Business loans

With such a wide range of business loans and alternative finance products designed to manage cash flow, investment and growth projects it’s hard to know where to start when it comes to applying for a business loan. There are also different lenders on the market from high-street banks, challenger banks, an independent bank or a niche alternative finance provider. We know that it can be a task choosing a lender and product to suit your business needs.

Apply for a business loan

How do small business loans work?

A business loan is a sum of money that the lender provides and the borrower pays back, plus interest, over a set period of time. Some lenders may even charge your business if you decide to pay your loan amount off early, so it's always important to read the terms and conditions of your loan. You can even apply for a business loan online via our Funding Cloud platform. However you choose to apply, lenders will just need specific documentation in order to carry out checks and make a decision on if they can offer your business funding. Alternative lenders are making it easier and quicker for businesses to access the funding they need to trade, plan and grow than ever before. Your business may also be eligible for an unsecured business loan, meaning you won’t have to provide assets or property as security. Other options to consider include business credit cards and bridging loans which are short-term business loans designed to get your business from A to B quickly. Your business loans’ interest rate will depend on how ‘risky’ the lender deems you when it comes to advancing you the money. If your loan has a fixed interest rate, the rate remains the same meaning you’ll pay a set amount of interest for the term of the loan. Floating rates, on the other hand, change in line with the lender’s interest rate as well as the rate the Bank of England sets. With so many products and providers, the eligibility criteria, interest rates, and overall costs can vary significantly. Let’s take a look at everything you need to know about business loans.

How do small business loans work?

A business loan is a sum of money that the lender provides and the borrower pays back, plus interest, over a set period of time. Some lenders may even charge your business if you decide to pay your loan amount off early, so it's always important to read the terms and conditions of your loan. You can even apply for a business loan online, lenders will just need specific documentation in order to carry out checks and make a decision on if they can offer your business funding.

Your business loans’ interest rate will depend on how risky the lender deems you when it comes to advancing you the money. If your loan has a fixed interest rate, the rate remains the same meaning you’ll pay a set amount of interest for the term of the loan. Floating rates, on the other hand, change in line with the lender’s interest rate as well as the rate the Bank of England sets.

How difficult is it to get a business loan?

The variety of lenders on the market today and advancements in technology are making it easier to apply for a business loan and receive a decision quickly. Even if your business credit history needs improvement, you might still be eligible for a business loan through alternative lenders. There are also grants and government loan schemes out there designed to help businesses grow and stay active in challenging times. 

Why not try using our business loan calculator to calculate how much your loan could cost. Our calculator will also let you compare different types of loans and see what you might be eligible for.

What is the eligibility and criteria for business loans

With so many different lenders and products on the market, the eligibility criteria for business loans vary. In an initial consultation, expect to be asked about:

  • Turnover and profit

  • Bank statements

  • Filed accounts

  • Loan amount vs. turnover

  • Trading history

  • Payment history (e.g. CCJs, late payments)

While there are no set ‘standard’ criteria for business loans, there are a few basic factors that most lenders look at when assessing your business. Here are a few rules of thumb to bear in mind before you apply for a loan:

  • The loan amount is less than 25% of your annual turnover

  • Your business is profitable

  • More than 24 months trading history (for most products)

  • No outstanding CCJs or late payments

  • Your business is based in the UK

Generally, lenders are unwilling to lend more than 10-20% of your annual turnover, and they'll want to see enough revenue to demonstrate affordability. If you’re not making much profit or making a loss, it’ll be difficult to get a loan, and a short trading history (less than 2 years) can make things more difficult too.

Although it might seem difficult, you’ll be surprised at what's still available to your business, as many of the lenders we work with are more flexible than traditional banks. You can use a variety of assets as security for a secured business loan, including commercial property, plant and machinery, vehicles, and stock. Lenders have different criteria for what they’ll accept as assets.

On the other hand, unsecured loans don’t require physical security but will often require a personal guarantee. Usually, lenders will want the guarantor to have a good personal net worth and be a UK homeowner, who can demonstrate their eligibility.

Our guide to secured vs. unsecured loans covers all you’ll need to know before applying for these types of funding.

Types of business loan

Business loans are a broad category and can refer to lots of different products including:

Within these product categories, you’ll find loans designed for specific situations and businesses to help offer the financial support they need. Business loans are a wide and varied part of the business finance market, so we’ve put together a comprehensive guide to business loans to help you find the right loan for your business.

Here at Funding Options, we work with a panel of 120+ lenders to compare and choose the right loan for your business needs.

High-street banks

It’s common knowledge that the banks aren’t lending to businesses as much as they used to. The effects of the credit crunch, pandemic and banking regulations are still being felt years later coupled with the fact that lots of businesses simply aren’t suitable for bank lending.

