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Best small business loans in the UK

We explore whether a loan is the right finance option for you along with some of the best small business loans in the UK market.

 Save yourself from sifting through the small print on these small business loans

Save yourself from sifting through the small print on these small business loans

As a small business owner you might be thinking about loans as a way of starting or growing your company.

Unfortunately, loans are notoriously complicated, riddled with complex terms and teeny tiny small print. Let us demystify the process and show you some of the best small business loans around.

Is a small business loan right for me?

It depends what type of business you have, how developed you are and what you need the loan for.

For example, some loans aren’t great for seasonal businesses as making repayments during off-peak times of year will be challenging.

In this case it’s worth considering other funding options like friends and family, crowdfunding, incubators, venture capital, small business grants or switching your business bank account. Check out our rundown of the best business bank accounts open to UK SMEs.

If you want to go ahead, you can do a few things to improve your chances of success. Make sure you’re as clear as possible on how much you need to borrow and what exactly the loan would be used for. Work the loan into your business plan and have a cash flow forecast ready, making sure you include loan repayments.

Having these documents is particularly beneficial to new businesses with a shorter trading history. It’s worth asking an accountant to glance over them before you apply for the loan.

Get your website and social media in shape as the people assessing your business loan may be looking at them too.

Each provider will have their own eligibility criteria but generally you and your business should be UK-based, you need to be over 18 and not in the process of bankruptcy.

Can I get a small business loan with bad credit?

It is possible, though you’re more likely to be limited to smaller loans and/or higher interest rates. The rate of increase depends on the loan and the risk to the lender.

If you’re worried, you can seek out a firm who will perform a ‘soft’ credit check, so it won’t affect your credit score. Remember that lenders will often need details of partners, directors, members or signatories of your business and if there are any major blemishes on their credit histories, that could affect your chances of securing funds.

Ask a credit checking firm for your credit report if you don’t know how you’re doing. Some of the bigger players offer free trials.

Secured vs unsecured loans

A secured loan lowers the lender’s risk by securing it against an asset or guarantor. So, if you put up your home as collateral in a secured loan, the lender can take possession of it if you fail to make repayments on your business loan. The upshot of a secured loan is that you can nab higher loan payments.

Unsecured loans don’t have a guarantor or asset making them riskier for lenders. To cope with said risk, they tend to lend out smaller amounts over shorter time periods.

Read more at The difference between secured and unsecured business loans.

High street banks

High street banks will provide the standard loans you’ll recognise – you borrow money upfront and pay it back over a pre-agreed term with interest.

We’ve listed the key products below.

Bank Secured/unsecuredLoan amountRepayment periodEligibilityRepresentative APR (pc)
HSBCSecured (unsecured offering also available)£1,000-£25,00012 months – 10 yearsWill need cash flow forecast and business plan along with management accounts and historic accounts7.4
SantanderUnsecured£2,000-£25,0001-5 yearsMust have a Santander business current account and a good credit history      

Not been declared bankrupt in the past six years
8.9 (7.9 on 123 Business World Current Account)
BarclaysUnsecured (secured option available)Up to £100,0001-10 yearsYou must be a sole trader, partnership, limited company, charity, club or association looking to borrow up to £25,000 for business purposes 8.9
RBS/NatWestSecured£1,000 to £50,0001-10 yearsAvailable for businesses with a turnover of up to £2m

Good credit rating without history of CCJs or bankruptcy
10.49
LloydsCan be secured or unsecured£1,000-£50,0001-25 yearsYou must need this loan for business use

You must be applying for a minimum of £1,000
9.3
Clydesdale/Yorkshire BankCan be secured or unsecured£25,001-£10,000,000Up to 15 yearsMust be aged 18+ and have a business in the UK12.8
TSBCan be secured or unsecured£1,000-£1,000,0001-10 yearsYou must be a sole trader, partner or director who requires the loan for business use9.94
Metro BankSecuredUp to £25,0001-5 yearsYou will need to have a business bank account with Metro Bank

You will need to have a business bank account with Metro Bank

They’ll generally consider businesses with over £2m turnover but can make exceptions.
9.6

HSBC

Loan amount: £1,000-£25,000

Repayment period: 12 months–10 years

Eligibility: You will need a cash flow forecast and business plan along with management accounts and historic accounts.

You don’t need an HSBC current account to apply for a small business loan. There are no charges for additional repayments to your loan, but you do have the option to defer your first repayment for three months.

Note that an arrangement fee of £100 is payable at the start of the loan.

Santander

Loan amount: £2,000-£25,000

Repayment period: 1-5 years

Eligibility: You must have a Santander business current account and a good credit history, having not been declared bankrupt in the past six years. You’ll also be denied if you’ve been a disqualified director or the director of a failed business in the past six years.

Unlike HSBC, you need to have a business current account with Santander to apply for a loan and be able to repay by direct debit. You’ll bag a better rate if you hold a 123 Business World Account over a standard Business Current Account, with a representative APR of 7.9pc compared to 8.9pc.

