Business Loans

A business loan is a fixed sum of money borrowed by a company or sole trader to fund things like cash flow, equipment, stock or growth, repaid in instalments over an agreed term, either secured against business assets or unsecured. If you're comparing business loans UK lenders offer, the first thing worth understanding is that "business loan" isn't a single product. It's an umbrella term covering everything from a short unsecured facility for a sole trader to a multi-year secured loan for an established limited company.

The core mechanics are similar to a personal loan: you borrow an agreed amount, the lender sets a repayment term, and you pay the money back in instalments, usually with interest added. What differs is who's assessed, how the loan is structured, and what happens if repayments aren't kept up.

A personal loan is assessed almost entirely on your individual income, credit history and existing personal debts. A business loan, by contrast, is usually assessed on the trading business itself, meaning turnover, cash flow, sector and business credit history, alongside the personal credit history of the directors or owner. Whether a loan is secured or unsecured also changes what's at risk if things go wrong, which we cover in detail later in this guide.

Most business loans taken out by limited companies sit outside the consumer credit rules that the Financial Conduct Authority applies to personal lending. This surprises a lot of business owners, who assume borrowing "as a business" comes with the same standardised protections as a personal loan or mortgage.

In practice, regulation depends on who's borrowing and what's used as security, not simply on the word "business" in the loan's name.

• Limited company borrowing is generally treated as commercial lending, which falls outside the consumer credit protections that apply to individuals. Lenders can set their own terms, and there's more variation between providers than you'd see in personal lending.
• Sole traders and partnerships are often treated more like individual consumers for regulatory purposes, because the borrower is a natural person rather than a separate legal entity, so more consumer credit protections can apply.
• Loans secured against a director's home, such as some secured business loans, bring in additional rules because residential property is involved, and carry a genuine repossession risk if repayments aren't kept up, which we explain in more detail later in this guide.

None of this means unregulated business lending is unsafe, but it does mean fewer standardised protections and more variation between lenders than you'd find in personal borrowing. That's exactly why comparing across a range of lenders matters more for business finance than for a standard personal loan, and why we don't treat Financial Conduct Authority-regulated status as a selling point in itself. You can check any firm's authorisation on the Financial Conduct Authority Register.

Every business loan follows a similar sequence, whether it's a small unsecured facility or a larger secured loan: application, decision, drawdown, then repayment.

At application, the lender asks for details about your business, its trading history, and what the loan is for, along with your accounts or projections and, usually, a personal credit check on the directors or owner. Some lenders can give an initial decision from an eligibility check alone, while others need full underwriting before confirming an offer.

Once approved, the loan moves to drawdown, meaning the funds are released, usually as a single lump sum paid directly into the business bank account. Some products, particularly asset finance and invoice finance, release funds differently, for example by paying a supplier directly or advancing money against unpaid invoices rather than paying out a single sum upfront.

Repayment structures vary by lender and product. Some business loans use a fixed regular repayment for the full term, so the amount coming out of the business account is the same each month. Others use a variable structure, where repayments can move up or down over the term, or a structure linked to trading income, such as a merchant cash advance repaid as a share of card sales. We don't quote specific rates or repayment figures here, because they change constantly between lenders and depend entirely on your business's circumstances. An advisor can talk you through current figures for options that suit your business.

"Business loan" covers several genuinely different products, and the right one depends on what you're funding, how quickly you need it, and what you're comfortable putting at risk. Here's how the main types compare.

If you already know which type suits your business, our dedicated guides go into more depth: asset finance for funding specific equipment, invoice finance for releasing cash tied up in unpaid invoices, and merchant cash advance for retail and hospitality businesses with strong card takings.

Where a secured business loan is secured against a director's home rather than a business asset, the risk is direct. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Comparing across a range of lenders and loan types before committing to one is usually more useful than assuming a single product is right for your business.

How much you can borrow depends on a combination of factors that lenders weigh differently, which is why the same business can be offered very different amounts by different lenders.

• Turnover and cash flow - lenders want to see the business can comfortably cover repayments alongside its existing costs, not just that it turns a profit on paper.
• Trading history - established businesses with several years of accounts generally have access to a wider range of lenders and loan sizes than pre-trading or newly trading businesses.
• Sector - some sectors are considered higher risk by certain lenders, which can affect both the amount offered and which lenders are willing to consider the application at all.
• Existing business debt - lenders factor in what the business already owes, since additional borrowing adds to its total repayment commitments.
• Director credit profile - particularly for smaller businesses and sole traders, the personal credit history of the owner or directors often carries real weight in the decision.

We won't quote borrowing limits or ranges here, because they vary hugely by lender, loan type and individual business circumstances, and any figure would be misleading the moment it's published. This is precisely why comparing across a panel of lenders matters: one lender's maximum might be another lender's minimum for exactly the same business.

If you're pre-trading or in your first year, don't assume you'll automatically be offered less than an established business. Some specialist and asset-backed lenders will lend against projected turnover, a strong personal credit history, or the value of an asset being financed, rather than insisting on years of trading accounts.

Eligibility criteria vary between lenders, but most business loan applications are assessed against the same broad checklist. Meeting every point below doesn't guarantee approval, and different lenders weigh each factor differently, but it's a useful starting point before you apply. Requirements often differ for pre-trading startups compared with businesses that have 2 or more years of trading history, which we cover in more detail shortly.

