Can I Get a Business Loan?

You should be able to get a business loan if you are over 18, are based in the UK and you and your business can pass credit and affordability checks from your lender.

Sarah Bridge Published on 11 March 2021. Last updated on 11 June 2021.
Can I Get a Business Loan?

Whether you are starting out in business or looking to grow an established business, a common question asked by owners is: “Can I get a business loan?”

Most business loans are provided by high street banks but you can also get business loans from building societies, peer-to-peer platforms and online banks. What they will have in common before deciding whether to lend to a business is a set of criteria that must be met before an application is considered.

Eligibility requirements for getting a business loan

While each lender will have its own set of requirements when it comes to business loans, most will require as a basic minimum:

  • You are over 18 and based in the UK.
  • You can show that you will be able to repay the loan.
  • Your business doesn’t have late payments or County Court Judgements on its credit file.

Lenders are also likely to require:

  • Business bank statements.
  • Financial accounts showing annual turnover and total business debts.
  • VAT returns.
  • Proof of ID and address.
  • Shareholders and directors’ details.

It will speed up the process if you have all the correct paperwork when making your application. You also might want to use a broker who will be able to advise you what information you need, new products and the current lending environment

What lenders are looking for when deciding on a business loan

While banks and other financial institutions are keen to lend money because they can charge interest on the loans, they are not so keen on lending money to businesses that are later unable to repay their loans because they cannot find the money or the business has gone bust with unpaid debts. That’s why lenders prefer to lend to businesses which can demonstrate:

  • A good credit rating – they will often check the business credit score and the personal credit score of the person applying for the loan, such as the business owner.
  • Good financial figures such as turnover, cash flow and profit. Lenders want to see that a business is on a strong financial footing, has been well-managed and will be able to make the loan repayments.

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Business loans for startups

If your business has only just been established or it has not been trading for long, then you might find it difficult to access a traditional business loan as you won’t be able to show your trading history. In that case, you could consider a Start Up Loan.

Can I get a Start Up Loan?

Start Up Loans are personal loans for new businesses that are unable to get a business loan meant for more established businesses. They are unsecured, meaning that you do not have to put up an asset such as your house for security. Start Up Loans are provided by the Start Up Loans Company which is backed by the government. Borrowers can access between £500 and £25,000, payable over between one and five years. Interest is fixed at 6% a year.

To apply for a Start Up Loan you must:

  • live in the UK.
  • be 18 or over.
  • have set up a business (or be about to start one) that has been trading for less than two years.

>>MORE: How Can I Get a Start up Business Loan?

Can I get a business loan with bad credit?

Credit scores or credit ratings relate to your personal finances or the financial health of your business and are based on a number of factors, such as how much debt you have and how good you are at meeting your monthly repayments. Lenders are likely to look at both your personal and your business credit score when deciding whether to lend money, and a poor or low credit score on either could harm your chances of getting a loan.

Different credit rating agencies score credit differently but overall, you or your business will be given a poor credit score if you have a large amount of outstanding debt, any missed or late payments or a County Court Judgement that shows that you have been ordered by a court to pay an outstanding bill.

Having a bad credit score could make it more difficult for you to get a business loan but it doesn’t make it impossible. You could seek alternative lenders away from the high street banks such as so-called ‘challenger banks’ or explore peer-to-peer lending options.

What should I do if I have a bad credit score?

If you have a poor credit score you might find that fewer business loans are available to you or you will be only offered ones with higher interest rates. You can check your credit score with credit reference agencies as well as get advice on how to improve your credit score. If you are able to, you might wish to try and fix your credit score before applying for a business loan to improve your chances of being approved.

>>MORE: Business Loans for Bad Credit

What if I am unable to get a business loan?

If you are declined for a business loan with some of the main high street banks then you might be able to access other sources of finance through the Bank Referral Scheme. By law, banks that take part in the scheme must refer any unsuccessful applicants to alternative finance platforms.

Banks currently signed up to the Bank Referral Scheme include HSBC, Barclays, RBS, Lloyds and Santander.

Image Source: Getty Images

About the author:

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

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