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PUBLISHED

28 May 2024

READING TIME

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Best Business Loans June 2024

Business loans are available for companies of all sizes, industries, and needs. Due to the costs involved, it is always good to compare providers before applying. Compare the pros and cons of NerdWallet’s top 10 best business loans for small businesses below.

Many or all of the products and brands we promote and feature including our ‘Partner Spotlights’ are from our partners who compensate us. However, this does not influence our editorial opinion found in articles, reviews and our ‘Best’ tables. Our opinion is our own. Read more on our methodology here.

Used correctly, a business loan can help you get an idea off the ground, take your organisation to the next level or cover a cash-flow issue. 

However, picking a lender can be tricky, especially if you haven’t applied for a business loan before. That’s why we’ve put together this list of our top 10 business loan providers for small businesses, as well as a detailed guide on how to apply. This guide should help you compare business loans for small businesses so you can choose a product which is right for your circumstances and your small business. 

Our picks for the best business loans providers for small businesses are informed by what small business owners chose as the most important factors when comparing lenders. That includes the flexibility of term length, the maximum amount borrowable, and the level of customer service.

Top 10 Business Loans for Small Businesses: Summary

This selection of brands has been reviewed and evaluated by Nerdwallet, but others are available in the UK market. Find out what we mean when we say ‘best’, why we are comfortable using it, and an in-depth explanation of Nerdwallet UK’s review methodology.

Provider

NerdWallet’s Rating

Min.Loan Amount

Max.Loan Amount

Min.Loan Term

Max.Loan Term

 
4.5 / 5
£1,000
£50,000
12 months
84 months
4.4 / 5
£1,000
£50,000
12 months
300 months
4.2 / 5
£1,000
£25,000
12 months
120 months
4.1 / 5
£1,000
£100,000
12 months
120 months
4.0 / 5
£10,000
£500,000
6 months
72 months
4.0 / 5
£5,000
£500,000
12 months
48 months

TSB
3.7 / 5
£25,001
£1,000,000
12 months
300 months
3.7 / 5
£1,000
£500,000
1 month
24 months
3.6 / 5
£25,001
£250,000
12 months
72 months
3.5 / 5
£5,000
£750,000
3 months
18 months

*This table is based on the loan with the shortest maximum term, and the lowest maximum borrowable amount, out of a lender’s product offering.

** Royal Bank of Scotland (RBS) and Ulster Bank, other brands within the NatWest Group, offer similar business finance solutions to NatWest in Scotland and Northern Ireland respectively, although specific terms may vary.

This top 10 only contains business loans providers reviewed by NerdWallet UK.

Important Information: Our Reviews, Star Ratings and Editor’s Picks do not consider the product provider’s lending rates and therefore do not reflect how much it costs to borrow from the reviewed brand. Always compare rates from other providers when considering any type of borrowing.

Top 10 Best Business Providers

This top ten is from 14 business loan providers that NerdWallet evaluated and reviewed. Others are available. Find out how we use ‘best’ and our guide to ratings.

NatWest Small Business Loan

4.5 NerdWallet's ratings

12.35%

£1,000 – £50,000

1 – 7 years
12.35% APR representative based on a loan of £10,000 repayable over 24 months at an interest rate of 11.70% per annum (fixed). Monthly repayment of £469.33. Total amount payable £11,264.04.

NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.

NERDWALLET’S REVIEW SUMMARY

With lots of variety on offer and no arrangement or early repayment fees, NatWest could interest any small business owner looking for a loan. For more details, read NerdWallet’s NatWest Business Loan Review.

NatWest loans key features:

  • Business loan variety: NatWest offers specialised business loans for small businesses, green ventures and more.
  • Up to £50,000 for small businesses: NatWest’s unsecured small business loan can offer new companies access to between £1,000 and £50,000.
  • Small businesses repayment period of seven years: The NatWest small business loan can be paid back over one to seven years.
  • Early repayment: If you manage to pay your Small Business Loan back early, you will not be met with fees.
Loan nameSmall Business Loan
Maximum amount borrowable£50,000
Minimum amount borrowable£1,000
Term flexibility1 to 7 years
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • Borrow between £1,000 and £50,000 with a small business loan.
  • You can access customer service online (via the automated assistant Cora and WhatsApp or through the bank’s mobile app), as well as via telephone and at a branch.
  • There are no early repayment fees if you want to pay off your small business loan before the end of your term. There are also no arrangement fees when taking out a small business loan with NatWest.

