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Small Business Loans

Best Small Business Loans

Every small business is different, and so are the lenders. Compare loans built for startups, sole traders, and growing SMEs. Find out in minutes which lenders could actually approve your business.

Running a small business often means juggling ambition with limited resources. Whether you need a cash boost to restock, invest in equipment, or bridge seasonal dips, small business loans can help you access the funds you need – even if you’re just starting out.

What are small business loans?

A small business loan lets you borrow money to cover costs or fund growth, which is repaid over time with interest. But unlike general business loans, these are tailored to the realities of smaller companies, so it’s less likely to be an issue if you have a short trading history and less collateral, or simply less time to spend on complicated applications.

» COMPARE: Best business loans

Why small businesses might find it harder to get funding

If your business is small, or you haven’t been trading for long, you may have found it harder to access finance for a number of reasons.

Lenders may see small businesses as high risk if they haven’t been trading long enough to build up a reliable cash flow or strong credit history.
Small businesses tend to have fewer assets to use as collateral.
Lenders expect new or small businesses to have higher failure rates, and perceive them as higher risk. However, PwC analysis found that, in 2024, the proportion of startup insolvencies was the lowest for a decade, despite record levels of company incorporations.
Complex loan applications may be harder for small businesses owners to navigate, especially if they have many other demands on their time.
Small business owners may not work with accountants or financial advisors who can help them with forecasting and planning. This makes it harder to show potential lenders a clear path to profitability.

The good news is that research from the 2025 Business Business Survey, carried out by British Business Bank and Ipsos, found that 82% of SMEs seeking finance obtained some or all of what they needed from the first provider they approached, and 71% obtained the full amount.

What lenders look for and how to prepare

Lenders consider a few different factors, depending on the type of loan you’re applying for, how much you want to borrow, and how long your business has been trading. Broadly speaking, they will want to look at your business’s financial health – which means they will not only look your business credit score (and, potentially, your personal credit score), but also consider your business history, any assets you might have, your business plan and the amount of debt you have in proportion to your income. In order to get a clearer picture, they might need to see your bank statements, and tax returns, and profit and loss statements.

With this in mind, you can prepare for your application by focusing on the following:

Build a trading history: Unless you’re applying for a startup loan, you stand a better chance of accessing finance if you can show that your business is well established and profitable.
Strengthen your credit history: If your business is very new it may take some time to build a credit history, but you can give your business an advantage by opening a business bank account, paying all your bills on time, using credit responsibly and making sure all your business information is up to date with HMRC and Companies House.
Reduce existing debt: Paying down your existing debt will help to reduce your debt-to-income ratio. Aim to use less than 30% of your available credit, rather than maxing it out.
Work on your business plan: Lenders like to see a clear explanation of why you need the loan and how it will support business growth. This includes developing financial forecasts, managing your budget, and anticipating any potential challenges and how you will deal with them.
Double check the details: Easily avoidable mistakes, such as Companies House errors, spelling mistakes, overdue accounts or using accounting software that isn’t compatible with the lender’s software could all mean that your application is unsuccessful.

» MORE: How to get a business loan

Best small business loan options by business stage

Business Stage	Loan Type	Why It Fits
Just starting out	Startup loans	Easier eligibility and support
Trading 1–3 years	Unsecured / short-term loans	Manage cash flow and seasonal dips
Established SME	Secured / long-term loans	Larger sums, lower rates
Sole trader	Sole trader loans	Simple application and flexible repayment

» COMPARE: See which lenders match your stage

What do different lenders have to offer? See our business loan lender reviews

How to get approved: Step by step

You’re more likely to be approved when matched with lenders that suit your business stage and turnover. To boost your chances of being accepted, just follow the steps below:

Check your eligibility: This depends on a number of different factors, and these vary depending on the lender you choose. However, there are some basic criteria that you will need to meet before you can apply for a small business loan which means you need to be at least 18 years old, a UK resident and have a UK-based business (or plan to start one). Many lenders will have an eligibility tool which lets you check if you’re likely to qualify before you apply.
Prepare your documents: Again, this varies according to the type of loan, but you are likely to need a business plan, financial statements showing income and details of existing debts, business bank statements and tax returns. You will also need to show personal ID, along with proof of business ownership and address.
Compare lenders: Think carefully about the type of loan you require, including the amount you want to borrow, interest rate and repayment term.
Apply: Once you’ve followed the steps above you are ready to apply, without hurting your credit score. Use the tool below to simplify the application process and save you time.

