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  • There are many types of business loan, designed to suit particular commercial needs
  • You can compare loan amounts and term lengths in our comparison tables

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Information written by Rhiannon Philps Last updated on 09 May 2022.

How to get a business loan

A business loan is exactly what it sounds like - a source of finance for businesses that need money to expand, to pay for equipment, to improve cash flow, or for other projects.

There are different types of business finance available, but essentially the business will borrow a sum of money and then repay it, with interest, over a set term.

The trouble is, finding the right business loan can be a daunting prospect. On the one hand, there’s traditional bank loans and on the other there are options like online lenders and alternative finance providers. Here at NerdWallet, we’ve put many of them in one accessible business loan comparison table, so you can find a loan to help nurture and grow your business.

Take a look through the table at the current deals on offer. Our business loan comparison tables break down the important factors like available loan terms and amounts. Not every deal will be right for you, but our tables are a good place to start when navigating the busy business loan marketplace.

» MORE: How business loans work

Most business owners will find themselves looking for extra finance at some point. But with so many finance options and lenders to choose from, you may feel overwhelmed and unsure where to begin your search for a loan.

There are a few fundamental questions you can ask yourself to help you make your decision:

  1. How much do I need to borrow?
  2. How long do I need to repay the loan?
  3. How much can I afford to repay each month?
  4. Do I struggle with unpaid invoices?
  5. Do I hold equity in a property?
  6. Do I need the loan to buy a specific valuable asset?
  7. What’s my personal and business credit rating like?
  8. Do I take payment through a card machine?
  9. Do I need a lump sum all at once?

When you have the answers to these questions, you might be able to start narrowing down the list of possible business loans.

Who is eligible for a business loan?

Sole traders, SMEs and large businesses can all qualify for a business loan. However, lenders will set their own criteria and determine your eligibility for a loan based on information like:

  • The age of your business.
  • Your annual turnover.
  • Your business and personal credit history.

» MORE: Can I get a business loan?

What do I need to apply for a business loan?

To make a decision on your loan application and to offer you a quote, lenders will need to know some information about you and your business including:

  • The name of your business.
  • Your contact details (address, phone number, email).
  • How long your business has been trading.
  • Details about your company finances and revenue.
  • How much you want to borrow.
  • What you want the money for (expansion, equipment, improved cash flow, marketing).
  • How long you want to borrow the money for.

To make applying for a business loan as quick and stress-free as possible, it will help to have all the relevant information and documents to hand, such as your company’s bank statements and accounts.

You can then use our comparison table to search through the business loans available and find the most suitable one for your company.

The main types of business loan

Secured business loans

Secured business loans are a type of business finance that requires you to put forward an asset - usually a property - as security for a loan. Secured loans often come with lower interest rates than unsecured loans as they represent less risk for the lender. They may also give you access to a larger loan amount over a longer term.

However, secured loans come with the added risk that you could lose your property (often your home) if you struggle to keep up with the payments.

Commercial mortgages and asset-backed lending are two types of secured loan available to businesses.

Unsecured business loans

Unsecured business loans are those that don’t require security. Here are some of the main types of unsecured business loan – note that this is not an exhaustive list:

  • Bank loan: These tend to be offered by major high street banks. They have been more difficult to obtain in recent years but are still a popular choice with established businesses with solid credit ratings.
  • Alternative business loan: Many alternative lenders and online banks will now offer business loans, usually through online-only platforms. Rates, terms and eligibility requirements for alternative business funding differ from lender to lender.
  • Lines of credit: Lines of credit offer businesses the option of seeking a credit limit against which they can withdraw money as and when they need it. Interest is then paid only on the balance owed.
  • Merchant cash advance: Merchant cash advances, which are also sometimes known as business cash advances, are a type of business loan that is repaid automatically when a business takes a card payment from a customer. Merchant cash advances can offer finance for businesses that have poor credit ratings or a limited trading history.
  • Invoice financing: Invoice financing involves ‘selling’ unpaid invoices to a financier who makes the value of the invoice available to the business immediately in exchange for a fee.
  • Short-term loan: Short-term business loans are straightforward business loans that are often offered over periods of months, as opposed to years. Cash is usually made available quickly, but interest rates can be high and loan amounts are often limited.
  • Peer-to-peer lending: Online platforms matching willing lenders (often either private equity investors or members of the public) with businesses that are seeking loans are a popular new finance model. Peer-to-peer lending rates can be preferable, but eligibility might be relatively strict.

Government business loans

In response to the devastating impact of coronavirus on businesses of all sizes, the government launched a number of business loan schemes.

These included the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS), but these are now closed for new applications.

