diff --git a/apps/desktop/src/components/main/sidebar/banner/component.tsx b/apps/desktop/src/components/main/sidebar/banner/component.tsx
index 565b5e2c9..b62f17465 100644
--- a/apps/desktop/src/components/main/sidebar/banner/component.tsx
+++ b/apps/desktop/src/components/main/sidebar/banner/component.tsx
@@ -17,7 +17,10 @@ export function Banner({
         className={cn([
           "relative group overflow-hidden rounded-lg",
           "flex flex-col gap-2",
-          "bg-white border border-neutral-200 shadow-sm p-4",
+          "bg-white p-4",
+          banner.variant === "error"
+            ? "border border-red-300 shadow-sm shadow-red-100"
+            : "border border-neutral-200 shadow-sm",
         ])}
       >
         {banner.dismissible && onDismiss && (
diff --git a/apps/desktop/src/components/main/sidebar/banner/index.tsx b/apps/desktop/src/components/main/sidebar/banner/index.tsx
index bcaf52fcf..398935546 100644
--- a/apps/desktop/src/components/main/sidebar/banner/index.tsx
+++ b/apps/desktop/src/components/main/sidebar/banner/index.tsx
@@ -1,10 +1,12 @@
 import { AnimatePresence, motion } from "motion/react";
 import { useCallback, useEffect, useMemo, useState } from "react";
 
+import type { ServerStatus } from "@hypr/plugin-local-stt";
 import { cn } from "@hypr/utils";
 
 import { useAuth } from "../../../../auth";
 import { useConfigValues } from "../../../../config/use-config";
+import { useSTTConnection } from "../../../../hooks/useSTTConnection";
 import { useTabs } from "../../../../store/zustand/tabs";
 import { Banner } from "./component";
 import { createBannerRegistry, getBannerToShow } from "./registry";
@@ -32,7 +34,18 @@ export function BannerArea({
     "current_stt_model",
   ] as const);
   const hasLLMConfigured = !!(current_llm_provider && current_llm_model);
-  const hasSttConfigured = !!(current_stt_provider && current_stt_model);
+
+  const { conn: sttConnection, local: sttLocal } = useSTTConnection();
+  const sttServerStatus = sttLocal.data?.status as ServerStatus | undefined;
+
+  const isLocalSttModel =
+    current_stt_provider === "hyprnote" &&
+    !!current_stt_model &&
+    current_stt_model !== "cloud";
+
+  const hasSttConfigured = isLocalSttModel
+    ? !!sttConnection
+    : !!(current_stt_provider && current_stt_model && sttConnection);
 
   const currentTab = useTabs((state) => state.currentTab);
   const isAiTranscriptionTabActive =
@@ -72,6 +85,8 @@ export function BannerArea({
         isAuthenticated,
         hasLLMConfigured,
         hasSttConfigured,
+        sttServerStatus,
+        isLocalSttModel,
         isAiTranscriptionTabActive,
         isAiIntelligenceTabActive,
         onSignIn: handleSignIn,
@@ -82,6 +97,8 @@ export function BannerArea({
       isAuthenticated,
       hasLLMConfigured,
       hasSttConfigured,
+      sttServerStatus,
+      isLocalSttModel,
       isAiTranscriptionTabActive,
       isAiIntelligenceTabActive,
       handleSignIn,
diff --git a/apps/desktop/src/components/main/sidebar/banner/registry.tsx b/apps/desktop/src/components/main/sidebar/banner/registry.tsx
index 16add99f7..4cb0684c4 100644
--- a/apps/desktop/src/components/main/sidebar/banner/registry.tsx
+++ b/apps/desktop/src/components/main/sidebar/banner/registry.tsx
@@ -1,3 +1,5 @@
+import type { ServerStatus } from "@hypr/plugin-local-stt";
+
 import type { BannerCondition, BannerType } from "./types";
 