Cons

  • You can only receive a maximum term of seven years for the small business loan. You can find other lenders that offer at least 10 years as standard.
  • On Trustpilot, NatWest has a ‘Bad’ rating. However, it is important to note those reviews are for the brand as a whole, not just business loans.

Lloyds Bank Small Business Loan

4.4 NerdWallet's ratings

11.60%

£1,000 – £50,000

1 – 25 years
11.60% APR representative based on a loan of £8,000 repayable over 60 months at an interest rate of 11.00% (fixed). Monthly repayment of £173.94. Total amount payable £10,436.40.

NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.

NERDWALLET’S REVIEW SUMMARY

Lloyds Bank gives you the flexibility to pay off loans in full before the term ends at no extra cost, while it also offers customers wide-ranging customer service options. For more information, check out NerdWallet’s Lloyds Bank Business Loans Review.

Lloyds Bank loans key features:

  • Secured or unsecured: Lloyds Bank’s offering includes both secured and unsecured business loans for small businesses.
  • Early repayment: Repay your Lloyds business loan in full and ahead of schedule without worrying about incurring a penalty.
  • Small businesses upper limit of £50,000: A small business can borrow between £1,000 and £50,000 with Lloyds.
  • Loan term stretches to 25 years: A Lloyds small business loan can be repaid over between one and 25 years.
Loan nameSmall Business Loan
Maximum amount borrowable£50,000
Minimum amount borrowable£1,000
Term flexibility1 to 25 years
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • You can borrow for up to 25 years with a secured or unsecured small business loan.
  • Small businesses can borrow between £1,000 and £50,000.
  • The lender offers web-based support via a virtual assistant or through the Lloyds Business app, alongside help @LloydsBank on its X account (formerly Twitter). Face-to-face assistance is also available in Lloyds branches across England and Wales.
  • You won’t incur any early repayment charges if you want to pay off your loan in full before your term ends.

Cons

  • There are no Lloyds Bank branches in Scotland or Northern Ireland.
  • You can only access a Lloyds small business loan if you have a turnover of less than £3 million.
  • You’ll need to provide a personal guarantee if you’re applying as a limited company or limited liability partnership.

HSBC Small Business Loan

4.2 NerdWallet's ratings

8.60%

£1,000 – £25,000

1 – 10 years
8.60% APR representative (fixed). Based on an assumed loan amount of £13,000 over 60 months at the AIR of 8.60% p.a (fixed). Monthly repayment £265.33. Total amount payable £15,919.83.
NERDWALLET’S REVIEW SUMMARY

HSBC’s loan options include a fixed-rate Small Business loan of up to £25,000, and a fixed- or variable rate Flexible Business Loan, for borrowing over £25,000. You could also be eligible for cashback on your loan if you use it for environmental purposes. To find out more, read NerdWallet’s HSBC Business Loans Review.

HSBC business loans key features:

  • Small businesses borrow up to £25,000: HSBC has a small business option starting at £1,000 and extending up to £25,000. For higher amounts, businesses can opt for the Flexible Business Loan.
  • Terms of 10 years for Small Business Loans: A Small Business Loan can be repaid over between 12 months and 10 years, while the Flexible Business Loan can go up to 20 years.
  • Capital repayment holidays: Taking a capital repayment holiday when you first get your Small or Flexible Business Loan can offer you more flexibility, though it will mean you pay more in interest overall.
  • Green SME Cashback Fund: For business loans going towards environmental projects, business owners can qualify for cashback on the amount they borrow.
Loan nameSmall Business Loan
Maximum amount borrowable£25,000
Minimum amount borrowable£1,000
Term flexibility1 to 10 years
Early repayment feesYes
Nerdwallet's PROS AND CONS

Pros

  • You can borrow up to £10,000 (HSBC Kinetic Small Business Loan), up to £25,000 (Small Business Loan) or a potentially unlimited amount (Flexible Business Loan).
  • You can borrow over a term of up to 10 years (Small Business Loan and HSBC Kinetic Small Business Loan) or up to 20 years (Flexible Business Loan).
  • Access to customer service is via the lender’s website, phone helpline and mobile app, as well as face-to-face support in a branch.
  • There is no arrangement fee for the HSBC Small Business Loan.

