1. Government-Backed Start Up Loans
This UK government scheme offers unsecured loans of up to £25,000 per founder for new businesses. Key features:
- Fixed interest rate of 6%
- Repayable over 1–5 years
- Includes 12 months of free mentoring
Perfect for startups without trading history or collateral.
2. High-Street Bank Business Loans
Traditional banks like Barclays, Lloyds, and HSBC offer term loans for businesses with good credit and trading history. Terms vary but often include:
- Repayment periods from 1 to 10 years
- Fixed or variable interest rates
- Need for financial records and business plans
3. Alternative Business Lenders
Fintech companies like Funding Circle, Iwoca, and Capify provide flexible, fast-access loans for SMEs. Benefits include:
- Quick online application
- Funding within days
- Less stringent requirements than banks
4. Secured Business Loans
These loans use assets such as property or equipment as collateral. They allow for:
- Larger borrowing limits
- Lower interest rates
- Higher risk if the business defaults
Ideal for capital-intensive businesses or those looking for long-term finance.
5. Merchant Cash Advances
This funding method is based on future card sales. It’s suitable for retail and hospitality businesses. Features include:
- Repayment tied to daily sales
- No fixed monthly repayments
- Fast approval process
6. Invoice Financing
Businesses can unlock cash tied up in unpaid invoices. There are two types:
- Invoice factoring: Lender manages collections
- Invoice discounting: You retain control
It improves cash flow without taking on new debt.
7. Asset Finance Loans
Used to buy or lease business equipment, vehicles, or machinery. Options include:
- Hire purchase
- Equipment leasing
- Asset refinancing
It allows businesses to spread the cost of large investments.
8. Business Lines of Credit
Flexible loans that allow businesses to borrow, repay, and reborrow as needed—similar to an overdraft. Benefits:
- Pay interest only on what you use
- Useful for short-term needs and emergencies
9. Peer-to-Peer Business Loans
Platforms like LendingCrowd or RateSetter connect businesses with private investors. These loans often have:
- Competitive rates
- Simple application process
- Fast decision times
10. Local Enterprise and Growth Hub Loans
Some UK local councils and enterprise hubs offer small business loans to encourage local development. Terms and availability vary by region.
Frequently Asked Questions
What is a business funding loan?
It’s a type of financial product that provides businesses with capital to cover expenses, invest in growth, or manage cash flow.
How much can I borrow with a business loan?
Amounts range from £1,000 to £500,000+, depending on your business type, credit score, and collateral.
Do I need a business plan to get a loan?
Yes, most lenders require a detailed business plan, financial forecasts, and proof of trading history.
Is a business loan taxable?
No, loans are not taxable income. However, interest paid on business loans may be tax-deductible.
Can I get a loan with bad credit?
Some lenders offer loans to businesses with poor credit, but expect higher interest rates and stricter terms.
How long does it take to get business funding?
Bank loans can take 1–2 weeks, while online lenders and merchant advances may fund you within 24–48 hours.
Conclusion
Choosing the right business funding loan depends on your needs, credit profile, and growth goals. Whether you’re launching, scaling, or bridging a cash flow gap, the UK offers diverse loan options—from government schemes to alternative finance. Compare terms carefully, stay informed, and pick a solution that supports your long-term success.