Top 12 Unsecured Business Loans

Compare the 12 best unsecured business loans offered by high street banks, alternative lenders and peer to peer providers.

About 8% of UK SMEs are financed, in part, by business loans of some type. So if you are looking at taking out a business loan, you have a big decision to make: to go secured or unsecured.

A secured loan uses your personal and business assets as a security for the loan amount. This is known as asset-based lending and if you fail to make loan repayments, those assets could be claimed.

An unsecured loan doesn’t need assets as security for the loan amount. Instead, lenders look at your credit history and the health of your trading position, considering factors such as cash flow, balance sheet and cash reserves. Unlike with secured lending, an unsecured loan is usually dischargeable (written off) if your business goes insolvent. However, most lenders will ask for the protection of a personal guarantor.

If you’ve decided that an unsecured loan is right for you, the next step is to compare the various business funding options available. In this guide, we’ve searched the whole market to find the best unsecured options available from UK banks, alternative lenders and peer-to-peer solutions. We’ve also included a handy FAQ, designed to help you make the best decision for your business.

Top 12 Unsecured Business Loan Providers

Banks

In the age of digital banks and innovative startups, we often forget the humble high street bank. But with competitive interest rates, good quality customer service and speedy decisions available, they are well worth your consideration if you are looking to increase your working capital.

  • How to apply: Apply in branch, by phone or online.
  • Eligibility: Sole trader, partnership, limited company, charity, club or association.
  • Decision speed: Get a quote online in minutes if you’re borrowing less than £100,000. Then, a full decision is usually made “within a few days” and the cash should appear in your account within 48 hours of signing paperwork.
  • Fees: Undisclosed.
  • Typical interest rate range: Representative APR is a fixed 8.9%.
  • Minimum turnover: Undisclosed.
  • Available amounts:  £1,000 to £25,000, with up to £100,000 for Barclays Business Banking customers.
  • Available terms: 1 year to 10 years.

Barclays is an international banking giant with origins as far back as 1690. There’s a Barclays branch on many high streets across the UK, and the bank recently made a promise to keep its ‘Last in town’ branches open, so in-person banking remains an option in even the most remote areas of the country.

For loans between £1,000 and £25,000, Barclays has one of the most transparent offerings available, with an easy to use unsecured business loan calculator on their website. This shows your monthly payments and likely interest rate instantly.

In order for business owners to access larger loans of up to £100,000, you’ll need an existing relationship with Barclays. That’s because, for more significant lending, the bank will need to calculate a provisional lending limit based on the health of your business. If you fall into this category, you can apply for loans up to that provisional lending limited and receive the money in as little as 24 hours — impressive!

Helpfully, Barclays also offer a 6-month repayment holiday at the start of your loan. Sure, interest will accrue during this time, but it gives you a chance to use the loaned capital before you need to make repayments.

We think this is one of the best offers on the high street for unsecured small business loans, due to the competitive, fixed interest rate and focus on building long-term relationships with business customers.

  • How to apply: Apply in branch.
  • Eligibility: Available to Metro Bank Business Current Account customers and minimum turnover generally applies (see below).
  • Decision speed: Undisclosed.
  • Fees: No fees under £25,000. Over £25,000, valuation fees, legal fees and or administration fees may be charged.
  • Typical interest rate range: Typically 9.6% fixed APR for loans up to £25,000, for amounts over this, the interest rate is tailored to each loan.
  • Minimum turnover: Generally over £2 million in turnover, though they do consider exceptions.
  • Available amounts:  £2,000 to £25,000 with more subject to status.
  • Available terms: 1 year to 5 years.

Metro Bank launched in 2010 and was the first high street bank to open in the UK in over 150 years. With their long branch opening hours and trendy online presence, it’s hard not to love this high street revolutionary.

According to the terms online, Metro offers unsecured business loans subject to status, which means this bank is playing its cards close to the chest. The only way to find out if your business qualifies is to apply.

However, there is another way. Businesses can quality qualify for unsecured loans with Metro Bank through the Enterprise Finance Guarantee, supported by the government-run British Business Bank. This is a scheme for business with under £41 million in yearly turnover who do not have sufficient security for a secured loan, but do have a workable business proposal.

Metro Bank will guide you through the process of applying for this initiative, but be warned — there is a government mandated 2% annual fee on all loans through the Enterprise Finance Guarantee.

  • How to apply: Apply in branch, by phone or online.
  • Eligibility: UK based business.
  • Decision speed: Undisclosed. But once approved, your funds should be available within 48 hours.
  • Fees: Arrangement fee applies, from £100 to £250 for loans up to £15,000. For amounts over this, you’ll be charged 1.5% (with £250 as a minimum).
  • Typical interest rate range: 9.9% APR representative.
  • Minimum turnover: Undisclosed.
  • Available amounts: £1,000 to £25,000.
  • Available terms: 1 year to 10 years.