How to get a small business loan through NerdWallet UK

We can help you find the best small business loans for you and your company. You’ll also be matched with lenders from our panel that offer you the best chance of acceptance. To see the funding options open to you, without affecting your credit score:

Answer a few questions about you and your business, so we know what to look for.
Get matched instantly with small business loan lenders and loans that you’re eligible for.
Compare loans and apply to your chosen provider, with forms pre-filled using details you’ve provided already.

» COMPARE: Find the right loan for your small business

business owner insight

Real stories: How small businesses use loans to grow

“We took out a small business loan when we had been trading for about six months. The extra funding helped our business to unlock opportunities that would otherwise have been inaccessible. At such an early stage and with no capital behind us, it would have been impossible to place bulk orders at a cheaper cost price. As a result of the loan, the business is in a better position in terms of stock availability and profit.”
Matt Palfrey, Director & Co-founder, Comfa.

Alternatives to small business loans

If you’re not ready for a loan, there are other ways to fund growth — here’s what to consider first:

It’s usually easier to apply for business credit cards, and they can help you to manage cash flow and cover short-term expenses. However, they typically charge higher interest rates and fees than small business loans, so they can become an expensive way to borrow unless you clear your balance each month.
A cash flow loan can usually be arranged quickly, without necessarily needing assets or a good credit history.
Asset finance could help you to access equipment, machinery, or other assets without paying for it up front. Instead, payments are made to cover the cost over an agreed period.
Invoice finance allows a small business to raise funds based on the security of unpaid invoices.

Pros and cons of small business loans

When deciding whether or not to apply for a small business loan, it’s important to weigh up the advantages and disadvantages. These will be specific to your business, but therse are the main things to consider:

Pros: A small business loan can help you to access funds needed for growth, smooth cash flow and build your business credit score, provided that you make the repayments as agreed. It may also save you money on interest compared to other forms of financing, such as an overdraft or business credit cards.

Cons: Depending on the age and stage of your business, and your credit score, you may face some eligibility issues. You may also have to use a business asset as collateral and should factor in the cost of interest.

Depending on the lender, small business loans tend to offer anything from £1,000 to £1 million, or much higher. Data from the 2025 Business Finance Survey by British Business Bank and Ipsos indicates that 37% of SMEs seeking finance were looking for in excess of £25,000, with businesses with employees more likely to seek larger amounts than those with no employees.

If you’re trying to work out how much a small business loan might cost you, both in terms of the monthly repayments and and the overall cost of borrowing, then our business loan calculator can help.

Simply enter the amount you would like to borrow, the term of the loan and the APR to get an idea of the rough cost of borrowing, making it easier to compare different loans before you apply.

An unsecured business loan tends to be the easiest type of small business loan to get. This type of loan may need a business owner to provide a personal guarantee, but doesn’t usually require any collateral or security for the loan.

This depends on the lender and the type of loan you’re applying for. See our guide on how to get a business loan to find out more.

Yes, you could still get a small business loan, even if you or your business has a less-than-perfect credit history. There are some specialist lenders for small business loans with bad credit, but you may have to pay more interest and provide some security. For more information, take a look at our guide to bad credit business loans.

This varies between small business loan lenders. As a general rule, a strong credit score will increase your chances of approval; according to The Federation of Small Business, businesses should be aiming for a business credit score of at least 40/100 in order to qualify.

If you take out a secured business loan you will be required to put forward an asset from your business as security. This could be something like your business premises or a piece of equipment – and there’s a chance you could lose the asset if you don’t keep up with the repayments.

Unsecured small business loans are often quicker and easier to arrange, but interest rates may be higher – and you may not be able to borrow as much. Lenders may also ask for a personal guarantee that you’ll be personally liable to repay the loan if your business can’t.

Startup funding is especially for new businesses that have been trading for less than three years, although these time restrictions can vary between lenders. Small business loans can be accessed by all types of small businesses, but very new companies that haven’t yet built up a business credit score or trading history may find it harder to be approved. Read our guide to startup business loans to find out more.

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