Before we delve into small business loans available, it’s important to understand the different types of providers. In the UK, there are four distinct sources available to business owners:
Banks offer both secured and unsecured business loans, with their unsecured loans generally coming at higher interest rates. Since the GFC, banks have been stricter when it comes to lending out money and will run detailed checks on your business to ensure you can service the loan. That aside, banks remain a viable option for many business owners.
If you are process of starting your business or it only has a few months trading history you may be interested in reading our guide to business loans available to start ups.
For those businesses with a 12+ month trading history and looking to secure finance quickly some of the best options are merchant cash advances and invoice finance where finance is secured against your credit card payments and invoices respectively.
Finally, business credit cards are now offering some very competitive terms and is another options if you are looking for fast and flexible business finance.
About HSBC Business Loans
HSBC is one of the world’s largest banking organisations, with 1.5 million business customers spread across 53 countries. HSBC works with sole traders up to large multi-nationals, offering a selection of business loan packages to suit individual needs. It offers fixed-rate small business loans of up to £25,000, which can be paid off over up to 10 years. These loans are available for SMEs with a turnover of up to £2 million per year. There are no charges for additional repayments, and customers can manage their loans via the HSBC online banking portal.
For larger businesses looking to borrow more than £25,000, HSBC also offers a Flexible Business Loan with payment terms of up to 20 years. For more information about eligibility for HSBC business loans, visit the business borrowing guide on the HSBC website.
About Lloyds Bank Commercial Business Loans
Lloyds Bank offers financial services to individuals and businesses all over the UK. Lloyds Bank claims to approve 9 out of 10 business loans and overdrafts, which includes three different business loans, depending on your company size and the amount you wish to borrow. Lloyds Bank offers secured and unsecured loans, for amounts as low as £1,000 up to £500,000. There are instant online approvals for loans up to £10,000.
Depending on the loan package, repayment terms are between 1 and 25 years.
Lloyds Bank offers a sample interest rate of 9.3% APR Representative, based on an £8,000 loan paid back over five years. There are no fees on loans up to £25,000, and a maximum arrangement fee of 1.5% applicable to larger loans.
About Yorkshire Bank Business Loans
Established in 1859, Yorkshire Bank is a subsidiary of Clydesdale Bank and has a strong focus on business customers. Yorkshire Bank offers business loans for SMEs between £10,000 and £150,000, all available via a 10-minute online application. Funds are then approved and available within 48 hours. Loans can be repaid over up to 5 years, with no additional fees for early payments.
For UK businesses that have traded for more than 18 months and have an annual turnover of less than £5 million, Yorkshire Bank offers competitive business loan rates with the backing of a strong financial group.
About Royal Bank Of Scotland Small Business Loans
The Royal Bank Of Scotland (RBS) has roots dating back to Edinburgh in 1727. Since then, it has become a significant financial group encompassing many banks and lenders. RBS offers competitive business loans for SMEs up to £50,000, with terms of between 1 and 10 years.
RBS offers fixed-rate loans, repaid in monthly instalments. You do not need to be an existing RBS customer to apply, and online applications are available through the bank’s website. Approvals are generally granted within 48 hours, with funds accessible shortly after.
About Rebuilding Society Business Loans
Rebuildingsociety.com is a peer-to-peer (P2P) financing platform that allows business owners to source funds from an online community of individual lenders. The company has facilitated over £15 million in loans to over 250 SMEs throughout the UK.
Loan applicants are connected to a pool of stakeholders who can fund their loans, investing in the long-term success of their business. The lenders set their own rates of interest, which is paid back directly to them over the life of the loan. Rebuildingsociety.com operates with maximum transparency, allowing open communication between business owners and lenders throughout the funding and loan process.
Via its online community, business owners can secure amounts of £25,000 up to £350,000. Loans can be taken out as either secured or unsecured and paid back over between 6 and 60 months. The average interest rate is listed as 12.4% for A-rated businesses, and interest rate discounts can be offered in exchange for additional security.
About Funding Circle Business Loans
Funding Circle claims to be the largest peer-to-peer financial institution in the UK, having lent £5.4 billion to 52,000 small businesses in the UK. Through its online platform, businesses are connected to individuals and organisations looking to invest in business loans. All interest paid is returned directly to investors, with Funding Circle collecting a fee of between 1.5% and 10% of each loan. Funding Circle performs credit assessments on applicants and manages returns for investors, acting as a facilitator for both parties.