However, businesses can still apply for the Recovery Loan Scheme. Under the scheme, which closes on 31 December 2021, businesses can apply to participating lenders for up to £10 million of funding to help them recover from the impact of the pandemic.

» MORE: How to apply to the Recovery Loan Scheme

Start-up business loans

When you’re just setting out on your business journey, your finances are likely to occupy most of your thoughts. But, even though you won’t have much business history to show lenders, if any, there are still opportunities for you to access funding.

For example, there is a government-backed Start Up Loan Scheme that offers loans of up to £25,000 to businesses that are up to 24 months old.

Other lenders may also be willing to lend to start-up businesses, although you may need to provide more information about you and your business to get accepted and you may struggle to get approved for large amounts.

Especially if you are starting out in business, lenders may look at your personal credit score to help them come to a decision about your loan application. They may also require a personal guarantee that you will repay the loan even if your business can’t, as this will give them extra security.

» MORE: Getting funding for your start-up

Small business loans

As small businesses grow, an injection of cash can make all the difference. Whether they want to move to bigger premises, hire more staff, buy more stock, invest in new equipment, or expand in other ways, small businesses will often need money to achieve their goals.

Many small and growing businesses won’t have the cash reserves to fund their expansion projects, which is when they may look for funding from external sources. Small business loans are key to help companies grow, and they are offered by high-street banks as well as online-only lenders.

If you are thinking of getting a small business loan, don’t just apply to your existing bank. Take some time to look at other providers and the types of funding available, as there are many different loan and credit options to cater for a range of businesses.

It is also worth seeing if you’re eligible for any small business grants as, unlike with a loan, you wouldn’t need to pay back the money.

Business loan FAQs

What can I use a business loan for?

Common uses of business loans include:

  • Buying new equipment/machinery/stock.
  • Paying bills.
  • Regulating cash flow.
  • Paying off other debts.
  • Investing in premises/staff.
  • Meeting costs involved in expansion.

Do I need to be the owner of a business to get a business loan?

Not necessarily. Criteria will vary between lenders, but company directors authorised to access the company accounts may be able to apply for a loan, not just the business owner. If you don’t yet own a business but are looking for a loan to start one, the Start Up Loan Scheme may be an option.

Do I need a business bank account to get a business loan?

If you are a limited company, you will need a business bank account to get a business loan. However, you don’t need to apply for a loan from the same bank that you hold an account with. If you are a sole-trader or a start-up without a business bank account, you may still qualify for business loans but you may find it more difficult as it will depend on the criteria of individual lenders.

» MORE: Why consider a business bank account?

Will my personal credit rating be taken into consideration when applying for a business loan?

Yes. In most cases, as a director of a limited company, or a self-employed sole trader, for example, a lender will take your personal credit score into consideration when deciding whether to approve your loan application. Other company directors or partners should also expect to have their credit rating examined.

Can I get a business loan with bad credit?

If your business has bad credit, you may find it more difficult to get approved for a loan. There are lenders that will offer loans to those with bad credit, but you are likely to face higher interest rates to account for the increased risk. Some lending options may be more suitable to businesses with bad credit, such as cash advances or invoice finance.

You may also improve your chances of approval if you apply for a secured loan or provide a personal guarantee to repay the loan if your business can’t.

Can you get business loans for new companies?

Many lenders will require a minimum number of months’ trading history, but there are some that will consider lending to start-ups.

» MORE: How to get a first-time business loan

Are business loans regulated?

Most business lending is unregulated. However, certain types of business loans will need to be regulated by the Financial Conduct Authority (FCA), such as loans of £25,000 or under to sole traders. Even if your business loan doesn’t come under regulation, you should still check that the lender is reputable.

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

Compare business loans

10 providers found
  • Funding Circle logo

    Funding Circle

    • Your business must have a minimum of 2 years’ trading history
    • A leading UK platform for Small Business Loans
    • Simple online application and decisions in as little as 1 hour
    • Rates from 2.9% to 12.1% per year - No early settlement fees
    • Minimum Turnover
      No minimum
    • Available Amounts
      £10,000 to £500,000
    • Available Terms
      2 to 6 years
    See Deal
    • Puzzle Funding logo
      Broker

