One of the hardest things if you’re setting up a new business is securing funding to invest in your ideas. Thankfully, that’s exactly what a start-up business loan is for.
Between the number of business start-up loans on the market, the pros and cons of various providers, and differing requirements around the age of your business or your previous trading history, it’s not that easy to choose the right business loan for your start up.
That’s why we’ve done some of the legwork for you by comparing start-up business lenders, leaving you with more time to focus on what matters: growing your business.
We’ve looked at what small business owners chose as the most important factors when comparing start up loans: from the flexibility of small business loan terms to the maximum amount borrowable and the level of customer service.
Every lender on this list of the seven best business loans for start ups either lends to start ups with no trading history or offers loans for small businesses that have been trading for less than a year.
Representative examples are based on information from the lender and are not necessarily based on the same loan amount or loan term.
Top 7 Best Business Start Up Loans: Summary
*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.
This top 7 only contains business loans providers reviewed by NerdWallet UK.
Top 7 Best Business Loan Lenders for Start Up Businesses
This top 7 is from 15 business loan providers that NerdWallet evaluated and reviewed. Others are available. Find out how we use ‘best’ and our guide to ratings.
Lloyds Bank Small Business Loan
11.20%
£1,000 – £50,000
1 – 25 years
11.20% APR representative based on a loan of £8,000 repayable over 60 months at an interest rate of 10.65% (fixed). Monthly repayment of £172.55. Total amount payable £10,353.00.
NerdWallet's Review Summary
Lloyds Bank offers loans for start ups, although expect to be asked for additional information and oversight – such as cash-flow forecasts – before it considers lending to your new business.
Lloyds Bank also gives you the flexibility to pay off loans in full before the term ends at no extra cost, and it gains points in our rankings for offering 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.
NerdWallet's Pros & 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.
NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.
HSBC Small Business Loan
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 offers loans for start-up businesses, although it expects you to provide proof of how you intend to repay the loan. For a new business, this may take the form of a business plan and cash-flow forecast.
HSBC’s loan options include a fixed-rate Small Business loan of up to £25,000, in addition to a fixed- or variable rate Flexible Business Loan, for borrowing over £25,000. You could 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.
NerdWallet's Pros & Cons
Pros
- With HSBC, businesses can borrow up to £10,000 (HSBC Kinetic Small Business Loan), up to £25,000 (Small Business Loan) or up to £25 million (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
- 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.
- The term flexibility of an HSBC Small Business Loan is not as good as some other lenders on the market.
Barclays Unsecured Business Loan
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'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, and its Barclaycard for business credit card.
Start ups can borrow from Barclays – just expect to be asked to provide a forecast of your business’s annual sales turnover before you can access any finance.
For further information about Barclays business loans, 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.
- 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.
NerdWallet's Pros & Cons
Pros
- Businesses can borrow from one to 10 years with an unsecured loan.
- Barclays offers 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.
NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.
Fleximize Flexiloan Lite
Available on application
£5,000 – £500,000
3 – 12 months
Available on application
NerdWallet's Review Summary
Direct lender Fleximize only lends to businesses with at least six months’ trading history. While one year’s trading history is required to access their flagship Flexiloan product, only six months are required for businesses seeking to take out a Flexiloan Lite. As such, this product has been designed with start ups and other new businesses in mind.
Fleximize offers customers both secured and unsecured business loans up to £500,000. However, 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:
- Borrow as much as £500,000: A Fleximize loan could give you the option of borrowing a maximum of £500,000.
- Short-term focus: Terms are between three and 12 months for the Flexiloan Lite.
- No early repayment fees: Borrowers can overpay their loan, or pay it back in full before the term ends, without worrying about fees.
- Decisions on loan applications are made within 24 hours.
NerdWallet's Pros & Cons
Pros
- With Fleximize, you can borrow between £5,000 and £500,000, subject to status.
- Fleximize offers short-term lending for start-up businesses, with term lengths of three to 12 months for Flexiloan Lite.
