Business Loans
If you’re looking to raise funds for your business, you could take a secured or unsecured business loan. Get the best deal with ABC Finance.
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Last updated and checked on May 27, 2026 by Peter Hemming
In the UK, business lending has two distinct tiers. There are the bigger banks like Barclays, HSBC, Lloyds, and NatWest, which provide funding to only larger, more established businesses.
For other businesses that may not have established trade and credit histories or have complex business structures, there is a market of specialist lenders who are willing to understand the needs on a case-by-case basis.
A whole-of-market broker like ABC Finance can provide access to the entire pool of lenders, identify the ones who are most likely to understand your case and may be amenable to giving you the loan under acceptable rates and terms.
Whether you are a startup, a small business, or are facing a situation of adverse credit history, we can help you build your case so that it gets the best chance of success.
What is a Business Loan?
Like a personal loan, a business loan is a sum of money borrowed from a lender and repaid at an agreed-upon interest rate and over a specified period. The difference is that business loans are borrowed by business entities and can only be used for business-related purposes, like purchasing equipment, managing cash flow, hiring staff, and so on.
The lender assesses the strength and future prospects of the business to ascertain whether they are suitable to be offered the facility, instead of the personal credit history of the owners.
Business loans can be offered by a broad spectrum of lenders, be it high street banks, online only banks, P2P platforms, or specialist finance providers. While smaller loans are available from as little as £1,000, the amount can go up to nearly any level, even £15 million or more. Repayment terms are usually dependent on the loan size and the capacity of the business to repay.
Business loans can either be secured or unsecured. Secured loans are provided backed by a business asset, which may be repossessed in the case of default. An unsecured loan does not require any collateral, but the higher risk for the lender translates into higher interest rates and more stringent eligibility criteria.
When Might a Business Loan Be Used?
An enterprise may need capital for several purposes, such as launching a new venture, buying new equipment, bridging a seasonal cash flow crunch, refurbishing business premises, or even consolidating existing debts under a single, more beneficial structure.
In the case of startups, the requirement is usually for getting the idea off the ground, which may entail several kinds of professional fees and the purchase of stock or premises. Small businesses often need loans to drive critical growth moments, such as taking on a large new client or investing in a second location.
Types of Business Loans
Business loans in the UK can broadly be classified in several ways. Below, we help you understand the various classifications and the differences between them.
Secured vs Unsecured
Secured business loans are offered against a collateral asset, which acts as security for the loan. As a business, you may own several assets such as land, machinery, vehicles, etc. These can be put up as collateral to a lender in order to get funds. For the lender, the secured asset reduces the risk involved in the loan, because in case of default, they have the right to repossess it. Accordingly, the rates offered in secured loans are lower than those in unsecured ones.
Typically, secured loans are used when the sums involved are large or for a longer term. Sometimes, lenders also insist on security in case there has been some adverse event on the borrower's credit profile in the past.
Unsecured business loans, as the name suggests, do not need any collateral. These loans are usually offered where amounts lower than £250,000 are involved due to their simpler nature. The key aspect the lender looks at is the borrower's credit history. They also ask for a personal guarantee from the company directors. The loans are disbursed relatively quickly, but rates are proportionately higher to account for the increased risk at the lender's end.
There are some government-backed schemes, like the UK Innovation Loan scheme for R&D-focused businesses, that offer unsecured loans without requiring any personal guarantees from the directors of the firm. Apart from this, there are specialist lenders who may sometimes be willing to overlook adverse credit and base the loan purely on the strength of the business. But these loans are usually offered only to businesses with an established track record of success.
Terms and Repayment Structures
For short-term loans, the repayment period is usually between three months and two years. These loans are often used to bridge immediate cash flow needs or for making urgent purchases. Such loans may be approved quite quickly, and their eligibility criteria are also more flexible. But they do usually come with higher rates.
Loans that run for more than three years are termed long-term loans. While three is the lower end, some of them may run up to twenty-five years or even longer. Typical examples of such loans are large capex investments and the purchase of property. While the monthly repayment amount for these loans is lower due to the longer repayment period, the overall repayment amount can be quite high as compared to the loan amount.
Across all types of loans, the interest may be charged either on a fixed or a variable basis. Fixed-rate loans are more predictable because the monthly repayment amount does not change, even as inflation rises or any other variables might change.