TSB launched in its current form back in 2013, making it fairly new on the high street bank scene. That being said, ‘TSB’ has been a household name for many years, thanks to its long history with the Lloyds Banking Group. Mostly recently, TSB was acquired by Spanish bank Sabadell in March 2015 and now has over 550 branches across the UK.

TSB has 2 business loan products — a base rate loan with a variable interest rate and a fixed loan with a fixed interest rate. Both are available on either a secured or unsecured basis. Despite generous ranges for their secured loans, TBS’s business loan terms state that unsecured loans are only available in amounts from £1,000 to £25,000. However, their 10 year term is one of the most generous in this review.

According to independent service quality survey results, TSB are the lowest ranked business bank with just 38% of SMEs surveyed willing to recommend them to other SMEs. Worryingly, only 37% praised TSBs account management.

It’s not all doom and gloom, though, with TSB working hard to regain the confidence of SMEs. In a recent report, TSB committed to supporting local businesses; allocating significant funding and setting out plans for improving their SME customer relationships.

  • How to apply: Apply online within 10 minutes.
  • Eligibility: UK limited company and trading for at least 18 months, with at least 1 set of accounts filed at Companies House.
  • Decision speed: Within 48 hours.
  • Fees: No arrangement fees on any online business loan.
  • Typical interest rate range: Representative 10.2% APR on unsecured business loans up to £25,000.
  • Minimum turnover: £5 million.
  • Available amounts: Up to £25,000 unsecured.
  • Available terms: 1 year to 10 years.
Established in 1849, Yorkshire Bank has had a tumultuous time lately, being acquired by the National Australia Bank in 1990 then by CYBG in 2018. Yorkshire Bank is currently undergoing a significant rebranding and will relaunch as Virgin Money by 2021. But you shouldn’t let the rebrand put you off; it’s still very much ‘business as usual’ whilst the transition takes place. In fact, Yorkshire makes the application process smooth and easy — providing one of the most straight-forward unsecured business loan applications we’ve seen. Here, customers can request an indicative quote online within 10 minutes and receive a decision within 48 hours. Yorkshire Bank was ranked 5th in an independent CMA survey of business banking providers, with 60% of SMEs likely to recommend the Yorkshire business account to other SMEs.

Alternative Lenders

The business lending market has been transformed by the emergence of alternative lenders. Faster and more flexible than the high street, alternative lenders could be a great choice for your business but please their terms and repayment periods as many charge higher interest rates than the rates advertised. 

  • How to apply: Apply online.
  • Eligibility: UK based limited company or sole trader, trading for at least 18 months.
  • Decision speed: Undisclosed.
  • Fees: Undisclosed.
  • Typical interest rate range: From 9.51%
  • Minimum turnover: Over £15,000.
  • Available amounts: £10,000 to £250,000.
  • Available terms: 1 year to 5 years

Esme is owned by NatWest but do things very differently to their parent company, referring to Esme as a “standalone digital lending platform for SMEs and scale up businesses”.

So what does this mean for you? For one: you can apply online, via a website that feels approachable and contemporary — a breath of fresh air compared to some other business lenders. Esme’s competitive rates and loan amounts of up to £250,000, make this alternative lender well worth your consideration. However, if you require longer terms than 5 years, you’ll need to look elsewhere.

Additional benefits include no early repayment charges and the ability to apply for up to 2 loans at time, once you’ve made 6 consecutive payments.

One thing to note: you can’t use Esme funds to buy other businesses, so empire builders will need to find another source of finance.

  • How to apply: Apply online or by phone.
  • Eligibility: Trading for at least six months, UK limited companies and LLPs. Excludes Guernsey, Jersey or the Isle of Man.
  • Decision speed: 24-48 hours.
  • Fees: No fees if you apply directly.
  • Typical interest rate range: Rates start from 1.5% per month.
  • Minimum turnover: Over £5,000 per month.
  • Available amounts: £5,000 to £250,000 (a maximum of two months’ revenue).
  • Available terms: 1 month to 24 months.

Fleximize was founded in October 2013 and prides itself on an agile approach, offering fast and flexible financing in as little as 48 hours. It also includes penalty-free early repayments which can reduce the loan term, top-ups to access further capital quickly and repayment holidays.

This financing approach is powered by its own credit scoring system and Fleximize encourages businesses that have been rejected elsewhere to apply directly, as the lending criteria here might be different to a traditional bank.

With an exceptional TrustPilot rating of 4.8/5, based upon 291 reviews from their business customers, reviewers particularly praise the flexible service and access to a dedicated relationship manager. With such strong customer feedback, it’s little surprise that Fleximize was awarded the ‘Innovation in the SME Finance Sector’ prize at the 2018 Business Moneyfacts Awards and named the ‘Best Business Finance Provider’ at the 2018 British Bank Awards.