- With the Flexiloan Lite, Fleximize offers business loans specifically designed for newer organisations.
- You can repay your Fleximize business loan early at no extra cost, and you will only pay interest for the time you’ve had the loan.
Cons
- Fleximize has limited remote customer service options, with only an online contact form and phone line 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.
- Businesses need a monthly turnover of at least £5,000 before they can access Flexiloan products.
NerdWallet has partnered with Funding Options. Check your eligibility with this lender and many others without affecting your credit score.
Iwoca Flexi-Loan
49.0%
£1,000 – £1,000,000
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.
NerdWallet's Review Summary
iwoca gives business access to flexible loans that suit a range of purposes. If you’re a start up, you can borrow up to £10,000 from iwoca without needing any trading history.
A dedicated business loans provider, iwoca 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:
- Different borrowing limit for start up businesses: While established small businesses can borrow from £1,000 to £1 million with iwoca, start-up borrowing is capped at £10,000.
- Short-term flexibility: You can pay back an iwoca business loan over term lengths from one day to two years.
- Early repayment: You can overpay or settle early at any point with no fees.
- Not for sole traders: Only limited companies, limited liability partnerships and ordinary partnerships can apply for iwoca business loans.
NerdWallet's Pros & Cons
Pros
- iwoca welcomes applications from start-up businesses, which can borrow up to £10,000 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 are available.
Cons
- Start ups are offered a lower upper borrowing limit than established businesses, meaning other providers on the market may be able to offer a larger loan to your new enterprise.
- All iwoca Flexi-Loans come with a variable interest rate.
- Sole traders are not eligible for an iwoca business loan, while limited companies will be required to provide a personal guarantee – typically from one of the company directors.
- iwoca has no app, so there is no app-based customer service.
- iwoca has no branches, so there is no face-to-face customer service (though you can visit its headquarters in London).
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
Cubefunder Business Loan
Available on application
£5,000 – £100,000
3 – 12 months
Available on application
NerdWallet's Review Summary
Cubefunder is a direct lender which claims to value the human element in business lending, meaning it promises to judge businesses by more than just their credit score. This provider of short-term small business loans scores well for the upper borrowing limit and fee-free repayments but loses points for its limited customer service options.
Start-up businesses can apply to Cubefunder for a loan, provided they have been trading for three months or more. Find out more by reading NerdWallet’s Cubefunder business loans review.
Cubefunder business loans key features:
- Different borrowing limits for sole traders and limited companies: Cubefunder’s Unsecured Business Loan is for limited companies only, with businesses able to borrow between £5,000 and £100,000. For sole traders, Cubefunder offers a smaller business loan for borrowing between £2,500 and £7,500.
- Short-term borrowing: Cubefunder business loans can be repaid over three to 12 months.
- Flexible repayment plan: You can choose to pay your loan back in daily or weekly instalments.
- Fee-free repayment: Cubefunder doesn’t charge fees for repaying your loan early.
NerdWallet's Pros & Cons
Pros
- Cubefunder offers a maximum unsecured loan amount of £100,000.
- Cubefunder business loans are short-term, over a maximum of 12 months, and you can choose to repay your loan on a daily or weekly basis.
- As long as you pay the full amount in the agreed period, there are no individual late payment fees.
- There are no early repayment fees if you want to pay off your Cubefunder business loan before the term ends.
Cons
- Cubefunder business loans are only available for businesses based in England and Wales.
- If you are a new customer, you are required to provide a personal guarantee when taking out a loan.
- Sole traders are not eligible for an iwoca business loan, while limited companies will be required to provide a personal guarantee – typically from one of the company directors.
- You can only contact Cubefunder over the phone or by email. There is no mobile app, live chat feature or access at a branch.
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
British Business Bank Start Up Loan
Available on application
£500 – £25,000
1 – 5 years
Available on application
NerdWallet's Review Summary
Founded in 2014, the British Business Bank is a government-owned lender tasked with helping UK small businesses access the financial support they need to grow. Although it is owned by the Department for Business and Trade, the British Business Bank operates independently of the government.