Approaching a major bank for a business loan means they’ll want to see a strong balance sheet, significant security and a long trading history. For businesses that are eligible for bank funding, it’s usually the cheapest option in terms of interest rates — but many other firms find it’s a long application process that leads to a ‘no’.

For these reasons, HM Treasury set up the Bank Referral Scheme. Funding Options is proud to be a government designated finance platform for the scheme, helping businesses that were previously unsuccessful with banks.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Challenger banks

Challenger banks are similar to high-street banks on the products they offer and the overall cost, but generally have slightly more flexible criteria that mean their loans are open to a wider range of businesses. Their application processes are normally faster too, although they can still be slow.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Independent lenders

At the forefront of alternative finance, the larger independent lenders offer some of the best alternatives to the banks. These providers are large and established, with plenty of cash to lend and without the same restrictions as banks. They’re also usually prepared to lend to a much broader spectrum of businesses and sectors.

Some independent lenders are focused on one particular product while others offer the full range of business finance. You can expect more flexible criteria and much faster applications — the major downside is, however, that they’re usually more expensive than banks.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Smaller specialists

Smaller specialist lenders are another important part of the alternative finance category, usually focusing on one or two types of lending. Their business loans are highly specialised, often designed for one particular sector, but this means the costs can vary widely.

Many of the smaller lenders offer very fast online processes, meaning you can potentially get a loan within a day or two. Best of all, instead of rigid criteria, they’re much more likely to take a case-by-case view of your application for a loan.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Loans for new businesses

Startup business loans are a type of finance designed for companies who are in the early stages of their business journey. Due to strict underwriting rules and a reluctance to take on risk, loans for startups from traditional banks can be harder to come by. 

However, there are still plenty of alternative business funding routes and lenders to explore, and you can still access finance if you’ve been trading for less than two years. 

To qualify for a startup loan, you’ll need to meet the lender’s requirements which do vary, but you’ll usually have to be starting a new business and have set up (or planning to) as a business entity. You can set up as either a sole trader, self-employed, Limited company (LTD) or Limited liability partnership (LLP).

A lender will also want to see your business plan which should contain everything from your financial projections to what marketing strategies you’ll be implementing, as well as the business idea itself and your goals. This will enable the lender to better understand how you’ll use the funding.

What are fast business loans?

Some products are designed so that your business gets the cash it needs as fast as possible. At Funding Options, our record is 1 ½ hours from the first enquiry to money in the customer’s account and our record from enquiry to approval is 20 seconds. 

How fast a loan can be processed does depend on how prepared you are. Lots of lenders require detailed documents such as filed accounts and forecasts, and your ability to get these documents together can make the difference between a couple of days or a couple of weeks.

In our experience, the biggest factor in how quickly you’ll get finance is you. Most lenders will reply quickly (within 24 hours), and your dedicated account manager will work hard to keep things moving. If you’ve got all the documentation ready, it’s often possible to get the deal done within a day or two.

First, you’ll need to give us the key details about your business and what you’re looking for. This will only take a few minutes, and you can do it on our website or give us a call.

Once you’ve decided which lender(s) you’d like us to approach, the application time varies depending on the product and lender you’re dealing with – but it always helps if you’ve prepared in advance!

  • Lenders we work with are much faster than the banks

  • Takes seconds to see your options

  • Offers back within 24–48 hours for most cases

  • Money in the account within days if you’ve got documents ready

How fast business loans help businesses

Fast business loans can really help businesses with short term cash flow problems or stock issues, as they can usually be arranged on the same day. They’re often a quick solution for SMEs when it comes to plugging a financial gap and as they’re usually unsecured loans so you won’t need to worry about having assets to offer the lender.

However, the convenience of speed comes with a cost - fast loans can have higher interest rates and competitive payback terms, so it’s worth considering the terms and weighing up all of your available options before committing.

Short term business loans

As the name suggests, short term loans are designed for the short-term, with term agreements usually between 3 months and 2 years. Term loans of more than 2 years would be considered medium - or long-term. If you're considering a loan for a very short term, it's also worth considering revolving credit facilities and other business overdraft alternatives.

Loans for small businesses

Loans for small businesses are offered by lenders and banks to help small businesses with the day to day running of their business. They can help grow your business, keep cash flow going or simply help with buying more equipment or stock. Loans for small businesses are either secured or unsecured, meaning the lender will either secure their money for your business loan against an asset from the business (secured) or not (unsecured).

Small business loans have historically been challenging to get from the banks, but with the range of alternative finance available these days, there are many more flexible solutions out there.

