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Business Loans For Limited Companies
If you're the director of an incorporated business, you may need access to a limited company loan to boost developmeny or support cash flow when times are tough.
Limited company loans are a specialist type of business finance available to help limited companies. As a limited company, you can apply for the loan with flexibility on how and when you make repayments and with competitive interest rates.
Here, we guide you through the eligibility criteria for a limited company loan, the process of applying for one, and how to get the best loan deal for your business.
In this guide:
Is My Business Eligible for a Limited Company Loan?
How Can My Business Benefit From a Limited Company Loan?
How Much Can a Limited Company Borrow?
Are Directors Personally Liable For a Limited Company Loan?
Does My Credit Score Affect My Chances of Getting a Business Loan?
How Do I Apply For a Limited Company Loan?
Is My Business Eligible for a Limited Company Loan?
Your business will be eligible to apply for a limited company loan if registered as a limited company with companies house and trading in the UK. Other criteria you'll need to meet include the following:
- Trading for at least 1 year (ideally with 1 year's filed accounts)
- A monthly turnover of at least £5,000 (£60,000 per year)
- Ideally a homeowner
- Directors are aged over 18 years old
See similar: Getting a Business Loan - 8 Top Tips
Watch our short video below covering the basics of business loans for limited companies.
How Can a Loan Benefit My Limited Company?
Loans for limited companies can be used to meet various business needs. They are often best suited to situations where an injection of cash will bring quick returns, such as business expansion, marketing efforts, purchasing new inventory or equipment, and taking on more staff.
But, while a loan can help a business meet growth demands, it can also be useful to tide things over when times are challenging or there is a shortfall in working capital. A loan may help a business meet an upcoming corporation tax bill or pay for necessary repairs on equipment and premises.
A limited company loan can be an excellent solution in many scenarios, giving you access to much-needed funding in the short term with the flexibility to make repayments over a period of 1-3 years.
- Funding for business growth and expansion
- Marketing and advertising
- Recruiting new staff
- Purchasing inventory or equipment
- Expanding premises
- Renovation/refurbishment of current premises
- Payment of corporation tax
- Improve cash flow
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.
How Much Can a Limited Company Borrow?
You can apply for a limited company loan from as little as £1,000 up to £500,000, depending on your company's size and annual turnover.
Lenders will assess each application individually and make an offer depending on their risk assessment.
One of the main benefits of applying for a business loan as a limited company is that you will be viewed as less of a liability than a sole trader, which means you should be able to borrow more.
Recent examples of business loans secured for clients
- £150k Unsecured Business Loan for a long-standing Estate Agents wanting to hire new staff and build a new website.
- £250k Unsecured Business Loan to support working capital for a manufacturing business trading since 1985
- £350k Invoice Finance Facility for a £2m+ turnover business supplying nurses/care workers to the NHS/Care Homes. The facility was needed to plug the gap between paying staff (weekly) and being paid by the NHS at the end of the month.
Are Directors Personally Liable For a Limited Company Loan?
Most limited company directors opt for unsecured loans because no business assets are available to use as security for the loan. Unsecured loans require an individual, such as a director or shareholder, to act as a personal guarantor. In many cases, you'll find it easier to get a secured loan for your limited company if you are a homeowner.
It's always important to consider the personal risk of guaranteeing an unsecured loan for a limited company. But often, the benefits outweigh the risks. Retaining ownership of your company is a huge advantage when using a business loan rather than selling shares to raise the necessary funds.
Related: How Do Business Loans Work?
Does My Credit Score Affect My Chances of Getting a Business Loan?
Lenders will examine the personal credit records of a private limited company's directors and the company's credit score. Your personal and business credit history can affect loan approval and financing eligibility.
Don't fret, however, if your credit score is less than perfect. Although some mainstream lenders may turn you down if your credit rating is poor, several specialist lenders are willing to offer company loans despite credit issues. However, they can come with higher interest rates.
How Do I Apply For a Limited Company Loan?
To apply for a limited company loan, it's always best to speak to a specialist broker with access to the wider lending market.
A business finance broker can help you decide what type of loan to apply for based on your company's situation and needs and guide you through the application process.
As soon as we have the following information, your broker can talk you through your options and get the ball rolling:
- Confirm your company's registered trading name and registration number
- Provide information on the number of years in operation, monthly turnover, and the number of directors
- Tell us how much you would like to borrow and what the money is for
Your broker will present you with possible borrowing options. When you decide to go ahead with a chosen lender, you'll be provided with a breakdown of the terms of your loan, the monthly repayments, and interest charges.
Repayment of the loan is normally structured as a fixed monthly payment over a set period of time.
We can also source merchant cash advances if you're taking a card or online payments for your business.
How We Can Help
Getting a business loan can be easy when you have professionals helping every step of the way. Our team of specialist brokers have extensive knowledge of the market and can offer you expert guidance.
We can advise you on the best path for your company and will help you find the financing that you need.
At Clifton Private Finance, we can guide you through every step of the loan application, find the right loan to suit your business and help you with documentation to give you the maximum chance of a successful application.
If you need business funding, call us on 0203 880 8890 or book a free no-obligation consultation below.
