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Large and small business loans guide

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 4, 2023

Fact Checked By:
David Nicholson - Finance Editor

Business loans UK – We can help you get accepted for a business loan

A business loan is exactly as it sounds: it’s a source of financing for businesses that require money to expand, pay for equipment, improve cash flow, and for other purposes.

There are many types of business finance available. However, when you get a business loan the basic principle is that the company will borrow money and then repay it with interest over a specified term.

Finding the right business loan for your business can be difficult, so this guide will help you understand how to get a business loan in the UK.

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How to obtain a business loan for UK businesses?

There are traditional bank loans, online business loan lenders and other financing options.

We have compiled a list of all the available business finance loans in one place so that you can easily find the right business finance for your business.

Not all funding options for expanding businesses are suitable for everyone; however, our tables can help you navigate the complex business loan marketplace.

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How do business loans work?

Many business owners will need additional business finance at one time or another.

There are so many business loan lenders and finance options to choose from that it can be overwhelming to know where to start your search for a loan.

To help you make a decision, there are some fundamental questions that you can ask.

  1. What amount do I need for a business loan?
  2. What are the loan repayments for the business loan?
  3. What is the monthly repayment limit for a business loan?
  4. Are unpaid invoices a problem for a business loan?
  5. What is the equity of a property I own?
  6. What loan do I need to purchase particularly valuable business assets?
  7. What is my personal and business credit score?
  8. Can I pay by card?
  9. What if I have to pay a lump sum at once?

These questions will help you narrow down your options for a business loan.

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We have access to over 200 lenders in the UK to get you the best rates

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Who is eligible to receive a business loan?

There are different types available, to sole traders, small business loans, and large company business loans.

Lenders will determine whether you are eligible for a business loan by using information such as:

  • Your business’s age
  • Your annual turnover.
  • Credit history for your business and your personal account.

How do I apply for a business loan?

Lenders will need information about you and your company to decide whether to offer you a quote for a business loan.

  • Your business name.
  • Your contact details (address, phone number, email).
  • How long has your business been in operation?
  • Information about your company’s finances and revenues.
  • How much you would like to borrow.
  • You want the money to go towards: expansion, equipment, increased cash flow, marketing
  • What length of time do you plan to borrow the money?

It will make applying for a business loan easy and stress-free.

Read more: How to get a small business loan without collateral

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These are the main types of business loans

Secured business loans

Secured business loans require you to pledge an asset, usually a property, as security for a loan. Because they are less risky for the lender, secured business loans have lower interest rates than unsecured business loans.

You may be able to borrow a more significant amount of money over a more extended period.

Secured loans have the additional risk of you losing your property (often your house) if your payments are not kept up. These are classed as business assets.

Two types of secured loans are available for business loans: commercial mortgages and asset-backed financing.

Unsecured business loans

Unsecured business loans don’t need security. These are the most common unsecured loans – it is not a complete list.

  • British business Bank Loan: These are typically offered by large high-street banks. Although they have become more difficult to get in recent years, these British business bank loans still remain a popular option for established businesses with good credit ratings.
  • Alternative to a bank loan for business: There are many online lenders and banks that will offer a business loan. Alternative Business Financing rates, terms, and eligibility requirements will vary from one lender to the next.
  • Lines for credit: Credit lines give businesses the opportunity to obtain a credit limit that they can use to withdraw money when and where they need it. The balance owing is the only amount that gets charged interest.
  • Merchant cash advance: These are also known as business cash advances. They are a business loan paid back when a company takes payment from a customer’s card. For businesses with poor credit ratings and limited trading history, merchant cash advances may be a viable option.
  • Invoice financing:This involves “selling” unpaid invoices to a financial institution that will make the invoice’s value available to the company immediately for a fee. Read more about invoice discounting
  • Short-term loans: These are simple business loans and are typically offered over a period of months rather than years. Although cash is often available quickly, interest rates and loan amounts can be high.
  • Peer to peer lending: Online platforms that match willing lenders (often private equity investors or members of the public) with businesses seeking loans are a new type of finance. Peer-to-peer lending rates are possible, but eligibility may be limited.