Cons

  • The Small Business Loan has a lower maximum level of borrowing than comparable products from other traditional banks.
  • Although you can make overpayments without a fee, you will have to pay an interest charge for early repayment in full for the Small Business Loan. You may also have to pay a prepayment fee and an early repayment fee for the Flexible Business Loan.
  • Borrowers seeking to secure HSBC’s Flexible Business Loan product may have to pay arrangement fees.

Barclays Unsecured Business Loan

4.1 NerdWallet's ratings

9.90%

£1,000 – £100,000

1 – 10 years
9.90% APR representative based on a loan of £12,000 repayable over 72 months at an interest rate of 9.45% per annum (fixed). Monthly repayment of £219.00. Total amount payable £15,768.00.

NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.

NERDWALLET’S REVIEW SUMMARY

Barclays offers a variety of borrowing solutions for businesses at different stages of growth and across a variety of sectors. Options include unsecured and secured business loans, as well as commercial mortgages, business overdrafts, asset finance, invoice finance, and its Barclaycard for business credit card. For further information, read NerdWallet’s Barclays Business Loans Review.

Barclays business loans key features:

  • Choices: Barclays offers a range of borrowing options to suit different business needs, including secured and unsecured business loans.
  • Flexible term lengths: There is scope for adjustment depending on how long you want to borrow for.
  • Repayment holidays: In some cases, Barclays will allow businesses to take a six-month repayment holiday at the start of an unsecured business loan term. Interest will continue to accrue on the loan and is calculated within future repayments.
  • Rates options: Borrowers can choose between fixed- and variable interest rates.
Loan nameUnsecured Business Loan
Maximum amount borrowable£100,000
Minimum amount borrowable£1,000
Term flexibility1 to 10 years
Early repayment feesYes
Nerdwallet's PROS AND CONS

Pros

  • Businesses can borrow from one to 10 years with an unsecured loan.
  • There is a wide range of customer service options, including social media, via its app or ‘help and support’ on your online account.
  • Barclays has branches in England, Wales, Scotland and Northern Ireland.
  • You can borrow up to £100,000 with an unsecured loan, subject to status.

Cons

  • General business phone lines are only open five days a week.
  • More information may be required to apply for a Barclays business loan online if you are not an existing customer.
  • Unsecured loans are not available for all industries, but Barclays does not specify which industries may be excluded on its website.

Funding Circle Business Loan

4 NerdWallet's ratings

Available on application

£10,000 – £500,000

6 months – 6 years
Available on application

This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.

NERDWALLET’S REVIEW SUMMARY

With an unsecured Funding Circle small business loan, you can borrow between £10,000 and £500,000 over six months to six years. Funding Circle is not a direct lender but a lending platform, using institutional investors to fulfil loan requests. Find out more by reading NerdWallet’s Funding Circle Business Loans Review.

Funding Circle business loans key features:

  • Borrow as much as £500,000: Funding Circle’s unsecured small business loans can stretch from £10,000 to £500,000.
  • Terms vary: Funding Circle offers loan terms that stretch from a minimum of six months to a maximum of six years.
  • Early repayment: Borrowers will not be charged for repaying their Funding Circle business loan in full early.
  • Personal guarantees: Borrowers will need to provide a personal guarantee to obtain a Funding Circle business loan.
Loan NameSmall Business Loan
Maximum amount borrowable£500,000
Minimum amount borrowable£10,000
Term flexibility6 months to 6 years
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • You can borrow up to £500,000 with an unsecured fixed-rate Funding Circle small business loan.
  • The minimum term length is just six months, meaning you can pay your loan off quickly if you wish.
  • There are no early repayment fees for paying your loan off in full before the end of your term.
  • The customer service offered by Funding Circle has earned the company a very high Trustpilot rating, with particular praise directed at the loan application process.

Cons

  • The maximum term length is six years, which is shorter than many traditional lenders.
  • While you don’t need to provide an asset as a security to get a Funding Circle business loan, you will be asked to give a personal guarantee.
  • While Funding Circle’s customer service has won praise from customers, the company offers no branch or app access.

Fleximize Business Loan

4 NerdWallet's ratings

Available on application

£5,000 – £500,000

1 – 4 years
Available on application

NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.