Variable-rate loans usually start at cheaper rates than fixed ones, but the rate is tied to the Bank of England base rate and can move both up and down depending on how it moves. Typically, loans under £25,000 are fixed-rate, while lenders prefer to offer out larger, long-term loans at variable rates.
Another classification can be based on how the repayment happens. If the repayment includes both capital and interest, then each payment brings down the outstanding loan amount. But on an interest-only basis, the entire loan amount remains outstanding at the end of the period and needs to be repaid. The monthly outlay in the former method is higher.
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Eligibility and Required Documentation
While eligibility varies by lender, there are some basic criteria that are followed by almost everyone in the UK market. Here, we list the ones that are found most commonly.
Common Eligibility Criteria
Trading history
A twelve to twenty-four-month trading history is often mandatory for lenders to consider your application. However, there are some specialist lenders and government-backed schemes that are willing to look at enterprises younger than this.
Turnover and profitability
Lenders typically look for a consistent history of net profits exceeding at least 125% - 150% of the monthly repayment amount. It gives them comfort that the business can comfortably repay the loan.
Credit history
Lenders look at the credit history for both the firm and its individual directors. While adverse credit is not an absolute rejection criterion, it does tend to leave the lender pool significantly curtailed. There are some alternative and specialist lenders who are willing to overlook these details, but for a higher rate and stricter terms and conditions.
Business structure
While all types of businesses, be it LLPs, limited companies, partnerships, and sole traders, can get loans, the documentation and other requirements vary. For limited companies, lenders will look closely at the firm's accounts and balance sheets, apart from asking for personal guarantees from the directors.
Sector and purpose
Lenders tend to view certain sectors as riskier. Hospitality, construction, and retail are all seen to fall under this umbrella. Accordingly, fewer lenders are available to offer loans to these sectors, and the rates are higher than for others.
Documentation You Will Typically Need
While exact requirements can only be specified by the lender, in general, most need the following:
For working capital or growth loans: two to three years of business accounts, recent bank statements (typically three to six months), management accounts if available, and a brief explanation of the purpose of the loan.
For asset-backed lending: valuation of the asset, as well as business accounts and bank statements.
For invoice finance or revenue-based lending: accounts receivable data, outstanding invoice schedules, and bank statements demonstrating consistent revenue.
For start-up loans and new business applications: a detailed business plan, personal credit history, cash flow forecast covering the first twelve to twenty-four months, and evidence of relevant industry experience.
For commercial mortgages or property-backed loans: property valuations, lease documentation, rental schedules, and evidence of the business's ability to service the debt.
Lenders often ask for personal identification, proof of address, and details of existing debts of the business.
Costs, Rates, and Disclosures
Business loan rates are offered based on several factors that help lenders understand how much risk they will be incurring.
What Affects Interest Rates and Fees?
The base rate for variable-rate lending in the UK is the Bank of England base rate, which is currently 3.75% as of May 2026. Lenders add on their margin to this, based on their risk appetite and cost structure.
Apart from this, here are some of the factors that influence rates:
Your credit profile
A strong, established credit history for the business and its directors goes a long way in reducing risk assessment and getting you more competitive rates.
Loan size and term
Pricing for short-term products is usually higher because there are fixed costs of managing the loan that need to be apportioned over a shorter period. The longer the loan, the better the rates, especially if the loan involves some form of security.
The strength of the business
Factors like profitability and turnover of the business help reduce your risk profile. Lenders place strong emphasis on a history of consistent profitability. The sector of operation also plays a role, as low-risk sectors tend to get more competitive rates from lenders.
Security offered
The higher the security offered, the lower the risk associated with the loan, and consequently, the more competitive the rate offered by the lender.
APR, Fees, Deposits, and Total Cost of Borrowing
Apart from the interest rate charged on the loan, there are other costs that need to be considered in the costs you are going to incur on your loan. Below are a few terms that you need to understand in order to calculate your total cost of borrowing.
Annual Percentage Rate (APR)
When comparing credit products, the annual percentage rate is often seen as the best metric. It is a headline rate that includes not just the interest rate offered, but also the standard fees charged by the lender, making it an overall figure that can be used for an apples-to-apples comparison.
However, it's important to note that APRs are only offered in standard cases. Lenders are obligated to offer the APR to only 51% of their borrowers, so while the headline APR is a good comparison metric, it may not be the actual rate you will get.