The British Business Bank’s government-backed programmes include their Start Up Loans scheme, which is dedicated exclusively to funding new businesses which cannot secure finance from other sources. So far, the British Business Bank has lent over £1.1 billion worth of loans to over 115,000 UK small businesses.
British Business Bank Start Up Loans key features:
- Designed for start ups: Start Up Loans from the British Business Bank have been explicitly created to help start-up businesses.
- Borrow up to £25,000: Start-up businesses can take out loans ranging in size from £500 to £25,000 with interest fixed at 6% per annum.
- Fee-free borrowing: Start Up Loans can be repaid over one to five years, with no fees for early repayment and no fees for arranging the loan.
- Mentoring and support: After you receive the loan, you’re eligible for 12 months of free mentoring, plus support, guides, and access to templates to help you on your business journey.
NerdWallet's Pros & Cons
Pros
- Repayment terms are flexible, with no fees for early repayment.
- Start-up businesses looking to borrow smaller amounts can access loans starting at just £500.
- Founders of start-up businesses can apply for British Business Bank funding if they can’t secure finance from other sources.
- A year’s worth of free mentoring is included with the loan, in addition to support throughout the application process.
Cons
- Some large commercial lenders allow you to take out loans with much longer repayment terms than the British Business Bank.
- Customer service options are limited, with borrowers able to use an online enquiry form or telephone for support from 9am – 5pm on weekdays excluding Thursdays and from 9am – 4pm on Thursdays.
- At £25,000, the maximum borrowing limit is lower than the upper limit for many commercial lenders.
This product may be one of a range offered by this provider. Always check terms & conditions for suitability before applying.
This top 7 only contains business loans providers reviewed by NerdWallet UK.
Top 7 Small Business Start Up Loans: Summary
| Provider | Star rating | Product name | Amount borrowable* | Loan term* |
|---|---|---|---|---|
| Lloyds Bank |  | Small Business Loan | £1,000 to £50,000 | 1 to 25 years |
| HSBC |  | Small Business Loan | £1,000 to £25,000 | 1 to 10 years |
| Barclays |  | Unsecured Business Loan | £1,000 to £100,000 | 1 to 10 years |
| Fleximize |  | Flexiloan Lite | £5,000 to £500,000 | 3 to 12 months |
| iwoca |  | Flexi-Loan | £1,000 to £500,000 (capped at £10,000 for start ups) | 1 day to 2 years |
| Cubefunder |  | Small Business Loan | £5,000 to £100,000 | 3 to 12 months |
| British Business Bank |  | Start Up Loan | £500 to £25,000 | 1 to 5 years |
This top 7 only contains business loans providers reviewed by NerdWallet UK.
What is a start-up business loan?
A start-up business loan is simply a loan which is suitable for new businesses – also known as start ups.
Because start-up businesses often struggle to secure funding – and because getting a new business off the ground can be a cash-intensive process – start-up business loans can be lifelines for new enterprises.
By taking on a start-up business loan, a new venture can acquire the capital it needs to commence operations and generally get up and running.
In this round-up of the best start-up business loans, we’ve defined a start-up loan as a product which can be accessed by a business in the first year of trading.
Some of the above loans have been explicitly designed with start ups in mind and others are more general business loans whose lending criteria don’t exclude new businesses from applying.
» MORE: What is a business loan?
What is a start-up business?
There is no one universal definition of what counts as a start-up business.
The term ‘start-up business’ may refer to any young or newly established business in its early stages of growth and development.
In this case, to make the process of narrowing down funding options easier for you and your business, we’ve defined a start up as being in its first year of trading.
That’s why we’ve filtered out any business loan products which require one year’s trading history or more before you can apply.
How to apply for a business loan for your start-up business
Applying for a business loan – even as a start-up business – may be easier than you think. Just follow the steps below.