      Puzzle Funding

      • YOUR BUSINESS MUST HAVE A MINIMUM OF 6 MONTHS’ TRADING HISTORY
      • Free service matches your business with over 100 lenders in seconds
      • Apply in 3 minutes and get funds in as little as 1 hour
      • High acceptance rate
      • Minimum Turnover
        £100,000 p.a.
      • Available Amounts
        £1,000 to £15,000,000
      • Available Terms
        1 month to 25 years
      See Deal
    • Puzzle Funding Bridging Loans
      Minimum Turnover: No minimum Available Amounts: £1,000 to £25,000,000 Available Terms: 1 month to 2 years
    • Puzzle Funding Unsecured Business Loans
      Minimum Turnover: £100,000 p.a Available Amounts: £1,000 to £15,000,000 Available Terms: 1 month to 25 years
    • Puzzle Funding Recovery Loans Scheme
      Minimum Turnover: £100,000 p.a. Available Amounts: £25,001 to £750,000 Available Terms: 1 month to 6 years
    • Puzzle Funding Asset Finance
      Minimum Turnover: £100,000 p.a. Available Amounts: £5,000 to £2,000,000 Available Terms: 1 month to 5 years
    • See All Puzzle Funding Products
      • See 4 Puzzle Funding products
    • Capify logo

      Capify

      • Your business must have a minimum of 1 years trading history. No sole traders.
      • Capify loans are paid back in very small automated regular payment; either daily or weekly
      • A fast and easy business funding alternative for SMEs
      • Funds can be used for any business purpose, from managing cashflow through to improving technology
      • Minimum Turnover
        £120,000 p.a.
      • Available Amounts
        £5,000 to £500,000
      • Available Terms
        3 to 18 months
      See Deal
    • Capify Unsecured Business Loans
      Minimum Turnover: £120,000 p.a. Available Amounts: £5,000 to £250,000 Available Terms: 3 months to 1 year
    • Capify Secured Business Loans
      Minimum Turnover: £120,000 p.a. Available Amounts: £5,000 to £500,000 Available Terms: 3 to 18 months
    • See All Capify Products
      • See 2 Capify products
  • Fleximize logo

    Fleximize

    • Industry-leading flexibility - top-ups, repayment holidays, penalty-free early repayment, no set-up fees
    • Interest charged on reducing balance, not total loan amount - repay early and only pay for the time you had the loan
    • Apply online in five minutes, typically get a decision in 24 to 48 hours, receive funds the same day
    • Minimum Turnover
      £60,000 p.a.
    • Available Amounts
      £5,000 to £500,000
    • Available Terms
      3 months to 4 years
    See Deal
    • iwoca logo

      iwoca

      • Flexible finance for small businesses from £1000 to £200,000
      • No long term commitments and flexible repayments to fit for your business
      • Apply online in minutes for a decision (some decisions may take up to 24 hours)
      • Minimum Turnover
        £50,000 p.a.
      • Available Amounts
        £1,000 to £200,000
      • Available Terms
        up to 12 months
      See Deal
    • iwoca Credit Lines
      Minimum Turnover: £50,000 p.a. Available Amounts: £1,000 to £200,000 Available Terms: up to 12 months
    • iwoca Working Capital Loans
      Minimum Turnover: £50,000 p.a. Available Amounts: £1,000 to £200,000 Available Terms: Up to 12 months
    • iwoca Unsecured Loans
      Minimum Turnover: £50,000 p.a. Available Amounts: £1,000 to £200,000 Available Terms: Up to 12 months
    • iwoca Merchant Revenue Based Loan
      Minimum Turnover: £12,000 p.a. Available Amounts: £1,000 to £50,000 Available Terms: 1 month to 2 years
    • See All iwoca Products
      • See 4 iwoca products
    • Cubefunder logo

      Cubefunder

      • Only available to Limited Companies in England and Wales with 3+ months' trading.
      • Fast and Flexible funding from £5,000 - £100,000 for Limited Companies within England and Wales
      • No penalties for Late payments or Early repayment
      • Apply and receive funds within 48 hours
      • Minimum Turnover
        £50,000 p.a.
      • Available Amounts
        £5,000 to £100,000
      • Available Terms
        3 months to 1 year
      See Deal
    • Cubefunder Unsecured Business Loans
      Minimum Turnover: £50,000 p.a. Available Amounts: £5,000 to £100,000 Available Terms: 3 months to 1 year
    • Cubefunder Short Term Business Loans
      Minimum Turnover: £50,000 p.a. Available Amounts: £5,000 to £100,000 Available Terms: 3 months to 1 year
    • See All Cubefunder Products
      • See 2 Cubefunder products
    • 365 Business Finance logo

      365 Business Finance

      • Your business must process credit and debit card transactions to apply for this product
      • A flexible business funding alternative
      • Cash advanced against card transactions
      • Pay back an affordable % of your card transactions
      • Minimum Turnover
        £10,000+ card transactions per month
      • Available Amounts
        £10,000 to £300,000
      • Available Terms
        4 to 18 months
      See Deal
    • 365 Business Finance Merchant Cash Advance
      Minimum Turnover: £10,000+ card transactions per month Available Amounts: £10,000 to £300,000 Available Terms: 4 to 18 months
    • See All 365 Business Finance Products
      • See 1 365 Business Finance product

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