Business Loans

Coronavirus: Financial support for businesses

Coronavirus Business Interruption Loan Schemes and Future Fund

Learn more about the Coronavirus Business Interruption Loan Schemes and Future Fund, managed by the British Business Bank, available during the coronavirus outbreak.

Other financial support

Find information on other coronavirus-related financial support.

Coronavirus advice

Read up-to-date guidance on coronavirus and how it affects your business.

What is a Business Loan?

A Business Loan is a common form of finance for SMEs and one of the first options for businesses looking to raise finance. The lender provides money that the borrower pays back, with interest, over an agreed period.

There are lots of Business Loan providers in the UK. They include:

The one that suits you best depends on what you can afford and whether you meet the lender’s eligibility criteria.

Key requirement

Secured Business Loans usually have lower rates of interest than Unsecured Business Loans

Key benefit

Decisions on Business Loans are made relatively quickly, usually within a few days if you provide the right information

Key consideration

Be clear in what your Business Loan will cost you in total. As well as interest, fees are likely to be payable

What types of Business Loans are there?

There are many types of Business Loans available in the UK. They range from short-term to longer-term loans, and can be either secured or unsecured.

Secured Business Loan

With these loans, you’ll need to use an asset from your balance sheet as security. The lender may also consider third-party security, such as a guarantee, instead of or alongside other security.

Usually, property is used as security although other assets like stocks and shares can be used too.

Unsecured Business Loan

This allows you to borrow without using any business assets as security. Often, you’ll need to provide a personal guarantee that says you’ll pay back the loan if the business can’t.

Unsecured Business Loans typically have higher rates of interest than Secured Business Loans.

Bank loans and commercial mortgages are the fourth most popular form of external finance among UK SMEs

British Business Bank Analysis, SME Finance Monitor 2017

Am I eligible for a Business Loan?

Every loan and loan provider is different, but there are some common requirements that all applicants will need to meet:

  • Your business can demonstrate its ability to repay the loan
  • You’re based in the UK
  • You have no late payments or outstanding county court judgements (CCJs)

Can I get a Business Loan if I have a poor credit rating?

Your business credit score will have a direct impact on your application. However, when reviewing your loan application, lenders are likely to check your personal credit report and score too.

If either score is poor, you may find it more difficult to get a Business Loan. At the very least, you may not get the low rate of interest you’d originally hoped for.

There are several websites that enable you to check your credit score online before completing a loan application. They also provide details around how your score is calculated and what you can do to change it.

72% of new Business Loan applications were successful in Q2 2017

British Business Bank Analysis, SME Finance Monitor 2017

What if my business is declined a loan?

The Bank Referral Scheme helps businesses access alternative finance if they are unsuccessful with their applications to some of the UK’s major banks.

By law, banks that participate in the scheme must refer any unsuccessful applicants to those alternative finance platforms.

How do Business Loans work?

As a business owner, you:

  • apply either online or in person at a branch
  • submit relevant documentation to allow the lender to carry out its checks
  • wait to see if you’ve been successful

There are lots of eligibility checkers online. These allow you to gauge whether your application will be successful, before you submit it. This is known as a soft credit check and doesn’t affect your credit score, even if your application is turned down.

Terms of the loan

Repayment period

Your Business Loan will have a set duration, during which you’ll need to repay the amount you borrowed, plus interest.

The lender may charge you for paying off your debt early as it will have already committed that money to your business.

Interest rate

The rate of interest you pay depends on how risky the lender deems it is to advance you the money.

For example, if you:

  • have good personal and business credit scores
  • are willing to use an asset as security

you’ll be deemed less of a risk than someone who:

  • has poor personal and business credit scores
  • is unwilling to provide security

As a result, you’re more likely to be approved for a loan with a favourable interest rate.

The lender might also offer you a fixed or floating interest rate. A fixed interest rate doesn’t change, so you know exactly what you need to pay for the duration of the loan. Floating rates can change, according to both the lender’s interest rate and the rate set by the Bank of England.

Benefits of Business Loans

Retain full control of your business

Flexible repayment schedules

Fixed rates of repayment

Access finance quickly

Risks of Business Loans

Charges

You might have to pay a fee if you’re late with a payment or miss one altogether.

Your credit report

The lender will carry out a credit check to determine whether you qualify for a Business Loan. This will have an impact on your business credit report. If you default on your loan repayments, it may affect your business credit report and/or your personal credit rating.

Assets as security

Any assets you use as security (property, for example) may be at risk if you default on a Business Loan.

What do I need to know before I apply?

  • What’s the interest rate?
  • Is the interest rate fixed?
  • How long is the loan for?
  • Are there charges for paying it back early?
  • How will I use the Business Loan?

Key things to consider

  • Do I have assets against which to secure the loan?
  • Can I afford the repayments?
  • Will I pay the loan off early if I'm able to?