Funding Circle offers unsecured business loans starting at £10,000, all the way up to £1,000,000. Loans can be taken out between six months and five years and can be repaid early with no additional fees. Funding Circle has a pool of around 92,000 investors, ranging from individuals to large institutions such as the government-owned British Business Bank.
About Capify Business Loans
Capify is an alternative finance provider for limited companies which has been operating since 2008. Based in South Manchester, Capify has funded thousands of businesses across the UK with loans ranging from £5,000 up to £150,000 and more. Capify’s focus is on agility and convenience, with fast loan approvals and flexible repayment terms. With a small minimum loan amount, businesses can use Capify to buy equipment, place large stock orders, improve cash flow, or hire additional staff.
Capify specialises in short-term loans that span between 6 and 12 months. Businesses can borrow up to 75% of their average monthly turnover, with repayments made daily or weekly to avoid monthly lump-sum payments. For limited companies turning over at least £10,000 per month, and which have operated for 12 months or more, Capify offers a competitive funding alternative to the traditional banks.
About 365 Business Finance Business Loans
Presenting a unique alternative to traditional bank loans, 365 Business Finance offers an SME financing model that deducts repayments directly from credit card transactions. The loans are especially suited to retail, cafes, restaurants, bars, and any other business with recurring credit card payment. Cash advances are available between £5,000 and £200,000, with fast online approvals and funds released within a few business days. 365 Business Finance offers a flexible repayment model and is available to any UK business six months or older, processing more than £5,000 a month in credit card transactions.
365 Business Finance has received extremely positive reviews, with an average rating of 4.9 out of 5 from over 150 customers on Trustpilot.
About Spotcap Business Loans
Spotcap entered the alternative lending market in 2014 and provides SMEs in the UK with unsecured business loans. Headquartered in Berlin, and with offices in London, Madrid, and Sydney, the company now has over 1,000 customers around the world and has raised more than £90 million in funding. Spotcap has consistently received positive reviews, holding a score of or4.9 out of 5 on Trustpilot from over 100 customers.
Spotcap offers unsecured business loans between £50,000 and £350,000, which can be repaid over terms of up to 24 months. Applicants are not required to submit personal guarantees or capital but must have run a UK-based business for at least three years with an annual turnover exceeding £500,000. Loans are approved within one working day and can be managed through Spotcaps paperless, online portal.
About Capital On Tap Business Loans
Capital On Tap is a specialist lender that has financed over £1 billion to more than 65,000 businesses across the UK. The company offers business loans of up to £50,000 in the form of either a credit card or an online loan, or both. Loans can be taken out between 1 and 24 months, via a 10-minute online application process. Capital On Tap is a finance option available to almost all SMEs; you need to be a UK-based business in good financial standing, with a turnover exceeding £2,000 per month. Whether the money is to boost cash flow, finance a business expansion, or for other reasons, Capital On Tap is a simple and easy way to secure extra funds.
Capital On Tap has received stellar online reviews, currently holding a score of 4.8 out of 5 from over 5,000 reviewers on Trustpilot.
About iwoca Business Loans
iwoca is an alternative lender that was founded in 2011. Headquartered in London, iwoca has lent over £900 million to over 50,000 SME customers. The company presents itself as a smart and friendly alternative to banks, with lower fees, greater transparency, and more straightforward access to small business funding.
Iwoca offers two packages for SMEs: a flexible credit line of up to £200,000 with a term of up to 12 months and a small business loan of up to £250,000 over a term of up to 5 years. The interest rates can vary, depending on the amount of money borrowed and the length of the term. iwoca offers fast and straightforward online approvals for their loans, and you can be approved for a loan and have access to new funds within just 24 hours. iwoca has received very positive online reviews, with more than 3,600 5-star reviews on Trustpilot.
About Fleximize Business Loans
Fleximize is a UK-based alternative lender that was founded in 2014. Since then, the company has facilitated loans to over 3,000 UK businesses. The company offers business loans between £5,000 and £500,000, both secured and unsecured. Payments terms can vary depending on the type of loan but can be arranged for up to four years with monthly repayments. Any business with at least six months of trading history and a monthly turnover of more than £5,000 is eligible to apply. Approvals are easy and fast, with funds generally approved and deposited within 48 hours.
Fleximize is an award-winning lender and was named the UK’s Best Business Finance Provider at the British Bank Awards in 2018. The company also holds an average rating of 4.8 out of 5 on Trustpilot.
About Ferratum Business Loans
Ferratum Business is part of the Ferratum Group, a publicly-traded company operating in 24 countries. With UK offices in Perth and Liverpool, Ferratum Business offers loans of up to £50,000 over 18 months. The loans are unsecured and feature fixed monthly repayments.
