Best small business loans in the UK
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.
The best small business loans in the UK are:
High street banks
Digital banking platforms
Alternative providers
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 cashflow 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/unsecured | Loan amount | Repayment period |
|---|---|---|---|
| HSBC | Both | £1,000-£25,000 | 1-10 years |
| Santander | Both | £25,001+ | 0-25 years |
| Barclays | Both | £1,000-£100,000 | 1-25 years |
| RBS/NatWest | Secured | £1,000-£100,000 | 1-7 years |
| Lloyds | Both | £1,000-£50,000 | 1-10 years |
| Virgin Money | Both | £30,000-£10m | Up to 20 years |
| TSB | Both | £1,000-£1m | 1-25 years |
| Metro Bank | Secured | £2,000-£25m | 1-30 years |
Loan amount: £1,000-£25,000
Repayment period: 12 months–10 years
Eligibility: You will need a cashflow 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 if you repay early, HSBC will deduct interest of one month and 28 days from your interest rebate.
You can have a three or six-month repayment holiday at the start of the loan, or take a January payment holiday during each year of your loan.
Loan amount: £25,001+
Repayment period: 0-25 years
Eligibility: New businesses and established SMEs seeking loans of £25,001 or more
Starting from £25,001, Santander’s business loans cater to more established small businesses, but are worth a look if you’re looking to borrow a more substantial sum. It offers fixed and variable rates, and you can pay your loan over any period up to 25 years.
See also: A guide to small business funding: Loans, eligibility and applications – Applying for business funding can be a complex task, so we want to help make things as simple as possible with this easy-to-follow guide
Loan amount: £1,000 to £100,000
Repayment period: 1-25 years
Eligibility: You must be a sole trader, partnership, limited company, charity, club or association.
Barclays, you can take out a fixed-rate, unsecured loan of between £1,000 and £25,000 over 1-10 years, taking a six-month repayment holiday at the beginning of your loan if you wish. There are no arrangement fees or early repayment fees for fixed-rate loans under £25,000.
Secured and unsecured loans of over £25,001 are also available, allowing you to stretch your repayments to 25 years. These can be either fixed or variable, and you can apply for an interest-only period. If approved, the cash should be yours within 48 hours of signing the paperwork.
Loan amount: £1,000 to £100,000
Repayment period: 1-7 years
Eligibility: You must have a good credit rating without a history of CCJs or bankruptcy.
Sister banks RBS and NatWest have the same loan offering for small businesses. You can borrow from £1,000 to £100,000 on a fixed-rate basis, which you have to repay over the relatively short time frame of 1-7 years. Unfortunately, repayment holidays aren’t available, but you can make fee-free early repayments and do fee-free early closures.
Loan amount: £1,000-£50,000
Repayment period: 1-10 years
Eligibility: You must be a sole trader, partner or director with authority to borrow on behalf of your business.
Lloyds offers business loans of between £1,000 and £50,000, with repayment terms of 1 to 10 years. Fixed rates are available for loans up to £25,000 and variable rates for any amount up to £50,000. There are no arrangement fees or early repayment costs.
You’ll need to provide proof that you can make your repayments on time along with details of any other business loan that you have. Oh, and if you’re a limited company or limited liability partnership, you need to provide a guarantee.
Loan amount: £30,000-£10m
Repayment period: Up to 20 years
Eligibility: You must have been trading for at least 12 months, be based in the UK and use the loan for business purposes.
Virgin Money’s base (linked to the Bank of England base rate) and fixed-rate loans are available for amounts ranging from £30,000 to £10m, with repayment periods of up to 20 years for base and five years for fixed. If your turnover is £6.5m+, you can borrow over £2.5m and access flexible repayment options.
You must be 18+ and have a UK-based business. An arrangement fee may apply.
Loan amount: £1,000-£1m
Repayment period: 1-25 years
Eligibility: You must be a UK-based sole trader, partner or director who requires the loan for business use.
TSB offers base and fixed-rate loans. The fixed-rate offering lets you borrow between £1,000 and £1m over one to 10 years, while base rate loan allows you to borrow from £25,001 over one to 25 years. Loans are available on a secured or an unsecured basis and the arrangement fee is up to 1.5 per cent, depending on how much you borrow.
Loan amount: £2,000-£60,000 (business), £25,000 to £25m (commercial)
Repayment period: 1-5 years (business), 1-30 years (commercial)
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’s business loans allow you to borrow between £2,000 and £60,000, repayable over one to five years, available to businesses with £2m in turnover or less. Commercial loans of £25,000 to £25, repayable between one and 30 years, are available if you have a Metro Bank Commercial Current Account (for businesses with £2m+ annual turnover).
Digital banking platforms
The following digital banking platforms offer business loans. In most cases, you will have to hold a business banking account with the provider to take out a loan.
| Provider | Type of loan | Loan amount | Repayment period | Eligibility |
|---|---|---|---|---|
| Monzo | Standard | £200-£25,000 | You can choose how long your repayment period is | Only open to sole traders who are existing Monzo Business customers. Must be aged 18+. |
| Tide | Standard | £1,000-£20 million | Depends on loan type and provider | Must be a Tide business banking customer |
Loan amount: £200-£25,000
Repayment period: You can choose how long your repayment period is
Eligibility: Only open to sole traders who are existing Monzo Business customers. Must be aged 18+.
