How to Get a Business Loan

If you’re ready to apply for a business loan, then it helps to be prepared. You don’t want your application to be turned down because you haven’t got the correct information to hand, or because your business is not in the best possible shape. Learn how to get a business loan with our guide below.

Sarah Bridge, Connor Campbell Last updated on 06 April 2022.
How to Get a Business Loan

Starting or running your own business requires many things, including commitment, hard work and money. While you can supply the commitment and do the hard work yourself, you may need outside help in raising funds. A popular way of doing this is by getting a business loan.

When applying for a business loan, there are a number of factors to bear in mind, from what kind of loan you want and how much you need to borrow to what you can do as a business to try to ensure that your application is successful.

It can all sound a bit overwhelming. That’s why we have put together a detailed guide on how to get a business loan in the UK.

Can I get a business loan?

Although each lender will have their own borrowing criteria, at minimum to be eligible for a business loan you will typically need to:

  • be over 18 years old
  • have a business based in the UK
  • satisfy the lender’s credit checks

Depending on the type of business the lender may check both your personal and business credit scores. Your personal credit score will likely be more important if you are a start-up with a limited trading history.

Applying for a loan will leave a mark on your credit report. Before submitting a formal application, you may want to make the most of the many online eligibility checker tools available. These will carry out a ‘soft search’, which will let you see your chances of being accepted for a business loan without affecting your credit score.

» MORE: Am I eligible for a business loan?

What type of business loan do I want to get?

Before you can decide on what business loan to apply for you will need to consider your borrowing requirements. This will include:

  • why you need a business loan
  • how much you want to borrow
  • for how long you would like the loan
  • how you plan to repay the loan

The answers to these questions should help inform what type of business loan you want. This could be:

» MORE: How business loans work

Should I apply directly or through a broker?

Once you have decided what type of loan you want, how much money you need to borrow and for how long, you will need to apply for a loan directly from a lender such as a high street bank, or through a broker who will be able to show you the options from different lenders.

An experienced broker can also help with the application process and make sure that you have all the necessary documents. They will let you know how long applications are taking with different lenders and can alert you to new products coming on to the market or loans that are about to be discontinued.

» COMPARE: Business Loans

What documentation will business loan lenders require?

To process your business loan application, your chosen lender will likely ask for a combination of the following documentation:

  • a business plan, which details how your company plans to repay the loan
  • a cash flow forecast, which shows how much money could be coming in and out of the business every month
  • details of your business assets and liabilities, including any income from other sources
  • monthly bank statements
  • financial accounts going back several years, showing profit and loss, balance sheet and cash flow statements
  • management accounts, showing the overall health of the business
  • company documents, such as Companies House registration, shareholder and directors’ details and proof of address and ID

Before making your application, make sure you have answered every question on the application form and included all the information asked for, clearly marked.

What should I look out for when comparing business loans?

Taking out a business loan is a big decision and one that should not be made lightly. Before you apply for or accept a business loan offer, you should make sure that you know:

  • the interest rate on the loan
  • whether the interest rate is fixed or variable (also known as floating)
  • how long the loan is for
  • any extra charges you will incur if you repay the loan early
  • the reputation of the lender, and its customer service

Your broker, or an online comparison site, can help you compare loans from different lenders so you can make sure you have the right one for you and your business.

How do I apply for a business loan?

The actual process of applying for a business loan will vary between lenders but usually contains the following steps:

  • You decide to go ahead with your business loan application.
  • You complete an application form either online or in person, which will include handing over the necessary documents required by the lender.
  • The lender will run a credit check, possibly on your business and personal accounts.
  • The lender will then decide whether to offer you a loan and will give you information, such as the interest rate and the amount you can borrow.
  • If your application is successful, you can decide whether to accept the loan.

Image source: Getty Images

About the authors:

Sarah Bridge has been writing about business and finance since 2000. She was formerly Deputy Editor, Personal Finance, The Mail on Sunday and was previously the paper's Leisure Correspondent. Read more

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

Looking for business finance? Compare business loans now

If you have any feedback on this article please contact us at [email protected]