- Decide how much you want to borrow and for how long. Once you’ve decided a start-up 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 grow your new business.
- Compare start up business loans and lenders. Shopping around and comparing business start up loans is an important step. Because lenders perceive more risk in lending to new and unproven ventures, not every business loan provider on the market will be willing to lend to start-up businesses. Take time to research and weigh up the various terms, conditions, and requirements of business lenders to make sure you are eligible for funding and that the loan you end up with suits the needs of your start-up business.
- 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.
- Wait to hear back. It can take a couple of hours to a matter of weeks to hear back about your start up loan application, depending on your financial circumstances and the lender in question.
» MORE: How to get a business loan
Who is eligible for a start-up 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.
As there is no official definition of what counts as a start up – and what counts as a start-up business loan – there may be many products which would be suitable for your start-up business.
However, lenders will set their own criteria and determine your eligibility for a loan based on information such as:
- how long your business has been trading
- whether your business is based in the UK
- your annual turnover
- your business and personal credit history
» MORE: How do business loans work?
Start-up business loan pros and cons
There are several benefits to business start-up loans, but some potential drawbacks to bear in mind too.
Advantages of start-up loans
- Using a business loan to fund your start up means you’ll retain ownership of the business, rather than giving away equity.
- Start-up loans can help with cash flow, helping your business take advantage of opportunities and weather unexpected difficulties.
- Provided you repay it in full and on time, taking out a start-up loan could boost your business credit score.
Disadvantages of start-up loans
- Like all loans, start up loans must be repaid with interest.
- Lenders may expect you to provide collateral – like personal or business property – as part of the agreement.
- You may be required to provide a personal guarantee before you can access loan products from certain providers.
- If you fail to meet the repayment terms of a loan, your business credit score may suffer.
- If you default on your start-up loan, you may face additional charges.
Types of small business start-up loans
When shopping around in search of finance for your start-up business, you will quickly discover that there are 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 and other restrictions 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. If you run a start-up business with no trading history, there may be some unsecured loan products which you can’t access.
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, if you’re planning to take out a secured loan to fund your start-up business, be aware that 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 start-up business loans for small businesses
There are a number of factors to bear in mind to help you compare start-up business loans. It’s important to consider which start-up loan is going to be right for your new business. Factors to compare include the interest rate on the loan, the amount you can borrow and any fees for taking out the loan. Of course, eligibility requirements are also relevant here – especially for brand-new enterprises.
Before you apply for a business loan for your small business, you should consider whether it is the best fit for you and your start-up organisation. Also make sure that you won’t be excluded by the business loan provider simply because you don’t have a specific length of trading history.
Once you’ve identified a few business loans which might be suitable for your start-up business, 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 new business.
- How much do I want to borrow?
- When do I need to repay the loan?
- How much can I afford to repay each month?
- Am I struggling with unpaid invoices?
- Do I hold equity in a property?
- Do I need the loan to buy a specific valuable asset?
- What’s my personal and business credit rating like?
- How long has my business been operating?
- Do I need a lump sum?
Alternatives to start-up business loans
There are many funding alternatives to consider if you’re unsure about whether a start up business loan is the right option for your new business. Some of these include:
Business overdrafts
Some banks offer access to a business overdraft: a short-term line of credit which can provide your business with greater financial flexibility. If you are faced with an unexpected cost, for example, then an overdraft could take pressure off your cash flow.
Be warned that your business will be charged interest on the amount you are overdrawn, and you may also be charged a fee for using the overdraft. Your bank can demand that you repay the overdraft at any time.
If you ask your bank, you may be able to increase your overdraft amount.
Business credit cards
A business credit card could provide your start up with greater financial flexibility, since they come with the option to spread the cost of your purchases. This can help with cash flow.
Business credit cards can also help to build your business credit score, and some lenders offer balance transfer credit cards, fee-free foreign use cards, or cards where you can earn reward points to further incentivise spending.