NERDWALLET’S REVIEW SUMMARY

Direct lender Fleximize offers customers unsecured business loans up to £250,000 and secured loans up to £500,000. Businesses must have a minimum monthly turnover of £5,000 to apply. To find out more, read NerdWallet’s Fleximize Business Loans Review

Fleximize business loans key features:

  • Loan variety: In the Flexiloan and Flexiloan Lite, Fleximize caters to established organisations and newer businesses.
  • Borrow as much as £500,000: A Fleximize loan gives you the option of borrowing a maximum of £500,000 (or £250,000 for unsecured loans).
  • Short-term focus: Terms are between three and 12 months for the Flexiloan Lite, or 12 to 48 months for its Flexiloan. However, this is capped at 36 months for unsecured loans.
  • No early repayment fees: Borrowers can overpay their loan, or pay it back in full before the term ends, without worrying about fees.
Loan nameFlexiloan
Maximum amount borrowable£500,000
Minimum amount borrowable£5,000
Term flexibility12 to 48 months (up to 36 months for unsecured loans)
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • With Fleximize, you can borrow between £5,000 and £500,000, with unsecured loans capped at £250,000.
  • Fleximize offers short- to medium-term lending, with term lengths of three to 12 months for Flexiloan Lite, and 12 to 48 months for its standard Flexiloan, capped at 36 months for unsecured loans.
  • Fleximize offers business loans for newer organisations that have only been trading for six months with its Flexiloan Lite option.
  • You can repay your Fleximize business loan early at no extra cost, and you will only pay interest for the time you’ve actually had the loan.

Cons

  • Fleximize has limited remote customer service options, with only an online contact form and phone line only on weekdays. You can visit the company’s HQ, but this is just one location, in Ipswich.
  • All Fleximize products, including secured loans, require a personal guarantee from at least one director or shareholder. Secured loans also require an equitable charge, which means the lender may claim equity in a property if the borrower defaults on the loan. 
  • You can only borrow a maximum of £250,000 on an unsecured Flexiloan or Flexiloan Lite if you are based in Scotland or Northern Ireland.
  • Sole trader and non-limited partnership loans start at over £25,000.
  • Non-homeowners can borrow a maximum of £20,000, and only as long as the business has been trading for over 36 months.

TSB Base Rate Business Loan

3.7 NerdWallet's ratings

Available on application

£25,001 – £1,000,000

1 – 25 years
Available on application

NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.

NERDWALLET’S REVIEW SUMMARY

TSB’s lending options can suit several different business needs, including fixed- and variable rate business loans for small businesses. If you want to apply, you will usually need to have a TSB business current account to take out a small business loan. To find out more, read NerdWallet’s TSB Business Loans Review.

TSB business loans key features:

  • Interest options: Borrowers can choose between a fixed-rate loan and a variable interest rate loan, known as a ‘base rate loan’.
  • Secured or unsecured: Secured and unsecured business loans are available as both fixed- and variable rate products.
  • Variable term lengths: Repayment periods of TSB loans can vary based on the type of loan chosen.
  • Repayment holidays: You may be eligible for repayment holidays on a TSB business loan. Bear in mind that you will still accrue interest when you take a break from your repayments, so you will pay more interest overall.
Loan NameFixed Rate Loan
Maximum amount borrowable£1 million
Minimum amount borrowable£1,000
Term flexibility1 to 10 years
Early repayment feesYes
Nerdwallet's PROS AND CONS

Pros

  • TSB’s fixed-rate loan offers flexible loan terms of between one and 10 years. (Its base rate loan offers loans of up to 25 years).
  • You can access customer service agents over the phone or face to face in a branch in England, Scotland and Wales.
  • You can borrow from £1,000 up to £1 million with its fixed-rate loan (or from £25,001 to a potentially unlimited amount with its base rate loan).

Cons

  • You will generally have to open a business current account to be eligible for a small business loan.
  • Although TSB has a dedicated business app, customers can’t review their loan on it (this can be done via internet banking). 
  • There are no 24/7 customer service options for business loan customers.
  • Break costs may be applied if you repay part of all of a fixed-rate loan before the end of the agreed term. This does not apply to base rate loans.

Iwoca Flexi-Loan

3.7 NerdWallet's ratings

49%

£1,000 – £500,000

1 day – 2 years
49% APR representative based on a loan of £10,000 for 12 months with an interest rate of 40% p.a. (variable). Total amount payable £12,294.

