A secured or unsecured business loan could help you grow your business, cover running costs or even fund a new company.
More from business loans
Whether it's to start a new business or grow an already established business, a business loan is a useful way to get the money you need to finance it.
Just like a personal loan, with a business loan can borrow a set amount of money, which the business would would have to pay back to the lender with interest.
Unsecured business loans
These are loans where you borrow money business, without using its assets such as stock, or machinery as a security.
Secured business loans
These are loans where you borrow money for the business using one of its assets as security for the lender.
Peer to peer loans
These are loans where you borrow from an individual through a P2P lending platform, rather than a bank or organisation.
When you're thinking about business loans, remember that there are several types of unsecured and secured loans for a business that wants to borrow money. The types include:
Bank loans: These are offered by banks and building societies and can be up to £250,000 over one to 15 years. They're usually unsecured loans.
Short-term loans: These are offered over a few weeks or months, and go up to £200,000. They have higher interest rates than other types of borrowing.
Peer-to-peer loans: These are when your business borrows money from investors instead of a bank. Some investors loan up to £1 million. Here's how peer-to-peer lending works.
Invoice finance: This is when a lender buys your outstanding invoices, releasing the money you're owed by your customers. You can find more information on invoice financing in our guide on how business loans work.
Cash advance loans: These are when you borrow money against your business's future debt or credit card sales. They come with set fees rather than an interest rate.
When you've decided on the best business loan for your needs, you can do a loan comparison using the table above. Then you can choose a lender and apply for your loan online.
With a business loan you can borrow as little as £500 all the way up £5 million and above.
Every loan company gives different limits on how much they can lend. So if you want to borrow a large amount, your choices for a lender might be limited.
Business loans can have a short repayment period like a month, or a longer term of up to 30 years.
When you're deciding how long you need to repay your loan, be realistic about what you can afford to pay each month.
The longer your loan term, the lower your monthly payments will be, but you'll pay more in interest over all.
Here's how the loan term and affect how much you pay in interest:
|Loan term||Monthly Payment||Total interest|
Using our loan repayment calculator is a good way of finding cheap business loans available to you.
How much you want to borrow
This is the amount of money you need to borrow to fund a business priority.
How long you need to repay the loan
This is the length of time you need to pay back the loan with interest.
The type of business loan you need
It's important to know which type of loan is best suited for your business.
The interest rate or APR
This the percentage rate at which you'll repay the loan and decides how much you'll have to pay monthly.
Any conditions attached to the loan
Sometimes lenders attach additional conditions, such as a personal guarantee.
Like all loans, business loans are given based on affordability and a credit check. Lenders will look at your business's credit rating and financial stability to decide what interest rates to offer you.
The interest rate you're offered on your business loan is based on a financial assessment of your business by the lender. They'll decide whether to offer you the business loan, and what interest rate to offer you, based on:
your business's credit rating
how much money you're asking for
what repayment term you want
your business's age
how profitable your business is.
If the lender thinks your business loan is low risk, you'll be offered a lower interest rate. If they think your loan is high risk, you'll be offered a higher interest rate.
The advertised APR that you see before you apply is the rate offered to at least 51% of applicants. That means almost half of those offered that business loan might be offered higher loan rates than what's advertised.
The average business loan rates on unsecured term loans in our comparison can be seen in the table below.
Remember that the interest rates on other kinds of business funding explained in this comparison can differ a lot. So don't forget to do your research when you're looking for the best business loan rates for you.
A business loan isn't the only way of securing finance for your business. Other options include:
Credit cards: Some business credit cards come with deals for 0% interest on purchases for a set period. Others offer rewards like air miles or cashback. A business credit card is good for day-to-day transactions and expenses, plus several members of staff can have a card. But remember that they're not great for longer-term borrowing. Most charge a high interest rate on purchases once the introduction period's over. Find out more about business credit cards. Find out more about business credit cards.
Crowdfunding: This is when you pitch your business idea online and offer perks or rewards to investors if your target's met. It's sometimes called donation or reward crowdfunding. Crowdfunding can be a good alternative to start-up business loans for new business ventures. But remember getting the amount you need can be a slow process. Find out more about how crowdfunding works.
Government grants: These are designed to help new businesses. They can also help businesses in certain sectors, or businesses in specific areas of the UK. The good thing about grants is that you don't have to pay the money back, and you keep full ownership of your business. Each grant has different criteria, so the finance isn't ever guaranteed. Search for business grants in your area.
You might find these six ways to get finance for your business helpful. Some of the other options might be good certain types of business. But, if it's quick business finance you're after, a business loan might still be the best option.
You've also got the option of using a combination of several types of funding for your business. That way, you can get the most value out of each type without relying on any one source.
It stands for annual percentage rate, and is the interest you pay on the total value of your loan. The lower your APR, the lower your monthly payments.
It depends on the loan you choose and the lender. Some banks may require you to have their business current account before offering you a loan.
No, most loans can be applied for by a registered company director.
Yes, you can secure against your business assets, like your property, stock or machinery. Your assets will be at risk if you do not keep up your repayments.
Yes, but the type may depend on the size and finances of the business. For example, only new businesses can get government start up loans.
Yes, and it may affect whether or not your loan application will be accepted. You can find the credit score for your business on the Experian website.
It depends on the type of loan you choose, whether it is secured and if you sign a director guarantee. Always check the terms and conditions carefully.
Our comparison tables include providers we have commercial arrangements with. The number of listings in our tables can vary depending on the terms of those arrangements, as well as other market developments. They are all from lenders regulated by the Financial Conduct Authority (FCA). Here is more information about How our website works.
We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.
You do not pay any extra and the deal you get is not affected.
Last updated: 2 August, 2021