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7 Ways to Get a Business Loan in the UK
When looking at getting a UK business loan, there are many things to consider. With a wide range of products and an even wider range of lenders in the marketplace, it can be the work of ages just to sift through them.
Written by: Sam Hodgson
There are seven key forms of business finance, and we'll walk you through the advantages of each type, what they're commonly used for and what to consider before applying.
For a rundown of the many products available to help finance your business projects, read on…
Key Takeaways
- The UK business loan market offers a wide range of products tailored to various business needs and lender requirements.
- The process of applying for a bridging loan can vary, depending on factors like loan type, business size and revenue structure.
- Unsecured loans tend to be quick and easy to apply for but can be more costly.
- Secured loans are typically cheaper but have a more stringent application process.
- To get a clear idea of what options are available to you, it's worth talking to a specialist business broker.
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Is it Difficult to Get a Business Loan in the UK?
How Can I Get a Business Loan?
Is it Difficult to Get a Business Loan in the UK?
Obtaining a business loan in the UK isn't as challenging as you might think. There are a variety of business finance products available from different lenders across the country, and each one is tailored to suit specific business needs.
How straightforward the application process will be typically depends on the type of finance you want to secure, as well as the structure and revenue of your business. Some types of business loans cater to businesses of a certain size, whereas others are tailored to specific types of revenue.
Two examples are merchant cash advances, which are only available to businesses generating part of their revenue through card transactions, and invoice finance, a product aimed at business-facing companies that rely on invoices.
Merchant cash advances, business bridging loans, and lines of credit have particularly simple application processes. Each relying on different factors for eligibility, such as collateral, exit strategy, and credit history, as part of its eligibility assessments.
Most business loans will have a minimum annual turnover requirement, and business loan eligibility typically relies on your business's credit score and/or the value of your collateral.
Your company's turnover commonly determines the amount you can borrow for a business loan. In some cases, if you present a particularly good business plan, you may be able to borrow based on your company's projected turnover.
See the latest market news below.
2024 Business Finance Market Update
In the past year, business finance saw significant growth, perhaps surprisingly driven by challenger lenders and alternative finance providers. Many of these lenders reached their largest milestones in 2024, primarily through supporting SMEs that may have struggled to access traditional funding elsewhere.
Businesses are continuing to face significant economic challenges carried over from 2023. High inflation, supply chain disruptions, and geopolitical tensions persist, which have complicated financial planning and made it difficult for businesses to acquire funding.
But the Bank of England has cut its base interest rate for the first time in 4 years, signalling a cautious shift toward economic stabilisation after years of inflationary pressure. Further cuts are anticipated, and businesses can expect a flurry of spending in the coming months.
As well as this, a number of banks and large firms seem to be racing to the finish line to implement generative AI and new technology that could streamline business and boost profits. Enhancing tech in banking looks like a win-win for lenders and borrowers, offering more personalised financial solutions and a quicker, more secure process.
In the tech industry, investments in AI are reshaping business. Tech giants like Alphabet, Amazon, and Microsoft have seen their market values surge, driven by the rush to implement AI.
The Basic Unsecured Business Loan
Many British business owners look no further than the basic unsecured business loan. Because it’s unsecured, you don’t need any significant assets to use as collateral for the loan. In many cases, it can serve as an efficient injection of capital to help your business grow.
An unsecured business loan can be applied for and approved quickly.
+ Pros
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Straightforward application process
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No need for collateral
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Easy to understand
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Light on fees
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Simple repayment structure
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Few restrictions on use
- Cons
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Requires a good credit rating
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Limited borrowing amount
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May need a personal guarantee
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Mid-range interest rates
Secured Business Loan
With lower interest rates, access to high levels of funding, and much of the simplicity usually reserved for the unsecured loan, a secured business loan is a favourite of many businesses - especially those looking to leverage previous investments for growth.
The amount you can borrow with this type of finance is really only limited by the value of the assets against which you can secure the business loan.
+ Pros
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Large levels of funding available
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Standard repayment structure
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Low interest rates
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Available for companies with poorer credit history
- Cons
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Requires assets for collateral
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Places limitations on assets
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Some setup fees
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Risk of repossession
Business Bridging Loan
When you need considerable capital at short notice, a bridging loan can swoop in like Superman, enabling your business to take advantage of opportunities before they slip through your fingers.
Bridging loans are short-term finance solutions, typically used as a flexible funding option while awaiting the sale of an asset or other source of considerable capital.
Because bridging loans are tailored for short-term use, you’ll need a foolproof exit strategy proving that you can repay the loan within the terms (typically 12 months).
Whether or not a business bridging loan is right for you will depend on your business, how much you want to borrow and how quickly you need it. Business bridging loans can fuel rapid expansion and propel your business when managed well.
+ Pros
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Access to significant funding with little wait time
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Developed to specialise in short-term business needs
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Flexible repayments
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Few limits on use
- Cons
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High-interest levels
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Needs compelling business plan documentation
Lines of Credit
The two most recognisable lines of revolving credit, both company credit cards and bank account overdrafts, are essential tools in a business's financial arsenal.
While not always seen as business loans by UK entrepreneurs, their function and structure put them squarely in the camp of business funding.
High-interest rates and occasional fees are seen as acceptable, given the extreme level of flexibility these lines of credit provide.
+ Pros
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Easy to obtain
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Revolving lines of credit
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Flexible repayment structure
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Available to companies with poor credit scores
- Cons
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High-interest rates
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Low credit ceiling
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Can be costly if left unmanaged
Invoice Finance
One tool used by experienced B2B businesses that many younger entrepreneurs are unaware of is invoice finance. It offers a way to access funds that you know are coming before your customers pay them, bridging the gap between the day an invoice is issued and the day it is due.
With two distinct ways of working (factoring and discounting), invoice finance solutions can be tailored to meet your immediate needs and solve short-term cashflow problems with ease.
+ Pros
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Quick to get
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Access funds tied up in accounts payable
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Scalable by size of business
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Available to businesses with poor credit
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Provides a solution to recover client debt
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Worry-free repayment structure
- Cons
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Fees can be considerable
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Only good for B2B businesses with sizeable accounts payable
Merchant Cash Advance
Often seen as the sister product to invoice finance, merchant cash advance offers B2C businesses a similar way to leverage future income early.
With a flexible repayment schedule based on a percentage of monthly card transaction takings, merchant cash advance aims to never pressure a company to repay, instead acting as a silent partner offering capital just when it is needed.
+ Pros
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Percentage-based repayments
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Relatively quick application process
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Scalable funds based on historical card transactions
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Available as a revolving line-of-credit form of funding
- Cons
Asset Leasing
Many business owners in the UK do not see leasing as a business loan, preferring to think of it as a rental agreement. However, it remains one of the premier products for businesses looking to finance significant purchases and thus deserves its place on this list.
Asset leasing takes different forms, including hire purchase and finance leasing, each allowing a company to access equipment that would otherwise be out of reach.
+ Pros
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Access to superior equipment, vehicles, and other assets
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Flexible terms to suit the business need
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In some situations, maintenance of the asset is undertaken by the lessor
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Tax benefits
- Cons
How Can I Get a Business Loan?
Here at Clifton Private Finance, our business finance specialists offer a complimentary advice service and can help you choose the right finance solution for your business requirements. They have access to a wide range of finance solutions from across the market.
Our team of advisers will help you to source the most competitive cash flow funding solution.
Our business loan service provides:
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Market-leading rates
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Fast service - finance within 2 to 7 days
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Access to specialist lenders
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Expert advice - professional service
Call us on 0203 880 8890 to discuss your requirements.