This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.

NERDWALLET’S REVIEW SUMMARY

iwoca gives business access to flexible loans that suit a range of purposes. This dedicated business loans provider currently offers one type of business loan: the Flexi-Loan. Find out more by reading NerdWallet’s iwoca Business Loans Review.

iwoca business loans key features:

  • Borrow up to £500,000: Small businesses can borrow from £1,000 to £500,000 with iwoca.
  • Short-term flexibility: You can pay back an iwoca business loan over term lengths from one day to two years.
  • Early repayment: Borrowers will not face an early repayment charge on the iwoca Flexi-Loan.
  • Not for sole traders: Only limited companies, limited liability partnerships and ordinary partnerships can apply for iwoca business loans.
Loan nameFlexi-Loan
Maximum amount borrowable£500,000
Minimum amount borrowable£1,000
Term flexibility1 day to 2 years
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • You can borrow up to £500,000 with the Flexi-Loan.
  • With loan terms of one day to two years, iwoca may be suitable if you are looking for short-term borrowing.
  • There are no early repayment fees.
  • Phone and online customer service and support is available.

Cons

  • All iwoca Flexi-Loans come with a variable interest rate.
  • Sole traders are not eligible for an iwoca business loan.
  • Limited companies will be required to provide a personal guarantee, typically from one of the company directors.
  • It has no app, so there is no app-based customer service.
  • It has no branches, so there is no face-to-face customer service (though you can visit its headquarters in London).

Starling Bank Business Loans

3.6 NerdWallet's ratings

Available on application

£25,001 – £250,000

1 – 6 years
Available on application

NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.

NERDWALLET’S REVIEW SUMMARY

Starling Bank offers unsecured business loans of between £25,001 and £250,000 to small- and medium-sized enterprises (SMEs) in the UK. Businesses need to operate as either a limited company or limited liability partnership in order to be eligible, and they must also have been trading for at least 24 months. Learn more by reading NerdWallet’s Starling Business Loans Review.

Starling business loans key features:

  • Small businesses can borrow up to £250,000: Starling business loans start at £25,001 and can go up to £250,000.
  • Variable loan terms: Starling business loan terms span from 12 to 72 months.
  • Early repayment: Starling borrowers are not penalised if they repay their loan early.
  • Not for sole traders: Starling’s loans are only available for limited liability companies and partnerships.
Loan nameStarling Business Loan
Maximum amount borrowable£250,000
Minimum amount borrowable£25,001
Term flexibility12 to 72 months
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • Your small business can borrow a maximum of £250,000 with a Starling unsecured loan.
  • Businesses can borrow for between one and six years with a Starling unsecured business loan.
  • Starling provides 24/7 customer service through live chat on the app, email and telephone support, while also responding to queries on its X account (formerly Twitter).
  • There are no early repayment fees if you want to repay your loan before the term ends.

Cons

  • Starling business loans are not available to sole traders.
  • You are required to provide a personal guarantee when taking out a Starling business loan.
  • At £25,001, the minimum amount you can borrow with a Starling business loan is much higher than most other lenders.
  • There is no face-to-face support as Starling has no branches.
  • If you are successful in your application, you will need to open a Starling business account and make it your primary business banking service.

Capify Small Business Loans

3.5 NerdWallet's ratings

Available on application

£5,000 – £750,000

3 – 18 months
Available on application

This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.

NERDWALLET’S REVIEW SUMMARY

With Capify, eligible limited companies can borrow between £5,000 and £500,000, while sole traders who are also homeowners can borrow over £50,000. Find out more by reading NerdWallet’s Capify Business Loans Review.

Capify business loans key features:

  • Up to £500,000 for small businesses: Capify lending products span £5,000 to £500,000, which is available either as both a small business loan or a merchant cash advance. 
  • Short loan terms: Business loans from Capify can be repaid across three to 12 months.
  • Repay it daily: A Capify small business loan can be paid off with daily repayments over the length of your loan term.
  • Turnover requirements: In order to successfully apply, your business will need to have been trading for at least a year and have a minimum monthly turnover of £10,000 for a small business loan and £20,000 in monthly credit or debit card turnover (with at least six months’ trading) for a merchant cash advance.
Loan nameSmall Business Loan
Maximum amount borrowable£500,000
Minimum amount borrowable£5,000
Term flexibility3 to 12 months
Early repayment feesNo
Nerdwallet's PROS AND CONS

Pros

  • You can borrow up to £500,000 with a Capify small business loan or merchant cash advance.
  • Business loans offer short-term borrowing over three to 12 months, broken into small daily repayments.
  • You have access to over-the-phone customer service.
  • There are no early repayment fees.
  • Capify considers all credit profiles and looks at different lending criteria to a traditional bank.