 type BannerRegistryEntry = {
@@ -9,6 +11,8 @@ type BannerRegistryParams = {
   isAuthenticated: boolean;
   hasLLMConfigured: boolean;
   hasSttConfigured: boolean;
+  sttServerStatus: ServerStatus | undefined;
+  isLocalSttModel: boolean;
   isAiTranscriptionTabActive: boolean;
   isAiIntelligenceTabActive: boolean;
   onSignIn: () => void | Promise<void>;
@@ -20,6 +24,8 @@ export function createBannerRegistry({
   isAuthenticated,
   hasLLMConfigured,
   hasSttConfigured,
+  sttServerStatus,
+  isLocalSttModel,
   isAiTranscriptionTabActive,
   isAiIntelligenceTabActive,
   onSignIn,
@@ -28,6 +34,53 @@ export function createBannerRegistry({
 }: BannerRegistryParams): BannerRegistryEntry[] {
   // order matters
   return [
+    {
+      banner: {
+        id: "stt-loading",
+        description: (
+          <>
+            Transcription model is
+            <strong className="font-mono animate-ping text-amber-500">
+              loading
+            </strong>
+            . This may take a moment.
+          </>
+        ),
+        primaryAction: {
+          label: "View status",
+          onClick: onOpenSTTSettings,
+        },
+        dismissible: false,
+      },
+      condition: () =>
+        isLocalSttModel &&
+        sttServerStatus === "loading" &&
+        !hasSttConfigured &&
+        !isAiTranscriptionTabActive,
+    },
+    {
+      banner: {
+        id: "stt-unreachable",
+        variant: "error",
+        description: (
+          <>
+            Transcription model{" "}
+            <strong className="font-mono text-red-500">failed to start</strong>.
+            Please try again.
+          </>
+        ),
+        primaryAction: {
+          label: "Configure transcription",
+          onClick: onOpenSTTSettings,
+        },
+        dismissible: false,
+      },
+      condition: () =>
+        isLocalSttModel &&
+        sttServerStatus === "unreachable" &&
+        !hasSttConfigured &&
+        !isAiTranscriptionTabActive,
+    },
     {
       banner: {
         id: "missing-stt",
@@ -43,7 +96,8 @@ export function createBannerRegistry({
         },
         dismissible: false,
       },
-      condition: () => !hasSttConfigured && !isAiTranscriptionTabActive,
+      condition: () =>
+        !hasSttConfigured && !isLocalSttModel && !isAiTranscriptionTabActive,
     },
     {
       banner: {
diff --git a/apps/desktop/src/components/main/sidebar/banner/types.ts b/apps/desktop/src/components/main/sidebar/banner/types.ts
index f32cdab22..74fa2b6d4 100644
--- a/apps/desktop/src/components/main/sidebar/banner/types.ts
+++ b/apps/desktop/src/components/main/sidebar/banner/types.ts
@@ -13,6 +13,7 @@ export type BannerType = {
   primaryAction?: BannerAction;
   secondaryAction?: BannerAction;
   dismissible: boolean;
+  variant?: "default" | "error";
 };
 
 export type BannerCondition = () => boolean;
diff --git a/apps/desktop/src/components/settings/ai/llm/select.tsx b/apps/desktop/src/components/settings/ai/llm/select.tsx
index a8bb964b0..13802d11b 100644
--- a/apps/desktop/src/components/settings/ai/llm/select.tsx
+++ b/apps/desktop/src/components/settings/ai/llm/select.tsx
@@ -82,10 +82,10 @@ export function SelectProviderAndModel() {
       <div
         className={cn([
           "flex flex-col gap-4",
-          "p-4 rounded-xl border border-neutral-200",
+          "p-4 rounded-xl border",
           !!current_llm_provider && !!current_llm_model
-            ? "bg-neutral-50"
-            : "bg-red-50",
+            ? ["bg-neutral-50", "border-neutral-200"]
+            : ["bg-red-50", "border-red-200"],
         ])}
       >
         <div className="flex flex-row items-center gap-4">
diff --git a/apps/desktop/src/components/settings/ai/stt/select.tsx b/apps/desktop/src/components/settings/ai/stt/select.tsx
index 3086fcf50..61e8e9137 100644
--- a/apps/desktop/src/components/settings/ai/stt/select.tsx
+++ b/apps/desktop/src/components/settings/ai/stt/select.tsx
@@ -15,6 +15,10 @@ import { cn } from "@hypr/utils";
 
