Compare Business Loans & Finance Options

UK businesses have more borrowing options today than at any point in the past decade. Whether you need capital to fund growth, purchase equipment, manage cash flow, or seize a time-sensitive opportunity, understanding the market — and how lenders assess your application — is the first step to borrowing on the best possible terms. This guide covers every major product type, what lenders look for, and how to compare offers effectively.

---

What Is a Business Loan?

A business loan is a sum of money borrowed by a company and repaid — with interest — over an agreed period. Businesses use loans to fund growth, purchase equipment, manage cash flow, hire staff, or seize opportunities that require upfront capital. Unlike personal loans, business loans are assessed primarily on the financial health of the business: its trading history, revenue, cash flow, and credit profile.

---

Types of Business Loans Available in the UK

Not all business loans work the same way. Understanding the different structures helps you choose the right product for your situation.

Term Loans

A fixed lump sum borrowed and repaid with interest over a set period, typically one to five years. Monthly repayments are fixed from day one, making budgeting predictable. Term loans suit planned investments — equipment purchases, premises expansion, acquisitions, or debt consolidation.

Unsecured Business Loans

Unsecured business loans do not require collateral. They are faster to arrange and suit asset-light or rapidly growing businesses, though they typically require a personal guarantee from a director and carry higher rates than secured alternatives.

Secured Business Loans

Secured business loans use business or personal assets as collateral. The security reduces the lender’s risk, which usually results in lower rates and higher borrowing limits — but puts those assets at risk if the business cannot repay.

Revolving Credit Facilities

Revolving credit works like a business credit line: you draw funds as needed, repay, and draw again up to your agreed limit. Interest is charged only on what you have drawn. Ideal for managing working capital and smoothing cash flow gaps.

Invoice Finance

Invoice finance lets B2B businesses unlock cash tied up in outstanding invoices without waiting for customers to pay. A lender advances typically 80–90% of each invoice’s value within 24 hours of issuing it — useful for businesses with slow-paying clients or large contract pipelines.

Merchant Cash Advances

Merchant cash advances provide a lump sum repaid as a percentage of daily card takings. There are no fixed monthly repayments — repayment flexes with your revenue, making it well suited to businesses with consistent card transaction volumes.

Revenue-Based Finance

Revenue-based finance is similar to a merchant cash advance but tied to monthly revenue rather than card sales, making it accessible to businesses without a card terminal. Repayments rise and fall with income.

Asset Finance

Asset finance funds specific asset purchases — vehicles, machinery, technology hardware — with the asset itself acting as security. Terms typically align to the working life of the asset.

---

How Much Can a UK Business Borrow?

Borrowing limits vary significantly by product, lender, and your business’s financial profile. Unsecured term loans typically range from a few thousand pounds up to £500,000 for established SMEs. Secured facilities can support borrowing into the millions for the right business profile. Revolving credit lines for SMEs commonly sit between £1,000 and £500,000. Invoice finance is determined by the value of your outstanding invoices, and asset finance by the value of the asset being purchased.

Repayment terms range from a few months for short-term working capital facilities to 15 years or more for large secured commercial loans. The exact amount available to your business depends on your trading history, revenue, creditworthiness, and the type of product you are applying for.

---

Secured vs Unsecured: Which Is Right for Your Business?

The choice between secured and unsecured borrowing comes down to three things: how much you need, how quickly you need it, and what you are willing to put at risk.

Secured loans offer lower rates, higher limits, and longer terms — but require collateral, which puts business or personal assets on the line if repayments cannot be met. They suit businesses making large, planned investments where the lower cost of borrowing justifies the arrangement time and the security requirement.

Unsecured loans are faster to arrange, require no collateral, and suit smaller borrowing amounts or situations where speed matters. The trade-off is higher rates and, in most cases, a personal guarantee from a director — meaning you are personally liable if the business defaults.

---

Business Loan Interest Rates: What to Expect

Business loan interest rates in the UK vary widely depending on the product, lender, borrowing amount, and your business’s risk profile. As a general guide:

• Unsecured term loans: typically 6–20% APR for established SMEs with a solid credit profile
• Secured loans: can start from around 4% APR, depending on the quality of security offered
• Revolving credit facilities: commonly 8–25% APR
• Short-term and higher-risk facilities: higher rates, sometimes significantly so

---

Short-Term vs Long-Term Business Loans

Short-term business loans — typically repaid within 12 to 24 months — suit businesses that need fast access to capital for a specific, time-limited purpose: bridging a cash flow gap, funding a seasonal stock build, or covering an unexpected cost. They carry higher monthly repayments but lower total interest over the life of the loan compared to spreading the same borrowing over a longer term.

Long-term business loans spread repayments over a longer period, reducing the monthly commitment and making larger borrowing amounts more manageable. They suit planned investments with a long payback period — premises, major equipment, acquisitions — where the business benefit accrues over several years. The trade-off is higher total interest paid over the life of the loan.

---

What Do Lenders Look For?

Eligibility varies by lender and product, but most assess the same core factors:

• Trading history: most lenders require at least 3–6 months trading; some require 2 years for larger facilities
• Annual revenue: lenders assess whether your revenue is sufficient to service the loan repayments
• Credit profile: both business and personal credit history are typically reviewed
• Cash flow: recent bank statements showing cash flow patterns and account conduct
• Purpose of borrowing: some lenders restrict certain uses; most accept growth, equipment, and working capital
• Security: for secured loans, the value and type of collateral available

---

How to Compare Business Loan Offers

The headline interest rate is rarely enough to compare loan offers properly. The metrics that matter are:

• Total cost of credit — the total amount you repay minus the amount borrowed. This is your true cost regardless of product type
• APR — the annualised cost of borrowing including fees. Always ask for this; some lenders quote monthly rates or factor rates that look cheaper than they are
• Repayment structure — daily, weekly, or monthly repayments affect cash flow differently; factor in your revenue cycle
• Early repayment charges — can you repay early without penalty? This matters if you expect to pay down the loan ahead of schedule
• Security requirements — secured loans have lower rates but put assets at risk; understand what you are signing
• Time to funding — urgency matters. Some lenders fund within 24 hours; others take several weeks

---

Business Loans for Start-Ups

Getting a business loan as a start-up is harder than for an established business, because lenders have limited trading history to assess. Options include:

• Government-backed schemes such as the Start Up Loans programme — personal loans of up to £25,000 per director for early-stage businesses, administered through the British Business Bank
• Specialist alternative lenders who will consider businesses from three months trading, typically for smaller amounts
• Asset finance, which is sometimes available to start-ups where the asset provides sufficient security

---

Business Loans With Bad Credit

A poor credit history makes borrowing harder and more expensive, but options exist. Some alternative lenders assess revenue and cash flow more heavily than credit scores. Secured loans — where an asset or personal guarantee provides security — may be available despite a weaker credit profile. Merchant cash advances and revenue-based finance are often more accessible for businesses with imperfect credit, as approval is tied to ongoing trading performance rather than historical creditworthiness alone.

---

Government-Backed Business Loans

The UK government periodically offers guaranteed lending schemes designed to improve SME access to finance, particularly for businesses that struggle to meet mainstream lender criteria. These schemes are administered through accredited lenders rather than directly by the government.

The British Business Bank oversees a range of programmes supporting SME lending across the UK. Scheme availability, terms, amounts, and participating lenders change regularly. For the most current information on government-backed lending options, visit the British Business Bank website or GOV.UK directly.