Cons

  • The majority owner of the business is required to provide a personal guarantee when taking out a loan.
  • There are minimum monthly turnover requirements for both the Capify small business loan and merchant cash advance.
  • You may be subject to processing, origination and monthly service fees when taking out a Capify business loan.
  • There is no app-based customer service or branch support. Web-based support also directs users to the phone or a contact form.

Find the right Business Loan for you

Compare offers from the UK’s leading business loan providers

This top 10 only contains business loans providers reviewed by NerdWallet UK.

The pros and cons featured with each brand are chosen by us based on a combination of our expert, research-based opinions and an exclusive survey of UK business owners and decision-makers. The survey identified the business product features that people felt were most important. There are other pros and cons that should be taken into account before considering a financial product. Information was correct at the time of publication but may have changed since.

Nerdwallet Survey: December 2022

In The News

SMEs increasingly rely on loans and credit as insurance costs bite

An increasing number of UK small and medium-sized enterprises (SMEs) are using credit cards or taking out business loans to cover the cost of their business insurance. 

Research by Premium Credit in March 2024 found that over the past year 55% of UK SMEs turned to credit to fund their insurance – up from 51% the previous year.

Of those businesses, almost a fifth increased the amount they borrowed compared to the previous year, with businesses borrowing £1,080 on average.

Among businesses using credit to pay for their insurance, just under half (45%) used cards as the source of credit, while 22% took out personal or business loans to pay for insurance.

In another sign that insurance costs are continuing to bite for UK small businesses, the study found that 27% of firms had reduced their level of cover in the past year, slightly up from 25% who cut back the year before.

What is a business loan?

A business loan is a form of finance that can be used to help support and expand your small business.

As with personal loans, business loans involve borrowing a sum of money and paying it back, with interest.

One of the most important differences between personal loans and business loans is that with a personal loan, you will be personally liable for repaying the amount you have borrowed.

With a business loan, as long as the appropriate company structure is in place, that responsibility falls to the business instead. This will not be the case, however, if you are a sole trader, or you have secured your business loan with a personal guarantee.

You can also typically borrow more through a business loan. What’s more, the interest payments on your business loan may be tax deductible unlike payments on a personal loan.

Are business loans regulated?

Most forms of business lending are unregulated. However, if the business loan is £25,000 or less, and is for certain business types, such as sole traders, it may be regulated by the Financial Conduct Authority (FCA). 

You should research the form of business finance you are interested in, and the lenders involved, to check if they are regulated ahead of applying.

How to apply for a business loan for your small business

Applying for a business loan may be easier than you think. Just follow the steps below.

  1. Decide how much you want to borrow and for how long. Once you’ve decided a business loan is the right option for you, it is important to consider the balance between what you can afford and what you need to help your business.
  1. Compare business loans and lenders to find the right fit for your small business. Shopping around and comparing business loans is an important step. Take time to research and weigh up the various terms, conditions, and requirements of business lenders to make sure the loan you end up with suits the needs of your small business.
  1. Submit your application and all relevant documents. This may include how long you have been trading, details about your finances, and what you want the money for.
  1. Wait to hear back. It can take a couple of hours to a matter of weeks to hear back about your business loan application, depending on your financial circumstances and the lender in question.

» MORE: How to get a business loan

Who is eligible for a business loan?

In theory, anyone who owns a business is eligible for a business loan, so sole traders, small and medium-sized enterprises (SMEs) and large businesses may all be eligible to apply for a business loan in the UK. However, lenders will set their own criteria and determine your eligibility for a loan based on information such as:

» MORE: How do business loans work?

Types of business loans for small businesses

There are a two main types of business loans: 

Unsecured business loans

Unsecured business loans do not require the use of company assets as security, though you may be required to provide a personal guarantee. These types of loans tend to have higher interest rates because there is a greater risk of the lender losing money if you can’t pay off what you owe. Unsecured business loans also require a good financial history and credit rating as evidence that the business will be able to repay the loan as there is no other guarantee in place. 