The good news is that there are no arrangement fees to worry about.

If you need a chunkier loan of over £25,000, you’ll need to refer to Santander’s corporate and commercial banking arm.

Barclays

Loan amount: Up to £100,000

Repayment period: 1-10 years

Eligibility: You must be a sole trader, partnership, limited company, charity, club or association.

With Barclays, you can borrow up to £100,000 over 1-10 years, taking a six-month repayment holiday at the beginning of your loan if you wish.

Secured loans of up to £25,000 are also available, allowing you to stretch your repayments to 20 years and go interest-only. If that doesn’t work for you, you can opt for its asset finance product.

RBS/NatWest

Loan amount: £1,000 to £50,000

Repayment period: 1-10 years

Eligibility: Available for businesses with a turnover of up to £2m who have a good credit rating without a history of CCJs or bankruptcy.

You don’t have to be an RBS or NatWest customer to apply for their loans, though you’ll be treated to personalised rates if you are an existing customer along with faster application processing.

No arrangement fees apply to loans but there are no options to take a payment holiday.

Established businesses will need to present their annual turnover for the past 12 months and start-ups will need your business’ annual sales forecasted turnover.

Compare RBS and NatWest business loans with Know Your Money

Lloyds

Loan amount: £1,000-£50,000

Repayment period: 1-25 years

Eligibility: You must need this loan for business use and must be applying for a minimum of £1,000.

Lloyds business products are broken down into three turnover grades: £0-£3m, £3m-£25m and £25m+.

On the lowest turnover grade, you can take out a:

  • Base rate loan (£1,000 over one to 25 years)
  • Fixed rate loan (£1,000 to £50,000 repaid over one to ten years)
  • Commercial fixed rate loan (£50,000-£50,000 over one to 25 years)

The bank is said to approve a huge nine out of ten business loan applications. New customers or those who want to borrow over £10,000 will need to complete an online enquiry form and take a follow-up call from a Lloyds business advisor.

Loans over £25,000 have an arrangement fee of 1.50pc. They can be taken on a secured and unsecured basis depending on how much you want and the time you want to take to repay.

Clydesdale/Yorkshire Bank

Loan amount: £25,001-£10,000,000

Repayment period: Up to 15 years

Eligibility: You must be 18+ and have a UK-based business

Much like RBS and NatWest, the Clydesdale and Yorkshire Bank offerings will be identical.

The only other things you need to know are that you won’t be hit with extra charges for lump sum payments or early repayment, nor are there any arrangement fees on loans up to £50,000.

Compare Yorkshire Bank business loans with Know Your Money

TSB

Loan amount: £1,000-£1,000,000

Repayment period: 1-10 years

Eligibility: You must be a sole trader, partner or director who requires the loan for business use.

You have a choice of a base rate or fixed rate loan depending on your business needs. The fixed rate offering lets you borrow between £1,000 and up to £1,000,000 over one to ten years. Loans are available on a secured or an unsecured basis and the arrangement fee can be up to 1.5pc depending on how much you borrow.

Fixed rate loans can be taken on a secured or unsecured basis. Capital repayment holidays may also be available. An arrangement fee of up to 1.5pc will apply depending on how much you borrow.

Base rate, as its name suggests, relies on the Bank of England base rate which is somewhat more precarious. It’s for loans from £25,001 and can be repaid over one to 25 years. Be aware that security might be required.

Metro Bank

Loan amount: Up to £25,000

Repayment period: 1-5 years

Eligibility: You will need to have a business bank account with Metro Bank and probably some security in the form of assets or a guarantee from a third party. They’ll generally consider businesses with over £2m turnover but can make exceptions.

Metro Bank only has one loan product for all businesses. Those who want a loan of over £25,000 will have a tailored rate depending on their loan rate and a maximum 1.75pc arrangement fee.

Alternative providers

None of the digital banks offer business loans (at least not yet). However, other firms can provide finance options for your small business.

They’ll either be in the form of unsecured loans or an alternative form of finance which is more flexible. Here are the three other types of lending mentioned in the table below.

Cash advance

Rather than loans, some firms offer business cash advances. With these, you borrow a sum upfront and you pay back a pre-agreed amount which is taken straight out of your card takings, so repayment is more flexible.

Cash flow finance

This is a loan which is backed by a firm’s expected cash flow and can be either short or long-term.

Asset finance

Asset finance can be used to get equipment, machinery and vehicles without upfront costs. Typically, the lender will be paying for the asset and you’ll pay a recurring fee for a set period in order to use the asset.