We’d recommend Fleximize to businesses who have been rejected by typical financing providers. But with an advertised rate as low as 1.5% a month, be extra cautious what you’re signing up for — as, in reality, the rate will likely be far higher. Also note Fleximize’s far shorter repayment terms in months, not years; a benefit for some, but a drawback for others.

  • How to apply: Apply online.
  • Eligibility: Minimum 3 years trading history, registered in England and Wales, homeowner in England and Wales and proven profitability in recent accounts.
  • Decision speed: Undisclosed application process length — requires an online form, follow up call and then documents to be exchanged. Upon accepted offer, though, funds are available the same day.
  • Fees: Undisclosed.
  • Typical interest rate range: Undisclosed.
  • Minimum turnover: Undisclosed.
  • Available amounts: £25,000 to £150,000.
  • Available terms: 3 months to 5 years.

Nucleus Commercial Finance was founded in 2011 and has lent close to £1.2 billion at the time of writing [November 2019]. The bank celebrates its “human approach”, with customer service representatives always available via telephone, and offers the stability and scale of bank financing combined with the fast decisions of an alternative lender.

Nucleus’s unsecured loan product is called Cash Flow Finance and, aside from requiring 3 years trading history, you’ll also need to be a homeowner to be eligible. But don’t worry, they do not take a charge over your property.

Being an alternative lender, Nucleus has the ability to incentivise early payments; clear the full loan amount before the end of your term, and you’ll receive a 10% discount. What’s more, the bank places few limits on what the capital can be used for — simply requiring that it is spent directly on your business.

  • How to apply: Apply online or by phone.
  • Eligibility: Based in the UK, trading for at least 3 years and have a UK business bank account.
  • Decision speed: Decision in one working day.
  • Fees: One-off arrangement fee (2-2.5%) deducted from your approved credit line when a withdrawal is made. Management fee from 1% per month, depending on your business.
  • Typical interest rate range: Monthly interest charged (average 1.4%).
  • Minimum turnover: Yearly turnover of at least £500,000.
  • Available amounts: £50,000 – £350,000 (or up to 8-12% of your annual turnover).
  • Available terms: Repayment term of 6, 12 or 15 months available if operational for 3+ years; 24-month term available if operational for 8+ years .

Spotcap was founded in 2014 is an online lender focused on small and medium-sized businesses. The company is headquartered in Berlin and operates in Spain, the Netherlands, the UK, Australia and New Zealand.

Spotcap has a transparent business loan calculator on their website, which allows you to enter an amount and a duration to instantly calculate an estimated monthly payment plan. It’s good that Spotcap offer this, because at first view the variety of terms and myriad of fees can be quite perplexing. Refer to this calculator to clarity exactly how much you can borrow, and what it’ll cost you to do so.

To its credit, Spotcap’s unsecured business loan is very flexible. Once your application has been approved, you have 1 month to make a withdrawal via the online dashboard. Then, you can either withdraw the full amount or just a partial amount, only being charged for the capital you actually use.

  • How to apply: Apply online.
  • Eligibility: Must be a UK-based business and operate as a sole-trader, partnership or limited company.
  • Decision speed: Decision in one working day.
  • Fees: Business loans have a 6% upfront fee.
  • Typical interest rate range: All loans have variable interest rate, with rates varying from 2% to 6% a month.
  • Minimum turnover: Undisclosed.
  • Available amounts:  £1,000 to £200,000
  • Available terms: Up to 12 months.

Founded in 2011, iwoca has a big, bold brand that seems to be targeting small, independent businesses with the promise of making finance “feel like a super power, not a headache”. And this niche approach seems to be working — as of November 2019, iwoca has lent £1 billion, to over 50,000 customers, with £330 million arranged in 2018 alone.

Most impressively, the bank recently received a £10 million grant from the Capability and Innovation Fund (CIF), issued by The Banking Competition Remedies fund. This aims to improve competition in the banking sector by funding challenger banks and is truly a testament to the strength of iwoca.

As well as the product detailed above, iwoca also offers other flexible financing options including a credit facility called ‘Credit Lines’. This is available for both new startups and established companies, but startups are limited to a maximum credit limit of £10,000.

Once you’ve arranged your product, you can withdraw as much or as little as you need via an online dashboard. From this dashboard, you can modify your repayments and make free early repayments to save interest.

Their focus on customer service is working as they’ve been rated excellent by more than 3,200 customers on Trustpilot. Go with iwoca if you want to spend “less time ticking boxes, more time shipping boxes”.

Peer-to-Peer

Peer-to-peer lenders are online money cupids, connecting investors with companies wanting to borrow. By cutting out the middleman, investors get higher rates and borrowers can get some fantastic terms. It used to be an unregulated by the financial conduct authority market, but since 2014 regulations from the FCA have introduced an element of control which is very much required given the recent collapses of Lendy and FundingSecure.