Secured business loans

Secured business loans require that you put down an asset such as property as security. 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 the asset you put up as security if you miss the payments.

» MORE: Types of business loans

How to compare business loans for small businesses

There are a number of factors to bear in mind to help you compare business loans. It’s important to consider which loan is going to be right for your small business. Factors to compare include the interest rate on the loan, the amount you can borrow, and any fees for taking out the loan. 

Before you apply for a business loan for your small business, you should consider whether it is the best fit for you and your organisation. There are a few key questions you can ask yourself to help you compare business loan providers and ultimately decide whether a business loan could be right for your small business.

  1. How much do I want to borrow?
  2. When do I need to repay the loan?
  3. How much can I afford to repay each month?
  4. Am I struggling 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. How long has my business been operating?
  9. Do I need a lump sum?

Tips for maximising your business loan

Once you have secured a business loan for your small business, you need to make sure you use it effectively. Below are some tips on how you can maximise your business loan:

» MORE: Try our business loan calculator

Alternatives to business loans

There are many funding alternatives to consider if you’re unsure about whether a business loan is the right option for your small business. Some of these include:

Business Loans Methodology

NerdWallet evaluated and reviewed 14 business loans providers (a mix of traditional and online-only lenders). Collectively, these represent the largest lenders by assets and internet search traffic, along with notable or emerging players in the industry.

We considered more than 10 data points for each account, based on the criteria that matter most to users, scoring them on flexibility of term-length, customer service, and amounts borrowable, among other factors. This information was gathered from each financial institution’s website and company representatives. In addition, we regularly add new brands and our editorial team reviews them against the same criteria for consistency and accuracy. 

Using the same data across all products and features we were able to create star ratings on a scale of one to five stars, where a one-star score represents ‘poor’ and a five-star score represents ‘excellent’. Please read more on our business loans methodology.

Frequently asked questions about business loans

How can I use my business loan?

A business loan is a source of finance for companies that need money for a variety of purposes. Below are some of the reasons you may consider getting a business loan. 

  • Cash flow: A business loan could help improve your business’s cash flow. However, you will need to have a strategic plan in place to overcome future cash-flow issues. 
  • Business growth: The money you borrow could help your business expand. 
  • Purchasing power: Business loans can help you buy new equipment, increase inventory or invest in office space. 
  • Recruitment: Money borrowed through a business loan may be used to invest in recruitment and hire new employees. 

» MORE: Why do businesses need finance?

What credit score is needed for a business loan?

There is no fixed personal or business credit score you need in order to apply for a business loan. However, a strong credit score could increase your chances of success and potentially give you access to lower interest rates, although it isn’t the only factor lenders will consider.

For example, credit reference agency Experian’s business credit score ranges between 0 and 100. The closer your score is to 100, the less of a risk you are likely to be seen as by lenders, and therefore the better your chances are of getting a business loan.

However, bear in mind that your credit score isn’t the only factor that lenders will consider when deciding whether to offer you a business loan.

Do I need a business bank account to get a business loan for my small business?

While it is not always a requirement, you may find that many lenders will not consider you for a business loan if you do not also have a business bank account. It can also make the application process simpler if you do.

In general, business bank accounts can make it easier to manage your finances and ensure that there is a clear separation between your personal and business funds. This is especially important when it comes to managing a business loan.

Review methodology

At NerdWallet UK, we base our reviews and our ‘Best’ pages on the results of surveys we undertook about what was important to people who use these products. This allows us to look at products impartially of any commercial arrangements we have and fairly rate the products on the same set of criteria.

Best means our ‘Best’ and is based only on what products we have aligned to our surveys, which form the basis of our reviews and ratings. This means that there will be other products on the market that we have not included in our ‘Best’ pages. Best does not mean it’s best for you, nor does it mean the ‘cheapest’.

Our reviews may display lenders’ rates. This additional information has not been included in our evaluations but is still very important when choosing a product. Rates offered can depend on circumstances, amount and term. Always check details before proceeding with any financial product.

Product details reflect the information that was available at that time but may have changed since. We strive to give you a review on as many products as possible, but there will be products not included on the market. The review is our opinion, but it does not constitute advice, recommendation or suitability for your financial circumstances.

You can view our full review methodology here.

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