1. Start Up Loans (British Business Bank)
This government-backed scheme offers unsecured loans of up to £25,000 per individual (max £100,000 for a group) with:
- 6% fixed interest
- Repayable over 1–5 years
- 12 months of free mentoring
Perfect for startups and first-time business owners.
2. High Street Bank Loans
Banks like Barclays, HSBC, NatWest, and Lloyds offer small business loans with competitive terms. These loans typically include:
- Repayment terms from 1 to 10 years
- Fixed or variable interest
- Requirement of trading history and financial statements
3. Online Business Loans (Fintech Lenders)
Companies like Iwoca, Funding Circle, and Capify provide quick-access loans to small businesses. Features:
- Fast approval (within 24–72 hours)
- Lower barriers to entry
- Flexible repayment options
4. Business Lines of Credit
Flexible funding where you draw funds as needed and pay interest only on the amount used. Ideal for:
- Managing short-term cash flow gaps
- Seasonal fluctuations
Providers: Tide, Fleximize, Capital on Tap
5. Equipment Finance and Asset Loans
Used to purchase or lease equipment, vehicles, or machinery. Offered by banks and specialist lenders with benefits such as:
- Spread costs over time
- Asset often used as security
- Preserves working capital
6. Invoice Financing
This allows businesses to access cash tied up in unpaid invoices. Two types:
- Invoice factoring: Lender manages collections
- Invoice discounting: You stay in control
Ideal for B2B companies with long payment terms.
7. Merchant Cash Advances
Lenders provide a lump sum repaid through a percentage of daily card sales. Best for:
- Retail, hospitality, or e-commerce businesses
- No fixed monthly repayments
Providers: 365 Business Finance, Liberis
8. Peer-to-Peer (P2P) Business Loans
Platforms like LendingCrowd and Assetz Capital match borrowers with private investors. Benefits:
- Competitive rates
- Transparent terms
- Good for businesses with modest credit profiles
9. Local Enterprise and Growth Hub Loans
Regional economic development agencies often offer small loans and grants to local businesses, especially in underserved communities.
Check your Local Enterprise Partnership (LEP) for tailored schemes.
10. Credit Union Business Loans
Credit unions offer ethical, affordable loans for community-focused businesses. Features:
- Lower interest rates
- Relationship-driven support
- May require membership or savings history
Frequently Asked Questions
What is the best loan for small business in the UK?
Start Up Loans are ideal for new businesses. For established SMEs, online lenders and asset finance offer flexibility and speed.
Can I get a small business loan with bad credit?
Yes, but terms may be stricter. Some fintech lenders and credit unions offer loans to businesses with less-than-perfect credit.
Do I need a business plan to apply?
Yes, especially for Start Up Loans and traditional bank financing. A solid plan improves approval chances.
Are small business loans taxable?
No, loans are not taxed as income. However, interest payments may be tax-deductible.
How long does approval take?
Fintech lenders may approve in under 24 hours; banks typically take 1–2 weeks.
Do I need to be trading to get a loan?
Some loans require trading history, while Start Up Loans are available to pre-revenue businesses.
Conclusion
There are numerous loans for small business UK owners, from government-backed schemes to fast, flexible fintech options. The key is to match the loan to your needs—whether you’re launching, growing, or managing cash flow. Research carefully, compare terms, and choose a funding path that supports long-term success.