Read more: Small business loans for bad credit

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Business loans from the government

The government created various business loan programs for businesses to address the devastating effects of coronavirus in all industries.

These include the Coronavirus Business Interruption Loan Scheme (CBILS), and the Bounce Back Loan Scheme (BBLS), which are now closed to new applications.

Read our Government business loan guide for more information on these types of loans.

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Start-up loans

Your finances will be the most important thing to think about when you are just starting your business.

There are still funding opportunities available for those who don’t have a lot of business experience.

There is, for example, a government-backed Start Up Loan scheme that provides loans up to £25,000 for businesses up to 24 months of age.

You may be eligible for loans from another loan provider, but you will need to provide additional information about your company and yourself to be accepted. It is sometimes hard to start a business with no money so finance can help you progress.

Lenders may consider your personal and business credit score when approving your loan application, especially if you’re just starting out.

Lenders may ask for a personal guarantee that your business will repay the loan. This will provide them with additional security.

You can view our tips to fix your business credit score to help you have the best chance of approval.

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Small business loans

Small businesses can grow with the help of money.

Small businesses often require money to reach their goals, whether they are looking to expand, buy more stock, hire more employees, purchase more stock, or make new investments.

Many growing and small businesses don’t have enough cash to finance their expansion plans. This is why they might look for funding from outside sources.

These loans can be used to grow businesses and are available as business loans from both high-street banks and online-only lenders.

Do not limit yourself to your current bank if you’re interested in a small-business loan as you should look into other lenders and see what types of funding are available. There are many loan and credit options that can be tailored to different businesses.

You might also want to check if you are eligible for any small-business grants. Unlike a loan, the money would not be repaid.

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FAQs about Business Loans

What are the best uses of a business loan?

These are some of the most common uses for a business loan:

  • Buying new equipment/machinery/stock.
  • Payment of bills
  • Controlling cash flow
  • Repayment of other debts
  • Investing in staff/premises.
  • Expanding costs.

Am I required to own a business in order to obtain a business loan?

Not necessarily.

There will be different criteria for each lender. However, company directors who have access to company accounts may still be eligible to apply for a business loan.

The Start-Up Loan Scheme might be an option if you don’t own a business yet but need a business loan to start one.

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To get a business loan for my business, do I need to have a bank account?

A bank account is required to get a business loan for a limited company. You don’t have to apply for loans from the same bank you already have an account.

You may be eligible for business loans even if you are not a sole trader or a start-up, but it may prove more difficult depending on which lenders you choose.

Will my personal credit score be considered when I apply for a loan for my business?

Yes in most cases, lenders will consider your personal credit score when considering whether or not to approve your loan request. Other company partners and directors will also check your credit score.

As a business owner, can I get a loan for my business if I have bad credit? Business loan providers may struggle to give you small business finance or a secure business loan with bad credit.

It may be more difficult for you to obtain a loan approval if your company has poor credit or if you have a bad personal credit rating.

Although there are alternative finance providers who will lend to people with poor business credit reports, you may have to pay higher interest rates due to the increased risk.

Businesses with poor credit ratings may find some lending options more appealing, such as invoice finance or cash advances.

If you can apply for a secured business loan, or provide a personal guarantee that you will repay the loan if your company is unable to pay it back, this may increase your chances of approval.

Read our guide on how a business loan affects your personal credit score 

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Are you eligible for business lending to start a new company?

While many lenders require that you have a minimum of three months of trading history, some lenders will still lend to start-ups. It would be worth making a loan application with your business plans.

If you are struggling to find finance it may be worth looking for an angel investor who may be able to help you with the initial funding required.

Popular business loan lenders in the UK

Below are some popular business loan lenders in the UK.

These are lenders, not brokers, so it is essential to use a broker such as Loan Corp who can view the whole of the market and get you the best rates.

Start your application below online:

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Is there a regulation on business loans?

The vast majority of business lending is not regulated.

The Financial Conduct Authority will regulate certain business loans for UK businesses, such as loans under £30,000 to sole traders.

Get approved for a business loan, start online below:

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