Only available to sole traders, Monzo allows you to borrow from £200 – one of the lowest amounts on the market – meaning you don’t have to borrow more than you need. You can change your repayment period fee at no extra cost and there are no early repayment fees to worry about. Your loan sits alongside your savings Pots feature.
No late repayment fees will be charged – just catch up in the app. However, you should know that Monzo might report these late repayments to credit reference agencies which could negatively affect your credit score.
Loan amount: £1,000 – £20 million
Repayment period: Depends on loan type and provider
Eligibility: Must be a Tide business banking customer
Connect your business bank account and compare unsecured business loans from Tide’s network of lending partners without affecting your credit score. Apply in five minutes and your loan could be with you in 24 hours. You must supply your bank statements for the past year, which you can do by connecting via Open Banking.
Tide also offer start up loans, business cash advance, invoice finance and other partner products.
12 of the best digital banking platforms for small business in 2023 – Considering a digital banking platform over one of the traditional stalwarts? We’ve picked out 12 of the best for your perusal
Alternative providers
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.
Cashflow finance
This is a loan which is backed by a firm’s expected cashflow 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.
| Provider | Type of loan | Loan amount | Repayment period | Eligibility |
|---|---|---|---|---|
| 365 Finance | Cash advance | £10,000 – £500,000 | Flexible | Must have been trading for at least 6 months
Average debit or credit card sales of at least £10,000 a month |
| Lombard | Asset finance | Dependent on the loan | Dependent on the loan | Dependent on the loan |
| Liberis | Cash advance | Depends on your average monthly revenue | Flexible | Dependent on your average monthly revenue and how long you’ve been trading |
| Fleximize | Secured and unsecured loans | £5,000-£500,000 | 3 – 60 months | Must have been actively trading for six months or more
Minimum monthly turnover of £5,000 |
| Iwoca | Unsecured loans | £1,000-£1,000,000 | Up to 24 months | Open to partnerships and limited companies |
| Start-Up Loans | Unsecured loan | £5,000-£25,000 | 1-5 years | Companies who have been trading for less than 36 months
You can’t get finance from other providers |
| Funding Circle | Secured and unsecured loan | £10,000-£750,000 | 6 months – 6 years | You must have been actively trading for at least one year |
| Nucleus | Secured and unsecured loan | £3,000-£500,000 | 3 months – 7 years | You must have a minimum 12-month trading history and at least one director in the UK.
There is no early repayment fee, as long as you make the repayment in full. |
Loan amount: £10,000 – £500,000 (cash advance)
Repayment period: Flexible
Eligibility: Your business must have been trading for at least six months and your average credit card and/or debit card sales must total at least £10,000 a month.
365 Finance offers a revenue-based cash advance solution that allows you to borrow between £10,000 and £500,000. If your application is successful, you should have the cash within days, and you are allocated a relationship manager to help with queries.
Loan amount: Dependent on loan
Repayment period: Dependent on loan
Eligibility: Dependent on the loan
Lombard, part of the NatWest Group, specialises in asset finance and offers a range of solutions including hire purchase, business contract hire, lease and more. The finance can fund a variety of improvements like tech, manufacturing and specialist assets. Lombard has relationship managers who specialise in the manufacturing, technology, green energy, commercial vehicles, agriculture, aviation and marine sectors.
Loan amount: Dependent on your average monthly revenue and how long you’ve been trading (cash advance)
Repayment period: Flexible
Eligibility: Dependent on your average monthly revenue and how long you’ve been trading
Liberis provides small business cash advances through its third-party partners. Repayments are linked to cashflow, with a percentage of each customer payment you take used to settle your advance and fees until the full amount has been paid off.
Loan amount: £5,000-£500,000 (secured or unsecured)
Repayment period: 3 – 60 months
Eligibility: To be eligible, you must have been actively trading for at least six months and have a minimum monthly turnover of £5,000.
Fleximize offers two funding packages: Flexiloan and Flexiloan Lite. Flexiloan is for businesses that have been trading for a year or more and offers secured and unsecured loans of between £5,000 and £500,000, repayable over 12-60 months. Lite is for businesses that have been in operation for at least 6 months. The only other difference is that repayment terms range from 3 to 12 months.
With Fleximize you can land a loan with penalty-free early repayments and repayment holidays.
Loan amount: £1,000-£1m (unsecured)
Repayment period: Up to 24 months
Eligibility: Open to partnerships and limited companies.
Iwoca allows you to borrow between £1,000 and £1m. Interest rates start at 2 per cent a month, depending on your business. There are no early repayment fees.
Loan amount: Up to £25,000 (unsecured)
Repayment period: 1-5 years
Eligibility: Aimed at companies who have been trading for less than 36 months and can’t get finance from other providers.
This government-backed loan has a fixed interest rate of 6 per cent 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 cashflow forecasts.
Loan amount: £10,000-£750,000 (secured or unsecured)
Repayment period: 6 months-6 years
Eligibility: You must have been actively trading for at least one year
Partnered with the British Business Bank, Funding Circle provides secured and unsecured loans with rates from 6.9 per cent per year and you can make full early repayments at no extra cost.
Loan amount: £3,000-£2 million (secured and unsecured)
Repayment period: 3 months – 7 years
Eligibility:
You must have a minimum 12-month trading history and at least one director in the UK.
There is no early repayment fee, as long as you make the repayment in full.
Next steps
SmallBusiness.co.uk is working in partnership with trusted lenders to help you find the best finance deals.
If you’re looking for fast funding for your business, complete this quick application to access our panel of business lenders.
