Business Loan Eligibility: Can I Get a Business Loan?

Each lender will have their own business loan eligibility criteria. Get to grips with what you can expect, and what you might need to supply, with our eligibility overview below.

Sarah Bridge, Connor Campbell Last updated on 13 April 2022.
Business Loan Eligibility: Can I Get a Business Loan?

Whether you are just starting out 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. Regardless of which path you choose, you will be faced with a set of business loan eligibility requirements that must be met before your application is considered.

Below we take a look at what business loan eligibility criteria you will typically need to satisfy, as well as how these requirements may differ if you are a start-up, or have bad credit.

Business loan eligibility requirements – an overview

When applying for a business loan, most lenders will require, at minimum, that

  • you are over 18 years old
  • your business is based in the UK
  • you can show that you will be able to repay the loan
  • you pass a business (and potentially personal) credit check

On top of those more generic requirements, each lender, and each type of business loan, will have its own specific eligibility criteria. This could include:

  • proof of your business bank account
  • how your business has performed historically
  • the market outlook of your business sector
  • requirements around the quality of your business assets
  • a minimum monthly turnover
  • a minimum number of months’ worth of trading records
  • proof of your projected turnover in the next 12 months
  • that you have not declared bankrupt, not have received a County Court Judgment (CCJ) or Court Decree

To show you meet many of these criteria, you may need to provide the following documents:

  • a business plan
  • 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.

» COMPARE: Business loans

Business loan eligibility for start-ups

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 much trading history, if any at all. In that case, you could consider a Start Up Loan, or other forms of start-up finance.

As with a traditional business loan, lenders will still likely want to see details of your business plan, information on your founders and directors, any record of your trading history (if your business is up and running), and your projected earnings. You will also need to pass the lender’s credit checks.

Can I get a government-backed Start Up Loan?

The government-backed Start Up Loans, provided by the British Business Bank, 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.

To be eligible for a government-backed Start Up Loan, you must be:

  • a current UK resident with a UK-based business
  • 18 years old or over
  • setting up a new business, or have one that has been trading for no more than 36 months
  • in a sector that qualifies for the scheme
  • able to pass the lender’s credit checks, and show you can afford to repay the loan

» 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 may 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 have their own distinct ways to score credit, 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 Judgment 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 digital 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 to 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.

» MORE: Your essential checklist for preparing a business loan application

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]