Arrangement or origination fees
Lenders charge anywhere between 1% to 3% of the total loan amount as an origination fee, meant to cover their administrative and loan management costs. In some cases, especially for loans under £25,000, a few lenders have started to offer zero origination fees. Origination fees are included in the headline APR.
Early repayment charges (ERCs)
Lenders often impose early repayment charges on loans to discourage borrowers from making a prepayment. You should always check the documentation regarding these charges in case there is a chance that you might repay the loan earlier than the overall term. If so, it might be a good idea to opt for a slightly more expensive loan with no ERC.
Total Cost of Borrowing
When we include the complete amount repaid, including the APR, fees, taxes, and ERC, we arrive at the total cost of borrowing. Let's take an example to illustrate this.
For a £50,000 loan at 12% over a five-year term, the monthly payments would be £1,096.78.
Then the total cost of borrowing would be £65,807.09, with the interest component being £15,807.09.
With a different lender, the APR might be 11%, in which case the monthly payout would be £1,074.24.
In this case, the total cost of borrowing would be £64,454.4, with the interest component being £14,454.4.
Our business loan calculator can help you model the various parameters we mentioned above to arrive at your total cost of borrowing for various scenarios and help you choose the most effective option for your needs.
At ABC Finance, we run these numbers with you across multiple lenders before any application is submitted, so you have a clear picture of the total cost before you proceed.
Startup Funding Options and Government Guidance
As a startup, funding options are often limited in the UK as the main banks and lending institutions shy away from organisations that do not have a 12 to 24-month trading history. The good news is that the government has stepped in to address this issue. Below, we provide an overview of the government-backed business loans for startups in the UK.
Start Up Loans and Government-Backed Options
The most popular government-backed program is the Start Up Loan Scheme. This program is delivered through the British Business Bank and administered by a network of accredited delivery partners.
On April 6, 2026, the program was extended to firms that have been trading for up to 60 months, in place of the earlier regulation which only allowed up to 36 months.
Each individual applicant is allowed to borrow between £500 and £25,000, with a maximum cap of £100,000 for cases where individual co-founders apply separately. The scheme operates on a 7.5% per annum fixed interest rate. The loan can be repaid within 1 to 5 years.
This scheme provides unsecured loans, so startups do not need to put up any collateral or pay any kind of application fee. Another feature of the scheme is that all successful applicants get up to 12 months of free business mentoring, which gives them access to a wide range of business support services.
Though the Start Up loan is meant for businesses, it is technically fashioned as a personal loan, which means that a personal credit check is required in order to get the application approved. However, this does not mean that those who have an adverse credit history cannot access the scheme. An overall assessment of the business plan, as well as the applicant's commitment towards success, is an equally important aspect that is assessed.
Innovate UK Innovation Loan
In the tech and innovation sector, the government offers the Innovate UK Innovation Loan scheme. These are also fixed-rate loans (current APR as of May 2026 is 7.4%), and do not incur any separate setup fees or personal guarantees. The loan can be repaid within seven years, and there is a provision for a reduced interest rate during the R&D phase of the company. This is one of the most founder-friendly government-backed debt finance options available in the UK.
Growth Guarantee Scheme (GGS)
This scheme is also managed through the British Business Bank. Rather than a loan facility, this program provides partial government guarantees to lenders who are giving business loans to new businesses and SMEs. By taking a partial guarantee of the loan amount, the government reduces the risk to the lender, incentivising them to offer credit to those applicants who might not be able to access it otherwise.
For the most up-to-date information on government-backed schemes, visit the British Business Bank's website or the official GOV.UK guidance on business finance.
Alternatives to Government-Backed Funding
For startups and SMEs that need funds faster than government-backed schemes can provide, there are a few options available in the market.
Challenger banks and online lenders
Funding Circle, iwoca, and Tide are institutions that have created end-to-end loan application services online, and can provide the required funds within 24-48 hours. However, their business loans usually have slightly higher rates than those of other lenders.
Peer-to-peer lending platforms
These applications can connect interested investors directly with startups looking for funding. Their lending processes are slightly less formal, and eligibility criteria can be a bit more flexible. In general, rates on these platforms are competitive, but that may not always be the case.
Angel investors and equity finance
Angel investors are an institution that has been funding small businesses for a long time. Startups willing to exchange equity or a share of future profits can leverage them to raise capital.
