Loans for businesses of every size and industry, from top UK lenders including:
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A business loan is a form of finance that can be used to help support and expand your organisation.
As with personal loans, you borrow a sum of money, and pay it back, with interest.
One of the most important differences between personal loans and business loans is that with a personal loan, you will be personally liable for repaying the amount you have borrowed.
With a business loan, as long as the appropriate company structure is in place, that responsibility falls to the business instead. This will not be the case, however, if you are a sole trader, or you have secured your business loan with a personal guarantee.
You can also typically borrow more through a business loan, while the interest payments on your business loan may be tax deductible unlike payments on a personal loan.
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, secured loans come with the added risk that you could lose your assets if you miss the payments.
Unsecured business loans are a type of finance that does not require security. These types of loans tend to have higher interest rates 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.
There may be government-backed business loans you can access. Examples include the Recovery Loan Scheme, introduced to help with the financial stresses caused by the Covid-19 pandemic, which has now been extended. What schemes are available can vary depending on government policy and changing economic circumstances across the country. So it can be useful to regularly check the Department for Business, Energy & Industrial Strategy's search tool for guidance on the business loan schemes available in your region.
The Start Up Loan Scheme is a government-backed fund that currently offers personal loans of up to £25,000 to UK businesses owners that have been fully trading for less than 36 months or those looking to start a business. You can apply for free, and there are no early repayment charges. If your application is successful, you'll also get up to 12 months of free mentoring. Government Start Up Loans have a fixed annual interest rate of 6% and must be repaid over a period of one to five years.
Small business loans are for start ups and small businesses to access funding. They can be used for a variety of purposes from hiring new staff to managing cash flow. As with all loans, small business loans are repaid over an agreed time period with interest. Large business loans tend to be cheaper than small business loans because there is less perceived risk with lending to a bigger company.
A working capital loan is simply a business loan that is designed to help a business cover a temporary shortfall in their cash flow, or working capital.
Working capital is broadly defined as the amount of cash a business has available to spend on the daily running of their operations, and is calculated by subtracting current liabilities, such as rent, bills, wages and payments owed, from current assets over the next 12 months.
Sometimes businesses may not have sufficient working capital to pay for their regular expenses. A working capital loan aims to offer a solution to this problem by providing businesses with short-term finance that will boost their working capital and allow them to pay for what they need.
Businesses can use a working capital loan for a variety of purposes, such as:
Essentially, the loan aims to help businesses manage their finances by improving their cash flow.
Bear in mind that working capital loans are not intended for long-term investments in your business, but to cover short-term needs.
While working capital loans can offer much-needed help to businesses, there are certain points you need to bear in mind.
Make sure you check the eligibility criteria for working capital loans, as lenders may require you to have a minimum number of years trading and a separate business bank account.
If your business qualifies, you can then apply for a working capital loan online by submitting relevant information about you and your business.
Lenders are likely to want to know details about your trading history, your average turnover, the size of loan you want to apply for and what you want to use the loan for.
They will use this information, as well as your business’s credit score, to make a decision on your application.
If successful, you will normally receive the loan relatively quickly, sometimes within 24 hours.
What is a good working capital?
How is your working capital ratio calculated?
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Does a working capital loan affect my personal finances?
How long will it take to get a business loan for working capital?
Do I need a business account to apply for a business loan?
Can I get working capital finance with bad credit?
Can I pay off my business loan early?
Can I get a working capital loan to start a business?