A poor personal or business credit history doesn't automatically rule out every lender, and business loans UK options for bad credit are more available than most people assume, even if they come with more limited choice.

Specialist lenders in this space typically weigh recent trading performance and cash flow more heavily than historical credit issues, particularly where a business has traded consistently for the past 6 to 12 months despite past credit problems. A County Court Judgment or default from several years ago usually carries less weight than a pattern of missed payments in the last few months.

Being realistic matters here: if you do find a lender willing to work with a poor credit history, the terms and cost of borrowing will usually be less favourable than for a business with a clean credit record, and the amount on offer may be smaller. No lender can guarantee approval, and treating a bad credit label as a barrier that rules out every option is usually more pessimistic than the reality.

If your business or personal credit history includes missed payments, defaults or a County Court Judgment, our dedicated bad credit business loans guide goes into more detail on what specialist lenders typically look for and how to strengthen an application.

If you're struggling with existing business debt rather than looking to borrow more, it's worth getting independent guidance before taking out further finance. MoneyHelper offers impartial guidance on business and personal debt at moneyhelper.org.uk or on 0800 138 7777.

Many unsecured business loans to limited companies require a director's personal guarantee, and it's one of the most important things to understand properly before signing anything, not a formality to skim past.

A personal guarantee means that if the business can't repay the loan, the director who signed the guarantee becomes personally liable for the outstanding balance. In practice, that can mean the lender pursuing the director's personal assets, including savings, to recover what's owed, separate from whatever happens to the company itself.

This is different from a secured business loan, where a specific asset, such as commercial property, equipment or sometimes a director's home, is used as security from the outset. With a secured loan, the lender's claim is against that named asset. With a personal guarantee on an unsecured loan, the director's liability isn't limited to a single named asset; it can extend to personal assets more broadly, up to the guaranteed amount.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. This applies directly where a business loan, or a personal guarantee, is secured against your home, which is why it's worth reading the terms of any guarantee carefully, alongside our secured business loans guide, before you sign anything.

Before signing a personal guarantee, it's worth asking: is the guarantee limited to a specific amount, or unlimited? Does it cover just this loan, or other business debts too? What happens to the guarantee if you leave the business or sell your shares? An advisor can talk through what a specific guarantee means for your circumstances, but the decision to sign one is always yours to make with full information.

The right options look different depending on whether your business is pre-trading, newly trading, or has a couple of years of accounts behind it.

Pre-trading and early-stage businesses typically have the most limited choice among mainstream commercial lenders, since most want to see some trading history. The Government-backed Start Up Loans scheme, delivered through the British Business Bank, is specifically designed for this stage, offering an unsecured personal loan with mentoring support for new businesses that might not otherwise qualify for commercial lending. A handful of specialist startup lenders will also consider newer businesses, usually weighing the founder's personal credit history and business plan more heavily than trading accounts. Our Start Up Loans scheme guide covers eligibility and how to apply in more detail.

Established businesses with 2 or more years of trading have access to a much wider commercial panel, including secured lending, asset finance and invoice finance options that typically aren't available to pre-trading businesses. Lenders can assess actual trading performance rather than projections, which usually means more competitive terms and larger amounts become available as a business builds a track record.

Neither route is inherently better; it's about matching the right product to where your business actually is. A pre-trading business forcing itself into commercial lending it doesn't yet qualify for is less useful than starting with a Start Up Loan and building from there.

Applying through an advisor follows a straightforward process, and there's no pressure to proceed at any stage, whether that's during the initial conversation or after seeing what's available.

Business loans can genuinely help with cash flow, growth or a specific purchase, but every advantage comes with a cost or a risk that's worth weighing before committing to any offer.

A business loan isn't the only way to fund cash flow, equipment or growth, and it's worth knowing what else is out there even if you ultimately go ahead with a loan.

• Business overdraft - flexible short-term borrowing tied to your business bank account, useful for smoothing cash flow rather than funding a large one-off purchase.
• Business credit card - convenient for smaller, everyday expenses, though usually a costly way to borrow if the balance isn't cleared regularly.
• Equity or investment funding - bringing in an investor in exchange for a share of the business, which avoids taking on debt but means giving up some ownership and control.
• Grants - non-repayable funding from government or sector bodies, though usually limited, competitive, and tied to specific criteria such as sector, region or business stage.

None of these are necessarily better or worse than a business loan; they're other routes worth knowing about before deciding how to fund your business.

Every lender in this guide, whether a bank, a specialist lender or the Start Up Loans scheme, can only offer their own product. An advisor's role is different: comparing a wide range of lenders and loan types in one place, rather than starting from what one lender happens to sell.

That matters in business lending more than most other borrowing, because the market is genuinely fragmented. The lender best suited to a pre-trading startup is rarely the same lender best suited to an established business wanting invoice finance, and working through each option individually would take considerably longer than comparing them side by side.

Access expert advice with no pressure to proceed is central to how this works in practice. You can compare your options, ask questions, and walk away at any point without any obligation to take a loan you're offered.

We compare a wide range of lenders rather than covering the entire market, so it's still worth asking your advisor which lenders were considered for your specific circumstances and why. If a business loan turns out not to be the right fit, you can also compare all our loan types to see what else might work for your business.