Ferratum’s loans are available to a broad range of businesses, provided they have been operating in the UK for more than 12 months, with an annual turnover greater than £75,000. The company has a fast online application process, with most approvals granted within 24 hours, and funds released the following day.
Ferratum Business has received positive reviews, with an average score of 4.5 out of 5 on Trustpilot.
About The Start Up Loans Company
A subsidiary of the British Business Bank, the Start Up Loans Company provides government-backed unsecured loans for individuals to start or expand a UK business. Since its launch, the company has lent almost £500,000 to a total of 60,000 people. With loans as small as £500 and scaling up to £25,000, individuals can access start-up business finance, which may not have been possible via traditional banks. Loans come at a fixed interest rate of 6% per annum and can be repaid over 1 to 5 years.
In addition to business finance, the Start Up Loans Company provides 12 months of free mentoring for approved business owners. It also offers business plan templates, start-up guides, and a host of other online tools designed to benefit individuals looking to thrive in the business world. You can find other companies offering start up loans here.
For further information about government business loans available in your area, search the UK government finance registry.
The secured business loan is one of the most popular types of SME business loan. A secured loan is a loan that’s backed by collateral, like business equipment, which your lender can seize if you default on the loan. This reduces the risk to your lender, which helps you secure better rates and higher loan amounts.
An unsecured business loan is a loan that doesn’t have collateral; if you default on the loan, your lenders can’t seize anything belonging to you, or your business. This is less risky for you, but it creates more risk for lenders. For this reason, unsecured loans tend to have higher rates, lower amounts, and stricter requirements.
A line of credit is a cross between a loan and a credit card. You can spend up to a specified amount (typically around £50,000 for SMEs, but can be much higher), so long as you pay off that amount and its interest within an agreed-upon deadline – like a loan.
You can then keep using, and repaying, the money you borrow on a line of credit so long as you continue to pay on time – like a credit card.
Although all of the loans we’re talking about in this article fall under the same “SME loans” umbrella, they’re very different from one another. Unsecured loans are great for newer businesses, secured loans are better for more established businesses, and a business line of credit is a solid option for businesses that need flexible funds.
The loan amount is the amount you’re going to borrow, not how much you’re going to pay back. So you’ll want to settle on an amount that you can reasonably pay back after interest is applied. The savviest approach would be to invest your loan in areas of your business that will provide a high ROI – that way the loan pays for itself. However, as we mentioned before, fewer and fewer SMEs have the bandwidth to do this right now.
APR, or annual percentage rate, is a combination of the interest you’re going to pay along with any annual fees, processing fees, paperwork fees, etc. It’s the most accurate representation of how much it’s going to cost you to borrow a loan, so make sure you know it before you sign on the dotted line.
Finally, you need to consider how long you want to carry your loan debt. The faster you repay a loan, the less you’re going to spend in interest. However, this will also increase the amount of each installment, which can choke your funds. Determine what you can afford each month before agreeing to a loan, and then choose your loan term based on that amount.
Just like a personal loan, several factors are considered before your business is approved for a loan. This includes:
Poor credit will limit the choice of lenders that will accept you, but there are still options available. You may be able to secure invoice financing or a cash advance, as these present a lower risk for lenders. Some specialist online lenders will consider you even with bad credit, especially if your business is consistently delivering positive financial results.
In short, yes. Just as lenders will look at both your business and personal credit history when assessing a new loan, that loan also has the possibility of affecting your personal credit score down the road. This is particularly true for sole traders whose business and personal finances are essentially the same. If your business runs into financial difficulty with you as an owner or director, this will have a bearing on your credit score when it comes to borrowing more money in the future.
Each lender will have their own criteria, with banks often having the strictest rules. Lenders will look at a host of factors, including the type of company you operate, the number of years you have been running, your annual turnover, your profitability, and your personal financial history as an owner or director.
These and other factors will impact who you can borrow money from, how much you can borrow, the rate of interest, and the repayment terms. The lower the financial risk you present to lenders, the more flexible they will be with their loan offerings.
If you are struggling to get a loan due to the credit rating of your business or want to look at other options to get working capital you may want to check out merchant cash advances, invoice finance or asset finance. It is often best to avoid taking out personal loans and have the credit check done on your business only. The eligibility criteria will vary between finance options and be determined by many factors so it may be best to go via a credit broker.
Just like a personal loan, several factors are considered before your business is approved for a loan. This includes:
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