How to Get a Business Loan in the UK: Rates, Eligibility and Tips

A business loan is one of the most common ways UK companies fund growth, equipment, hiring or working capital. But approval rates and terms vary hugely depending on how you apply and who you apply to. Two businesses with identical accounts can get very different answers from the same lender depending on how the case is presented. This guide covers what actually decides the outcome.

How business loans work

A business loan provides a lump sum repaid in fixed instalments over an agreed term, with interest. Loans can be secured, backed by an asset such as property, or unsecured, based on your business's strength and trading history. Terms typically range from one to several years, and longer on secured facilities.

The distinction matters more than most borrowers expect. Secured lending is cheaper and available in larger amounts, but it takes longer and puts an asset at risk. Unsecured lending is faster and leaves your property alone, but costs more and is usually capped against turnover.

The main types of business loan

• Unsecured business loan. No asset security, typically one to five years, decided on trading strength. A personal guarantee is usually required.
• Secured business loan. Backed by commercial or residential property, priced lower and available over longer terms.
• Asset finance. Where the money is for equipment or vehicles, the asset itself is the security, which is normally cheaper than a loan for the same purpose.
• Invoice finance. A revolving line against your unpaid invoices, which grows with turnover instead of needing renegotiation.
• Merchant cash advance. Repaid as a percentage of daily card takings, suited to retail and hospitality with variable trade.
• Revolving credit facility. A limit you draw and repay as needed, paying interest only on what is drawn.
• Government backed lending. Schemes such as the Growth Guarantee Scheme, where a government guarantee supports lending that would otherwise be declined.

What lenders look at

• Trading history and turnover. How long you have traded and your revenue. Most lenders want a minimum of 12 to 24 months.
• Profitability and affordability. Whether cash flow comfortably covers the repayment alongside existing commitments.
• Credit profile. Both business and, for smaller firms, the directors' personal credit.
• Security or guarantees. Assets available, or personal guarantees offered.
• Existing debt. Other loans, advances and finance agreements, and whether the business is already stretched.
• Bank conduct. Returned direct debits, unauthorised overdraft use and HMRC arrears all read badly.
• Purpose. A specific, productive use is far easier to fund than an unexplained request for working capital.

Typical rates and costs

Rates depend on the loan type, term, security and your business profile. Secured loans generally price lower than unsecured because the lender's risk is reduced. Beyond the interest rate, expect an arrangement fee on most facilities, and check for early settlement charges if you may want to repay ahead of term.

Always compare the total cost of borrowing rather than the headline rate. A lower rate over a longer term can cost more overall than a higher rate over a shorter one, and a facility with a large arrangement fee can be worse value than one that looks more expensive per month.

What documents you will need

• Two years of filed accounts where available, plus up to date management figures
• Six to twelve months of business bank statements
• Details of existing loans, leases and finance agreements
• Proof of identity and address for the directors
• A short explanation of what the money is for and how it will be repaid
• For secured lending, details of the property or asset offered

Having these ready before you apply is the single cheapest way to speed up a decision. Most delays in business lending are caused by missing paperwork rather than by underwriting.

How long it takes

An unsecured loan for an established business can be agreed within 24 to 48 hours and funded within a week. Asset finance is similar once the supplier details are confirmed. Secured lending against property takes considerably longer, typically six to twelve weeks, because a valuation and legal work are involved. If you have a deadline, say so at the outset, because it changes which lenders are worth approaching at all.

How to improve your chances

• Keep management accounts and bank statements up to date, and file accounts on time
• Have a clear, specific purpose for the funds rather than a general request
• Show how the loan will generate a return or protect cash flow
• Apply to lenders whose criteria genuinely fit your business
• Clear or explain any HMRC arrears before applying rather than hoping they are missed
• Avoid making several applications at once, since a run of credit searches makes each subsequent lender more nervous

What to do if you are declined

A decline from one lender is not a verdict on the business. Lenders have very different appetites by sector, size and structure, and a case that fails a high street credit model can be perfectly fundable elsewhere. Ask for the reason, fix what can be fixed, and consider whether a different product would suit better. If the money is for equipment, asset finance may succeed where a loan failed. If the issue is timing rather than affordability, invoice finance or a revolving facility may fit.

What does not help is applying to five more lenders straight away. Each search is recorded, and a cluster of them is itself a reason to decline.

How we help

A cold application to the wrong lender wastes time and can dent your credit profile. We know which of the 300+ UK lenders suit your sector and circumstances, and structure the application for approval. At Sadi's Commercial Finance, founded by a former banker, we place deals with the right funder from the start.

Frequently asked questions

How much can my business borrow?

Unsecured lending is commonly assessed against annual turnover and affordability. Secured lending is driven by the value of the asset offered and can go considerably further. The realistic figure depends on affordability rather than a fixed cap.

Can a new business get a loan?

It is harder, since most lenders want 12 to 24 months of trading. Options for newer businesses include asset finance, government backed lending and start up loans, and the directors' experience and security carry more weight.

Do I need to give a personal guarantee?

On unsecured lending to a limited company, usually yes. A personal guarantee is not the same as a charge over your home, though guarantees can ultimately be enforced, so it should be understood properly before signing.

Will a poor credit history stop me?

Not automatically. Some lenders weigh recent trading performance more heavily than historic credit issues, particularly where there is an explanation and performance has recovered. The terms will reflect the risk.

Is a secured or unsecured loan better?

Secured is cheaper and larger but slower and puts an asset at risk. Unsecured is faster and leaves property alone but costs more. The right answer depends on the amount, the urgency and what you are willing to pledge.

How quickly can I get the money?

An unsecured loan can be funded within a week for an established business. Secured lending against property typically takes six to twelve weeks.

Does applying affect my credit score?

Most lenders carry out a credit search, which is recorded. A single application is not a problem. Several in a short period is, which is why applying selectively matters.

Can I repay early?

Most business loans allow it, though some carry an early settlement charge. Check this before signing if there is any chance you will want to clear the balance ahead of term.

Need a business loan? See our business loans service or speak to a specialist. You may also want to read our guides to asset finance, invoice finance and revolving credit facilities.