Be mindful, however, that unless you pay off your business credit card in full each month, you will be charged interest and the cost of borrowing will be greater in the long term.
Merchant cash advances
Merchant cash advances are a funding option for businesses that take card payments. Unlike some small business loans or start-up loans, firms can generally access merchant cash advances without needing to provide assets as security.
With a merchant cash advance, a lender will provide your business with an up-front sum of money – to cover a short-term shortfall or cash-flow issue, for example.
A percentage of your business card sales income will then be deducted daily, weekly, or monthly and be sent to the lender until the initial loan is repaid. Be warned that your business will be charged interest for a merchant cash advance and will also have to pay a fee for this service.
Invoice finance
Invoice financing is a way of immediately releasing some of the money tied up in your unpaid invoices.
With invoice financing, a lender will use your unpaid invoices as security for a loan, with some loan approvals taking less than 24 hours. This means invoice financing can provide quick access to up to 90% of the money you are owed by your customers or clients.
There are different types of invoice financing arrangements, including invoice factoring (where the lender takes on the responsibility for managing your sales ledger and collecting payments from your customers) and invoice discounting (where your business keeps control of customer payments).
Asset finance
Asset finance is a versatile source of funding which can be used to help cover the cost of business-critical assets.
Through leasing or hire purchase, asset financing arrangements can ease the cash-flow pressure on businesses by providing a way of spreading the cost of equipment acquisitions or upgrades.
Just bear in mind that fees and interest payments are likely to apply if you use asset finance to finance the cost of buying assets for your start-up business.
Small business grants
The key difference between a grant and a loan is that a grant usually doesn’t have to be paid back.
While small business grants can be very competitive – and may come with more stringent requirements or eligibility criteria than small business loans – it’s worth considering every option to fund your start up.
There are many grants available to UK small businesses, some of which are available based on the sector, location, or age of your business.
Crowdfunding
If you’re looking to get a new business idea off the ground, then you might also want to consider running a crowdfunding campaign.
Crowdfunding generally involves securing small amounts of funding from many sources – typically lots of individuals – who might choose to back a business idea in return for rewards, like early product access or equity in your business. Crowdfunding campaigns typically take place online through dedicated websites.
Angel investors
Angel investors are the largest source of investment in UK start ups and small businesses. Angel investors are typically successful or wealthy individuals looking to use their own money to invest in a young business in return for a minority stake.
Think Dragon’s Den: many of the show’s ‘dragons’ are real-life angel investors.
In addition to providing you with seed funding, an angel investor will generally take a hands-on approach to helping you grow your business – for example, by leaning on their own connections or mentoring you on your business journey.
» MORE: How to get start up funding in the UK
Start-up business loans from the government
The UK government aims to support the creation and growth of new businesses through the British Business Bank.
The British Business Bank is an independent lender owned by the Department for Business and Trade. Founded in 2014, the British Business Bank’s mission is to make it easier for new businesses to thrive, offering an alternative to the sometimes challenging business finance market.
The British Business Bank offers Start Up Loans through the Start-Up Loans Company, which is funded by the UK government. These loans allow you to borrow between £500 and £25,000, payable over one to five years, at a fixed interest rate of 6% per annum.
Applicants are also supported with a year’s free training, mentoring and advice if they are accepted for a loan.
The British Business Bank also offers access to more conventional small business loans as part of the Growth Guarantee Scheme, the successor to the Recovery Loans Scheme.
Business Loans Methodology
NerdWallet evaluated and reviewed 15 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 start-up business loans
Start ups often need capital to get off the ground. Even business models that aren’t massively capital intensive are likely to need some funding when starting out from scratch.
Here are a few possible uses for start-up funding when launching a new business:
- Overheads: A capital injection may be needed to cover the cost of essential overheads.
- Business growth: The money you borrow could help your business expand, including by investing in promotion or marketing.
- Purchasing power: Business loans can help you buy new equipment, increase inventory or invest in office space.
» MORE: Why do businesses need finance?