  • How to apply: Apply online.
  • Eligibility: On application.
  • Decision speed: In as little as 5 hours.
  • Fees: Undisclosed.
  • Typical interest rate range: From 1.9% per year.
  • Minimum turnover: Undisclosed.
  • Available amounts: £10,000 to £500,000.
  • Available terms: 6 months to 5 years.

Funding Circle is a peer-to-peer marketplace, founded in 2010. Over 54,000 UK businesses have borrowed £5.8 billion through Funding Circle and the lender recently received £150 million of capital from the government-led British Business Bank to distribute.

As a peer-to-peer marketplace, Funding Circle collects deposits from thousands of investors and redistribute the capital to businesses in the form of loans. Each investor will lend less than 0.5% of their overall capital to a business, so don’t worry, an individual investor won’t be calling you for updates!

Funding Circle specialise in small businesses and offer a quick application process that takes just 10 minutes, with access to dedicated account management and follow-on funding when you need it.

According to a survey conducted by Funding Circle, 90% of businesses that borrow from Funding Circle would speak to them first for a loan vs. a bank, and it’s easy to see why. With generous loan terms, low interest rates and competitive capital amounts available, Funding Circle is definitely worth considering.

  • How to apply: Apply online or by phone.
  • Eligibility: Be a UK-based business as a limited company, process more than £10,000 a month through your business bank account and have at least 12 months trading records.
  • Decision speed: Approved in 24 hours and funded within 3 days.
  • Fees: 3% initial fee, a £295 processing fee and a monthly service fee of £25.
  • Typical interest rate range: Undisclosed.
  • Minimum turnover: Undisclosed.
  • Available amounts: Limited to 75% of your average monthly turnover, a minimum of £5,000.
  • Available terms: 6 months to 12 months, depending on your turnover.

Capify was founded in 2018 with the goal of providing simple, quick, and responsible access to capital.

Capify was included in this review for business borrowers who need short term (6-12 months) capital without large monthly repayments. Instead, Capify take small amounts regularly, either daily or weekly. This could fit your cashflow better than a large monthly repayment. They all offer Merchant Cash Advances.

Customers benefit from a dedicated account manager and UK-based support. Clearly, the support is good with an 4.7/5 rating on Trustpilot from 276 reviews, praising their personal service.

  • How to apply: Apply online.
  • Eligibility: Must be a limited company or LLP, with cashflow indicating ability to repay (illustrated by 2 years filed accounts), proven management ability and a strong business plan.
  • Decision speed: 10 days, following a successful loan auction.
  • Fees: 4% of the amount you borrow plus additional fees if arranged by a broker. Late fees also apply.
  • Typical interest rate range: Rates starting at 5.95%.
  • Minimum turnover: Approximately £100,000 a year.
  • Available amounts: £5,000 to £500,000.
  • Available terms: 6 months to 5 years.

Since launching in 2014, LendingCrowd arrived on the scene to “think outside of the bank”. And it’s certainly done that — LendingCrowd’s funding model is different to other P2P platforms as it centres around an auction system, called the ‘Loan Market’.

To list your funding requirements on the loan market, your business is assessed by a LendingCrowd panel, which typically takes 24 hours. From this assessment, LendingCrowd grant a credit rating from A+ to C+, which determines the rate of interest you’ll pay. This ranges from 5.95% for an A+ business to 12.25% for a C+ rated business. Full details can be seen here in the borrower’s guide. Once on the loan market, lenders are either automatically matched or can self-select investments on the LendingCrowd Loan Market.

We included LendingCrowd in this article due to this flexible approach. If you’ve been rejected elsewhere, LendingCrowd could match you with investors with an appetite for risk and higher returns.

FAQs

If you default, the lender may increase the interest your rate and/or add fees. They might also send the loan to a collection agency. If unsuccessful, the agency can take you to court and possibly garnish your wages or place a lien against your home. Your personal credit score will also drop.

No, lenders can collect the outstanding loan amount via court order, giving them the ability to seize assets.

Yes, thanks to the Enterprise Finance Guarantee (EFG). Of the businesses that qualified under this scheme, 37% were startups. EFG guarantees 75% of the loan if you default, basically working as the security.

If you do not qualify for Enterprise Finance Guarantee, you can usually get an unsecured business loan with a personal guarantee.

There are 3 main ways:

  • A Limited Personal Guarantee is a specified limit to the amount of debt that can be collected from you personally, if your business fails to pay.
  • An Unlimited Personal Guarantee means that an unlimited amount of debt can be collected from you personally, if your business fails to pay.
  • Blanket Business Lien As A Form of Security means that the lender can seize all your businesses assets in order to repay the loan.

Your choice of lenders will be reduced but it is possible to get a business loan. Check out our guide to business loans for bad credit

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