenge is to create incentives for start-ups to employ additional staff and grow.
One way of achieving this would be to give a bonus for each new employee hired (eg. The interest rate drops by five points for every additional employee).
Another incentive mentioned by Meena Kadri and Tim Hood would be setting a certain profitability threshold before repayment starts.
Who is behind the system?
Similar to student loans this could be a public-private partnership. The public hand could lower the risks for private investors to join in. The enterpreneur loan is kick off money, after which the start-up could become a business customer for the private partner.
Potentially the revenue of the loans used to save the banks which were too big to fail in 2008 could be channeled into these start-ups as a political gesture of the big helping the small.
Back to school
Because starting a company is a hard education of its own right, the system could include uni-credit (ECTS) points, to help students stay in their programs, or other entrepreneurs to start a degree. This would benefit both the start-ups with easy access to education and academic innovation as well as the universities, which get hands on business experience and know-how onto their campus.