In general, there is no fixed personal or business credit score you need in order to apply for a business loan. 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 start-up loans in particular, where there are no business assets to act as security for the loan, lenders may be more wary of lending money and may ask for more proof that you’ll be able to pay it back. As part of their considerations, lenders may examine your personal credit record before offering you a start-up 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 start-up loan.
While it may not be an essential 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.
As a rule of thumb, the process of applying for a start-up loan is likely to be a bit simpler if you already have a business bank account.
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.
There is no official or universally accepted definition of what counts as a start-up business, although it’s generally agreed that a start-up business is in its early stages. Likewise, many lenders don’t offer explicit start up business loans or make a distinction between start-up business loans and standard business loans.
Generally speaking, start-up loans should be accessible for businesses that haven’t been trading for a long time. While some lenders require a business to have been trading for more than a year to access a loan, we’ve defined start-up loans as products that are available to businesses in their first year of operation.
There may also be other differences between standard business loans and start-up business loans, like access to additional business advice or support for new businesses.
When it comes to start-up business loans, you should always check the terms and conditions of your loan with your lender. Different lenders may have different rules about what you can and can’t use your start-up loan for.
However, none of the start-up lenders in our sample say you can’t use a start-up loan for a home business, so it’s certainly possible to secure start-up funding for a business you’ll be running from home.
By definition, start-up businesses generally have little or no trading history, so most lenders will want to see a business plan before giving you a loan. Here you should specify whether you plan to run your business from home or not.
Some business lenders will only consider your company for a loan if you have been trading for a certain length of time – say, a year. This is because some lenders view start-up businesses as more risky, since they have not proven themselves or established a strong trading history.
However, by the same token, there are plenty of business lenders that do not require an arbitrary trading history before considering a business for a loan. This means start ups and new companies are eligible to borrow from these lenders.
Just be aware that some lenders will ask for additional information before lending to a start up business. Lenders might want to see a business plan, growth forecast, or evidence of your own personal finances. Some lenders may also have different borrowing limits or requirements for start-up businesses or new companies.
Considering all the lenders in our sample, the most you can borrow is £1 million. The least you can borrow with a start-up business loan is £500.
Different lenders will have different borrowing limits and requirements, however, so it’s always wise to shop around and compare loans until you find the one which is best for your circumstances and your business.
If you’re trying to work out how much your business can afford to borrow with a start-up business loan, then using a loan repayment calculator could help.
You can use NerdWallet’s business loan calculator to not only get a sense of how much your start-up business can afford to borrow but also to see how much it’ll cost to pay it back.
The highest maximum start-up business loan term in our sample is 300 months, or 25 years.
The shortest possible term for a start-up business loan is just one month.
If you are the director of a limited company, you are allowed to lend money to your own business. By the same token, directors can also borrow money from their businesses.
There are various rules around director’s loans, which you can read in more detail on the Gov.uk website.
If you lend your company money, the company will not need to pay corporation tax on this sum.
However, if you charge interest on any money you lend your company, then the loan will count as both a business expense for your company and a source of personal income for you – meaning you must report it on your self-assessment tax return.
Launching your own business can be expensive, and one way to cover the costs of turning your ideas into reality is by taking out a start-up business loan.
Before committing to anything, however, make sure you have researched all your options so you can settle on the choice which is right for you.
There are some serious advantages to start-up business loans, including higher borrowing limits than personal loans and the ability to retain control and equity in your business. Business loans, when repaid promptly and in full, can also help to boost your business credit score, while some business lenders offer additional help and support to founders in the early stage of their business journey.
Just bear in mind that start-up business loans also have their downsides, and remember that money you borrow will have to be repaid, in full, with interest. Owing to the fact that your business doesn’t have a proven track record, the application process for a start-up loan may be more involved than for other types of loan. And if you do not repay a secured loan, you could risk losing business assets.
Most forms of business lending are unregulated. However, where a business loan is for £25,000 or less and designed for certain business types, including sole traders, loan products 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.
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