Business loans for bad credit

Whilst you may not think it’s possible, you can still be eligible for a business loan even if you have a poor credit rating. Yes, it's certainly more challenging to borrow money with bad credit in the background, but it's still very much worth exploring — and you might be surprised at the choices potentially still available if you're willing to offer further security or a personal guarantee. 

If you’re applying for a loan and have bad credit, you may need to be prepared to pay higher interest rates and have more restrictions as lenders may be less flexible. Why not start an application with us today and find out what loans are available for your business.

How much of a business loan can I get? 

Depending on how much you need and your business circumstances, you could be eligible for a business loan of anywhere between £1,000 and £15M+. How much you can borrow will also vary from lender to lender and you should only take out a business loan if you know you can pay it back in full along with any interest you accumulate. 

How to apply for a business loan

When you apply for a business loan, it’s important to fill out your application accurately — even the smallest mistake could lead to delays with your application or even getting declined.

To help things move along smoothly, get the following ready before you apply:

  • Business plan

  • Business bank statements

  • Information on profits and losses

  • Balance sheet

  • Personal details

If you apply for business finance through Funding Options, a Business Finance Specialist will be on hand to help you navigate the process, from application to money in the bank.

Will I pay interest rates on my business loan?

Yes, like any other loan there will be interest added when you start paying it back. The interest rates you can expect to pay will vary depending on your business profile and there are various risk factors that the lender will consider. It’s worth remembering that generally speaking the higher the risk, the higher the cost of the finance.

Credit rating is one of the best indicators of what interest rate you'll pay for a business loan. If your credit history is poor, you’re likely to pay a much higher interest rate. Risk is also partly determined by the term length you need and the security you're able to provide.

The Competition and Markets Authority (CMA) is expected to make business loan providers make their products more transparently and consistently priced — something we wholeheartedly support at Funding Options.

Business loans for startups 

Startup business loans are a type of finance designed for companies who are in the early stages of their business journey. Due to strict underwriting rules and a reluctance to take on risk, loans for startups from traditional banks can be harder to come by. 

Fortunately, there are still plenty of alternative business funding routes and lenders to explore, and you can still access finance if you’ve been trading for less than two years. 

To qualify for a startup loan, you’ll need to meet the lender’s requirements which do vary, but you’ll usually have to be starting a new business and have set up (or planning to) as a business entity. You can set up as either a sole trader, self-employed, Limited company (LTD) or Limited liability partnership (LLP).

The lender will also want to see your business plan which should contain everything from your financial projections to what marketing strategies you’ll be implementing, as well as the business idea itself and your goals. This will enable the lender to better understand how you’ll use the funding.

Business loan lenders

There's a huge range of lenders offering loans to businesses, and this means there are lots of different eligibility criteria, application processes and interest rates to go through. Here’s a summary of what you can expect from different business lenders:

High-street banks

It’s common knowledge that the banks aren’t lending to businesses as much as they used to. The effects of the credit crunch, pandemic and banking regulations are still being felt years later coupled with the fact that lots of businesses simply aren’t suitable for bank lending.

Approaching a major bank for a business loan means they’ll want to see a strong balance sheet, significant security and a long trading history. For businesses that are eligible for bank funding, it’s usually the cheapest option in terms of interest rates — but many other firms find it’s a long application process that leads to a ‘no’.

For these reasons, HM Treasury set up the Bank Referral Scheme. Funding Options is proud to be a government designated finance platform for the scheme, helping businesses that were previously unsuccessful with banks.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Challenger banks

Challenger banks are similar to high-street banks on the products they offer and the overall cost, but generally have slightly more flexible criteria that mean their loans are open to a wider range of businesses. Their application processes are normally faster too, although they can still be slow.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Independent lenders

At the forefront of alternative finance, the larger independent lenders offer some of the best alternatives to the banks. These providers are large and established, with plenty of cash to lend and without the same restrictions as banks. They’re also usually prepared to lend to a much broader spectrum of businesses and sectors.

Some independent lenders are focused on one particular product while others offer the full range of business finance. You can expect more flexible criteria and much faster applications — the major downside is, however, that they’re usually more expensive than banks.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Smaller specialists

Smaller specialist lenders are another important part of the alternative finance category, usually focusing on one or two types of lending. Their business loans are highly specialised, often designed for one particular sector, but this means the costs can vary widely.

Many of the smaller lenders offer very fast online processes, meaning you can potentially get a loan within a day or two. Best of all, instead of rigid criteria, they’re much more likely to take a case-by-case view of your application for a loan.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

We’re specialists in helping SMEs find the lender that’s right for them, so get in touch with us via email or apply online and one of our Business Finance Specialist’s will help you find the best business loan for your needs. With a panel of 120+ lenders, we can compare and choose the right loan for your business.