Business finance in the UK runs from government-backed loans to fast but expensive alternatives. Speed and flexibility are what lenders charge for, so work out how much of each you really need before you compare offers.
Government-backed routes first
| Scheme | What it offers | Who it suits |
|---|---|---|
| Start Up Loans | An unsecured personal loan of £500 to £25,000 per founder, repaid over one to five years at a fixed rate set by the British Business Bank, with free mentoring | Early-stage businesses |
| Growth Guarantee Scheme | A 70% government guarantee to the lender on term loans, overdrafts, asset finance and invoice finance, up to £2 million, through accredited lenders. The lender makes the decision | Established businesses that lack security |
Check the current Start Up Loans rate and eligibility on the British Business Bank's site before you apply, because they are set centrally and can change.
Quick loans for business
Quick loans for business, often from online lenders, can pay out within days, but speed usually costs more. Compare the total you will repay, the APR or factor rate, the early repayment terms, and whether you are asked for a personal guarantee, which makes you personally liable if the company can't pay.
Two alternatives to a standard loan are worth knowing. A merchant cash advance lends against your card sales and is repaid as a percentage of future takings, and it can cost much more than a term loan. Invoice finance lets you borrow a percentage of what customers owe you, so the cash arrives before they pay.
Flexible business loans and a business line of credit
Flexible business loans usually mean a facility you can borrow from, repay and borrow from again, such as a business overdraft or a revolving credit facility. In the UK, a business line of credit is normally offered in one of those two forms. You pay interest on what you use, which suits uneven cash flow, but facilities can be reviewed or withdrawn, and may be secured or need a personal guarantee.
Bad credit business loans and guaranteed approval
No lender can guarantee approval. Every lender checks the business and, often, the directors' personal credit. If your credit is weak, these routes tend to work better:
- Asset finance and invoice finance, where the equipment or the invoices act as the security
- A Start Up Loan, if you are early-stage
- A smaller amount, backed by a clear plan and cash flow forecast
Be wary of anyone who promises certain approval or asks for a fee upfront. Lending to sole traders and small partnerships can be FCA-regulated, but lending to limited companies mostly isn't, so read the terms carefully.
Before you apply
- Know what the money is for and how much you need by when.
- Have your accounts, forecasts and bank statements ready.
- Check your business and personal credit files.
- Compare the total cost, not just the headline rate.
- Ask about personal guarantees and early repayment charges.
For how invoicing links to getting paid, see our guide to invoicing software for UK small businesses. For a card to manage everyday spending, see business credit cards in the UK.