Is a Business Loan right for me?

About your business

Business stageEstablished with assets and a trading history
Annual turnoverAny
SectorsAny
RegionsAny

What's my next step?

Other finance options

Equity Crowdfunding
Equity
Using an online platform, investors buy shares in a company to help it grow.
{"mTitle1":"EQUITY CROWDFUNDING","mTitle2":"Investors like","mPara2":"Businesses of any size who sell their product or service in a compelling way on Crowdfunding platforms.","mTitle3":"You're looking for","mPara3":"Either large or small sums of finance to create new products, for acquisition, to develop products, fulfil projects or enter into new markets.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/equity-crowdfunding"}
{"section1Name":"ABOUT EQUITY CROWDFUNDING","section1CTA":"LEARN MORE","section1URL":"/equity-crowdfunding","section1Rows":{"row1":{"Title":"Purpose of finance","Content":"Creating new products, acquisition finance, product development, project fulfilment, entry into new markets"},"row2":{"Title":"Amount of finance","Content":"Up to £4.3m without a prospectus, higher with a prospectus"},"row3":{"Title":"Duration of finance","Content":"Dependent on the business being funded"},"row4":{"Title":"Cost of finance","Content":"This is platform specific. Platforms often charge a success fee (usually a percentage of the amount raised) with a listing fee. Others will charge a percentage of profit"},"row5":{"Title":"Time to finance","Content":"Once your documents are in order, it can take as little as a month"}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/equity-crowdfunding","section2Rows":{"row1":{"Title":"Business stage","Content":"Pre-revenue through to more established businesses"},"row2":{"Title":"Annual turnover","Content":"Any"},"row3":{"Title":"Sectors","Content":"Any"},"row4":{"Title":"Regions","Content":"Any"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":"https://www.british-business-bank.co.uk/finance-hub/wp-content/uploads/2018/04/Equity-Crowdfunding.pdf"},"item2":{"txt":"view the application checklist","url":"https://www.british-business-bank.co.uk/finance-hub/equity-crowdfunding-checklist"}}}
Invoice finance
Debt
Businesses sell or borrow against their unpaid invoices, giving them access to the money before the invoices are paid.
{"mTitle1":"INVOICE FINANCE","mTitle2":"Providers like","mPara2":"Businesses of all sizes and stage of growth with invoices.","mTitle3":"You're looking to","mPara3":"Capitalise on an untapped asset on your balance sheet to raise finance quickly.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/invoice-finance"}
{"section1Name":"ABOUT INVOICE FINANCE","section1CTA":"LEARN MORE","section1URL":"/invoice-finance","section1Rows":{"row1":{"Title":"Purpose of finance","Content":""},"row2":{"Title":"Amount of finance","Content":""},"row3":{"Title":"Duration of finance","Content":""},"row4":{"Title":"Cost of finance","Content":""},"row5":{"Title":"Time to finance","Content":""}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/invoice-finance","section2Rows":{"row1":{"Title":"Business stage","Content":"Any but must have invoices"},"row2":{"Title":"Annual turnover","Content":"Any "},"row3":{"Title":"Sectors","Content":"Any"},"row4":{"Title":"Regions","Content":"Any"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":""},"item2":{"txt":"view the application checklist","url":""}}}
Start Up Loan
Debt
A government-backed loan that helps people who are starting their own business.
{"mTitle1":"START UP LOAN","mTitle2":"Providers like","mPara2":"Businesses within the first two years of trading or that have yet to start.","mTitle3":"You're looking for","mPara3":"Up to £25,000 unsecured loans to help start or grow your business.","mCTATxt":"FIND OUT MORE","mCTAUrl":"https://www.british-business-bank.co.uk/finance-hub/start-up-loan"}
{"section1Name":"ABOUT START UP LOAN","section1CTA":"LEARN MORE","section1URL":"/start-up-loan","section1Rows":{"row1":{"Title":"Purpose of finance","Content":""},"row2":{"Title":"Amount of finance","Content":""},"row3":{"Title":"Duration of finance","Content":""},"row4":{"Title":"Cost of finance","Content":""},"row5":{"Title":"Time to finance","Content":""}},"section2Name":"ABOUT YOUR BUSINESS","section2CTA":"LEARN MORE","section2URL":"/start-up-loan","section2Rows":{"row1":{"Title":"Business stage","Content":"Yet to start or trading for less than two years"},"row2":{"Title":"Annual turnover","Content":"Any"},"row3":{"Title":"Sectors","Content":"Some exclusions apply (see <a href='https://www.startuploans.co.uk/am-i-eligible/' target='_blank'>here</a>)"},"row4":{"Title":"Regions","Content":"Any"}},"applyItems":{"item1":{"txt":"view the journey to finance","url":""},"item2":{"txt":"view the application checklist","url":""}}}