 import { useBillingAccess } from "../../../../billing";
 import { useConfigValues } from "../../../../config/use-config";
+import {
+  isLocalSttModel,
+  useSTTConnection,
+} from "../../../../hooks/useSTTConnection";
 import * as settings from "../../../../store/tinybase/settings";
 import {
   getProviderSelectionBlockers,
@@ -35,6 +39,13 @@ export function SelectProviderAndModel() {
   ] as const);
   const billing = useBillingAccess();
   const configuredProviders = useConfiguredMapping();
+  const { local: sttLocal } = useSTTConnection();
+  const sttServerStatus = sttLocal.data?.status;
+
+  const isLocal = isLocalSttModel(current_stt_provider, current_stt_model);
+
+  const isUnreachable = isLocal && sttServerStatus === "unreachable";
+  const isNotConfigured = !current_stt_provider || !current_stt_model;
 
   const handleSelectProvider = settings.UI.useSetValueCallback(
     "current_stt_provider",
@@ -79,10 +90,10 @@ export function SelectProviderAndModel() {
       <div
         className={cn([
           "flex flex-col gap-4",
-          "p-4 rounded-xl border border-neutral-200",
-          !!current_stt_provider && !!current_stt_model
-            ? "bg-neutral-50"
-            : "bg-red-50",
+          "p-4 rounded-xl border",
+          isNotConfigured || isUnreachable
+            ? ["bg-red-50", "border-red-200"]
+            : ["bg-neutral-50", "border-neutral-200"],
         ])}
       >
         <div className="flex flex-row items-center gap-4">
@@ -212,7 +223,7 @@ export function SelectProviderAndModel() {
           )}
         </div>
 
-        {(!current_stt_provider || !current_stt_model) && (
+        {isNotConfigured && (
           <div className="flex items-center gap-2 pt-2 border-t border-red-200">
             <span className="text-sm text-red-600">
               <strong className="font-medium">Transcription model</strong> is
@@ -220,6 +231,15 @@ export function SelectProviderAndModel() {
             </span>
           </div>
         )}
+
+        {isUnreachable && (
+          <div className="flex items-center gap-2 pt-2 border-t border-red-200">
+            <span className="text-sm text-red-600">
+              <strong className="font-medium">Transcription model</strong>{" "}
+              failed to start. Please try again.
+            </span>
+          </div>
+        )}
       </div>
     </div>
   );
diff --git a/apps/desktop/src/hooks/useSTTConnection.ts b/apps/desktop/src/hooks/useSTTConnection.ts
index 8d89d6356..3ce48a84a 100644
--- a/apps/desktop/src/hooks/useSTTConnection.ts
+++ b/apps/desktop/src/hooks/useSTTConnection.ts
@@ -10,6 +10,17 @@ import { ProviderId } from "../components/settings/ai/stt/shared";
 import { env } from "../env";
 import * as settings from "../store/tinybase/settings";
 
+export function isLocalSttModel(
+  provider: string | undefined,
+  model: string | undefined,
+): boolean {
+  return (
+    provider === "hyprnote" &&
+    !!model &&
+    (model.startsWith("am-") || model.startsWith("Quantized"))
+  );
+}
+
 export const useSTTConnection = () => {
   const auth = useAuth();
   const billing = useBillingAccess();
@@ -26,11 +37,7 @@ export const useSTTConnection = () => {
     settings.STORE_ID,
   ) as AIProviderStorage | undefined;
 
-  const isLocalModel =
-    current_stt_provider === "hyprnote" &&
-    !!current_stt_model &&
-    (current_stt_model.startsWith("am-") ||
-      current_stt_model.startsWith("Quantized"));
+  const isLocalModel = isLocalSttModel(current_stt_provider, current_stt_model);
 
   const isCloudModel =
     current_stt_provider === "hyprnote" && current_stt_model === "cloud";