Business loans for women
Addressing diversity in the business landscape is an important part of the government's programs. The British Business Bank ensures female-led businesses do not remain underserved by actively working with banks and lenders to track diversity.
The Start Up Loans programme through Innovate UK and other similar programmes offer targeted support for female business owners. These institutions also provide mentoring to young women entrepreneurs.
Beyond government schemes, several private lenders and specialist funds focus on women-led businesses, including Female Founders Fund-style equity investors and community development finance institutions (CDFIs) that prioritise underrepresented founders.
Industry-Focused and Sector-Specific Lending
Certain industries are bracketed as high risk and therefore do not have a wide lender pool to access funding from. Below, we take a look at financing options for industries related to exports, manufacturing, industrial, and healthcare.
Industrial, Export, Manufacturing, and Healthcare Finance
Export finance
The UK Export Finance (UKEF) is the government's export credit agency.
The organisation gives insurance and guarantees to lenders who might otherwise choose not to extend credit to export-oriented businesses. The key support they offer includes credit facilities, bond support, and working capital support. UK businesses that operate in the international market have complex products, so brokers who understand export finance can be of particular benefit to them.
Manufacturing finance
Manufacturing finance can be of two types: asset finance, meant for acquiring new equipment, and invoice finance for managing cash flow between raising invoices and actual payment.
Healthcare finance
Healthcare is a specialist sector because of its unique income structures and regulatory requirements. The healthcare lending sector provides access to funding for GP practices, veterinary practices, private clinics, care homes, and dental surgeries. A whole-of-market broker who understands the nuances of this sector well can provide invaluable advice for lending solutions in this industry.
At ABC Finance, we have access to sector-specific lenders across the full spectrum of UK industries and match your case accordingly.
Brokerage, Comparison, and Finding Lenders
Using a Broker vs Applying Directly
There is a wide variety of lenders available in the market, and most businesses do not have the market knowledge to identify the perfect one suited for their needs. Moreover, by approaching just one lender, you are restricting yourself to only their products, rates, and terms.
Whole-of-market brokers like ABC Finance have market expertise. They can review your needs, understand the merits and demerits, build a compelling case, and present it to a set of lenders who are likely to view it positively and provide terms and rates that are acceptable to you.
Brokers can also be invaluable in getting business loans for bad credit situations, complex cases, and businesses that do not have a strong trading history. High street lenders often decline such cases, but brokers can do a fitment analysis and prepare a panel of lenders who will understand your case properly.
However, while selecting a broker, it is also important to choose only FCA-regulated and are transparent about their payment structures. At ABC Finance, we make sure that all our fees are explained to you upfront, and since our income is independent of any single lender, our only effort is to provide the best possible service to you.
What to Look for in Lender Terms and Service Levels
The following are some of the key factors to look at when reviewing a loan offer.
Total cost of borrowing
As explained earlier, the total cost of borrowing includes APR, all valuation, legal, and arrangement fees, as well as any early repayment charges. You should always compare the total cost across offers to understand which one is best for your situation.
Speed of decision and funding
If you require urgent funding, you need to understand how quickly your lender is willing to disburse the facility. High street banks often take the longest time, running into several weeks depending on the complexity of the case, whereas online lenders tend to be the quickest, delivering the funds within days of approval.
Regulatory status
The Financial Conduct Authority (FCA) regulates all lending firms in the UK. Only registered organisations are allowed to provide credit to UK businesses. Make sure your lender is properly authorised and regulated.
Flexibility of terms
Despite your best efforts at planning, there is no guarantee for the future. Make sure the loan terms offer some amount of flexibility in terms of overpayments, repayment holidays or an increase in the facility later. Even if the product is slightly more expensive, these options can become invaluable later on.
How to Apply and What Happens Next
All business loan application processes follow the same set of steps, even though the speed and complexity of each stage may vary by lender and case details.
What Happens After You Apply?
First, an initial application is made, using either a broker or online. In this application, you provide basic details of the facility that you need, including the amount, term, purpose of the loan, business details, and trading history. Most lenders are able to access your transaction history through Open Banking these days, which has greatly enhanced the pace of the assessment at this stage.