ProviderType of loanLoan amountRepayment periodEligibility
365 Business FinanceCash advanceUp to £200,000FlexibleMust have been trading for at least 12 months

Average debit or credit card sales of at least £5,000 a month
LombardAsset finance£6,320 - £150,0001-7 yearsDependent on the loan
EsmeUnsecured loan£10,000-£150,0001-5 yearsMust have been actively trading for at least 18 months

Turnover of more than £15,000 per annum
LiberisCash advance£2,500-£300,000FlexibleMust have been trading for at least 4 months

Must have at least £2,500 per month in customer card takings
FleximizeUnsecured loans£5,000-£500,000Up to 48 monthsMust have been actively trading for 6 months

Minimum monthly turnover of £5,000
IwocaUnsecured loans£1,000-£200,000FlexibleOpen to sole traders, partnerships and limited companies

Start-ups have a maximum credit limit of £10,000
Start-Up LoansUnsecured loanUp to £25,0001-5 yearsCompanies who have been trading for less than 24 months

You can’t get finance from other providers
Funding CircleUnsecured loan£10,000-£500,0006 months – 5 yearsYou must have been actively trading for at least two years

Registered at Companies House
NucleusCash flow financeUp to £150,0003-36 monthsYou must have been trading for a minimum of three years

365 Business Finance

Loan amount: Up to £200,000 (cash advance)

Repayment period: Flexible

Eligibility: Your business must have been trading for at least 12 months and your average credit card and/or debit card sales must total at least £5,000 a month.

365 Business Finance offer cash advances as opposed to traditional loans. They also have unsecured business loans, business funding, business loans for bad credit and franchise financing.

Compare 365 Business Finance loans with Know Your Money

Lombard

Loan amount: £6,320 – £150,000 (asset finance)

Repayment period: 1-7 years

Eligibility: Dependent on the loan.

Lombard offers the two most common types of asset finance: hire purchase and lease finance. The finance can fund a variety of improvements like tech, manufacturing and construction equipment. Lombard has relationship managers who specialise in the manufacturing, technology, green energy, commercial vehicles, agriculture, aviation and marine sectors.

Compare Lombard business loans with Know Your Money

Esme

Loan amount: £10,000-£150,000 (unsecured)

Repayment period: 1-5 years

Eligibility: Loans are open to you if you’re a limited company or a sole trader. In either case, you must have been actively trading for more than 18 months with a turnover of more than £15,000 per annum. Both need to provide the last three months of business bank statements.

Esme loans are funded by NatWest. You can have two loans at a time but your must have made six consecutive payments to apply for a second one.

Liberis

Loan amount: £2,500-£300,000 (cash advance)

Repayment period: Flexible

Eligibility: You must have been trading for at least four months with an average of £2,500 per month in customer card takings.

With Liberis there’s no APR, late fees or penalty fees. Pay the loan back through customer card transactions using tailored quotes across different industries including pub, hotel, salon and retail.

Compare Liberis business loans with Know Your Money

Fleximize

Loan amount: £5,000-£500,000 (unsecured)

Repayment period: Up to 48 months

Eligibility: You must have been actively trading for at least six months and have a minimum monthly turnover of £5,000. Loans aren’t open to businesses in Northern Ireland or Scotland.

With Fleximize you can land a loan with penalty-free early repayments and repayment holidays. They’ll lend up to a maximum of two months’ revenue. That means that if you have a £50,000 turnover, your lending limit it £100,000.

Compare Fleximize business loans with Know Your Money

Iwoca

Loan amount: £1,000-£200,000 (unsecured)

Repayment period: Flexible

Eligibility: Open to sole traders, partnerships and limited companies. Start-ups have a maximum credit limit of £10,000.

Iwoca offers borrowing ‘for cash flow, stock or investments.’ Interest rates vary from 2pc-6pc a month, depending on your business. You can typically be funded up to one month’s revenue or £10,000 for a start-up business. You can top up the loan, up to the credit limit.

Compare Iwoca business loans with Know Your Money

Start Up Loans

Loan amount: Up to £25,000 (unsecured)

Repayment period: 1-5 years

Eligibility: Aimed at companies who have been trading for less than 24 months and can’t get finance from other providers.

This Government-backed loan has a fixed interest rate of 6pc per annum. It’s not just funding: you get 12 months of free mentoring too along with pre-loan support to help you create business plans and cash flow forecasts.

Compare Start Up Loans business loans with Know Your Money

Funding Circle

Loan amount: £10,000-£500,000 (unsecured)

Repayment period: 6 months-5 years

Eligibility: You must have been actively trading for at least two years and registered at Companies House

Partnered with the British Business Bank,  P2P firm Funding Circle provides unsecured loans with rates from 1.9pc per year and you can make full early repayments at no extra cost. They can be used for ‘almost any purpose’.

Compare Funding Circle business loans with Know Your Money

Nucleus

Loan amount: £25,000-£150,000 (cash flow finance)

Repayment period: 3-36 months

Eligibility: You must have been trading for a minimum of three years.

This cash flow finance offering goes up to £150,000, repayable over three months to three years. It’s geared towards small businesses who would benefit from cash flow payments, like expanding premises, recruiting or filling a cash flow gap.

Nucleus also provides property finance (term loans, bridging loans, interest only loans), business cash advance, invoice finance, asset-based lending, construction finance. Each has different eligibility and required documents to set up.

Compare Nucleus business loans with Know Your Money

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