Business loans UK

Whether you're starting a new enterprise or looking to grow, purchase necessary equipment or finance working capital needs, a business loan could be what you need to secure that added investment. Here's all you need to know about the various types of business loans to help ensure you get the right finance for your company.

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Business loans UK

What is a business loan?

The eligibility criteria for business loans depend on whether you're seeking a secured or unsecured loan. 

Suppose your business owns high-value assets. In this case, you're likely to be eligible for secured lending, especially if you're prepared to use real estate as security. With unsecured lending, eligibility criteria depend more on core business financials, such as cash flow and credit rating and the amount you need to borrow.

In both cases, you'll need to provide your Companies House registration number, and although it varies, lenders will require you to have been trading for at least six months prior to applying. You will also need to let the lender know the nature of the loan, and need to demonstrate that the primary source of repayment, i.e. your business, is viable and able to service the loan.

How to get a business loan

Use our business loan calculator below to determine how much you can borrow to take your business to the next level. We break down funding barriers with a simple application process that empowers you. 

All of our partner lenders are registered with the financial ombudsman service or trade as public limited companies (bank plc). Through our technology, Funding Cloud, we can accurately validate your business profile, matching you to the industry’s most significant lender network.

Business Loan Calculator

What is a business loan?

Understanding how business loans work can help you find the right financing for your company, which can be a lifeline when used responsibly. Typically, a business loan can range from £1,000 to several million, with terms varying from a one month repayment to 15 years.

Although other business finance options are available, such as bridging loans or asset financing, a standard small business loan offered by a bank or high street lender is the first port of call for many businesses, with owners turning to this type of funding as a solution for increased cash-flow or working capital without losing equity.

How much can I borrow with a Small Business Loan?

Depending on how much you need, you could be eligible for funding of anywhere between £1,000 and £15M. Though how much you can borrow will also vary from lender to lender.

Interest Rates

Credit rating is one of the most valuable indicators of what interest rate you'll pay for a business loan. Risk is partly determined by the term length and the security you can provide. The official interest rate for the United Kingdom is called Bank Rate, set yearly by the Bank of England which keeps a close watch on the financial system, so you can have confidence that whatever rate a lender offers you will be transparent and consistently priced.

Types of business loans

Here we will break down different types of business loans, their key strengths and benefits and various eligibility criteria, talking you through the steps you need to take to get a business loan.

Secured Business Loans

A secured business loan (also known as asset-backed lending) allows businesses to use an asset from their balance sheet as security against the amount they want to borrow. 

Lenders will use business asset(s) as security to mitigate risk, increasing the chances of loan approval. You could be offered favourable terms (compared to an unsecured loan) such as fixed interest rates, or a month by month repayment schedule. 

There are other types of secured lending, such as (for example) invoice financing, which allows you to use your invoices and accounts receivable as security for a loan. 

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Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

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Unsecured Business Loans

An unsecured loan is borrowing provided through a bank, building society, or a peer-to-peer lender. Unlike secured lending (see above), there's no collateral required to back the loan, such as your existing assets, with credit rating also taking a back seat. This means you can provide your business with upfront working capital, bypassing the 'red-tape' associated with secured lending. 

The amount lent and interest rates will depend on the creditworthiness of both you and your business. To qualify for an unsecured business loan, your registered offices must be based in the UK, have been trading for at least four months and have a minimum annual turnover of £10,000. 

A personal guarantee may also be required. If your situation changes and your business cannot repay the loan, the guarantor may be required to pay back the remaining balance under the agreed terms.

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Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

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Working Capital Loans

Working Capital Loans

Working capital loans are generally over a short or medium term, designed to boost cash flow in the business to go after new opportunities or to cover short term expenses (rather than long term investments). The size of the working capital loan you can get depends on many facets of your business profile. 

Secured working capital loans typically require assets as security, with the amount borrowed restricted by the value of the assets. Alternatively, it’s possible to get unsecured business loans up to £250,000 to help with working capital — however, for these loans, your credit rating will be an essential factor, and often, you will need to provide a personal guarantee.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

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Short-term Business Loans

Short-term financing can be a viable solution to cover emergency payments or growth opportunities and are designed for the short-term. However, these are typically between three months and two years. If you're considering a loan for a very short term, it might be worth considering revolving credit facilities.

At Funding Options, our record from enquiry to approval is just 20 seconds

However, the convenience of speed can come with a cost - shorter-term business loans can have higher fixed interest rates.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

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Recovery Loan Scheme

The Recovery Loan Scheme (running until 30 June 2022) is a government-backed scheme supporting access to finance for businesses following the Covid-19 pandemic. To ensure more businesses can access finance, the government guarantees the lender up to 80% of the loan. Eligible businesses will be required to pay loan interest and any related upfront costs from the outset.

Eligibility criteria:

  • Business has been impacted by the Coronavirus (COVID-19) Pandemic

  • Minimum of 2 years' trading history

  • Business is trading in the UK (with company registration number)

  • Annual turnover of up to £45 million

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Can I get a business loan with bad credit?

While it may not seem possible, you can still be eligible for a business loan even if you have a poor credit rating. Yes, it's undoubtedly more challenging to borrow money with bad credit; however, it's still very much worth exploring, especially if you're willing to offer additional security or a personal guarantee

 When considering an application, lenders won't necessarily be interested in your credit rating; your business credit file impacts your eligibility here. You'll have a business credit file without ever having borrowed money, and you'll also have a business credit rating. 

 Suppose you're looking to apply for a business loan and have bad credit. As lenders may be less flexible, it would help if you were prepared to pay potentially higher interest rates and have additional restrictions placed on you. Lenders will also consider the purpose of the loan and the strength of the business.

Business Loans for Bad Credit

Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness, with all quotes being subject to status and income.

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