The next step is a credit assessment. For online lenders and straightforward cases, the decision can be made within a few minutes or hours. For more complex cases and larger lenders, the assessment may take several days. When you approach using a broker, there would already be a pre-assessment put in place, which can significantly speed up this process and improve the chances of success.
After this stage, if the outcome of the assessment is acceptable to the lender, they will move on to the underwriting stage. This involves complete verification of the information you provided, along with a detailed review of all the financial documentation and possibly even a meeting with the business owners.
In case it is a secured loan, the lender will also ask for a formal valuation of the asset.
After this stage, a formal offer is issued. For unsecured loans, the whole process might take 24 to 72 hours for online lenders and 2 to 4 weeks with larger banks. For secured loans, the time taken might be 4 to 8 weeks.
Once you accept the offer, funding is usually provided within 1 to 5 business days.
Common Pitfalls and How to Prepare
Incorrect or incomplete documentation is one of the biggest reasons for application rejection. That is why it is important to verify that all documentation you are submitting is complete and up to date. Any discrepancies between documentation should have a clear note of explanation provided for reference, along with proofs, if available.
Many businesses do not understand that making multiple applications simultaneously can significantly impact your credit. Each credit search leaves a footprint on your credit file, and if multiple applications are rejected for any reason, your score can quickly fall and deteriorate your chances of getting approved in the future.
Another problem is a lack of clarity regarding the purpose of taking a loan. Lenders need a clear understanding of what you will be using the money for and how you plan to generate the returns needed to service the loan. A clear business plan for the facility with figures and explanations can be very helpful in this regard.
Adverse credit history does not automatically disqualify you from taking a loan. Do not try to hide it. Rather, be upfront and explain the situation that caused the adverse credit proactively. Lenders prefer to see the borrower be upfront about their situation.
Lastly, a clear demonstration of the ability to repay is an absolute must. If lenders are doubtful regarding your ability to repay, they will stress-test your repayment capacity, and if found wanting, the application is likely to get rejected or receive materially worse terms.
Frequently Asked Questions
Can I get a business loan as a start-up with no trading history?
Yes, it is possible to get a business loan as a start-up with no trading history, but the options available to you might be limited. There is a government-backed Startup Loan scheme that offers up to £25,000 per applicant with zero collateral. Moreover, the loan is provided at a fixed rate of 7.5% per annum.
Can I get a business loan with bad credit?
Yes, but it can be a lot more challenging to get a business loan with bad credit, and you will usually end up with higher rates and more stringent terms.
There is a market of alternative and specialist lenders who are willing to overlook adverse credit on the basis of the health of the business and its future potential. These lenders are usually less visible than mainstream banks, so it is useful to approach a whole-of-market broker like ABC Finance, who knows how to approach the right lender panel with the best likelihood of approving your case.
What are business loans with no personal guarantee?
Most unsecured business loans require the director or owner to sign a personal guarantee, making them personally liable if the business cannot repay. Some products, particularly the Innovate UK Innovation Loan and certain asset-backed facilities, do not require personal guarantees. These are less common and typically available to businesses with stronger trading profiles or specific qualifying activities.
How quickly can I get a business loan?
Mainstream banks usually take 2 to 4 weeks to assess unsecured loans, and even longer for secured facilities because they require a valuation of the asset being used as collateral. Online and alternative lenders are much quicker, providing a decision within 24 to 48 hours in most cases, and disbursing the funds in 1 to 5 days.
What is the difference between the Start Up Loan scheme and an SBA loan?
The US government offers SBA loans for new business owners. The equivalent scheme in the UK is the Start Up Loan scheme, which offers up to £25,000 per applicant at a fixed interest rate of 7.5% per annum. The loan is offered as an unsecured facility with zero collateral requirement and also provides free mentoring to startups.
Can I get a business loan with no credit check?
In the UK, no-credit-check business loans are very rare and should be approached with caution. FCA-regulated lenders are obligated to carry out credit checks, which include business and director credit profiles. However, if you have adverse credit, specialist lenders may use a "soft" credit check at the initial stage to indicate eligibility without leaving a mark on your credit file. At ABC Finance, we help you identify the right option for you.
The information in this article is correct as of May 2026 and is intended as general guidance only. It does not constitute financial advice. Business loan eligibility, rates, and terms vary by lender and individual circumstances. ABC Finance Ltd is an FCA-regulated whole-of-market broker. Please speak to one of our advisers for guidance tailored to your specific situation.
