How To Get A Small Business Loan In The UK
How To Get A Small Business Loan In The UK

A small business loan is a form of business financing that enables small businesses to fund their daily operations costs. The loan is often provided by a lender or a high street bank and is usually secured against an asset, or unsecured. Finding a loan in the United Kingdom might be difficult, and in the article, we will explain how to get the small business loan that is available.

Small business loans provide startups and small businesses the financial boost they may need to succeed. They can be used for various purposes, from managing cash flow to business expansion, and enabling businesses to grow whilst keeping costs at a low.

When business owners borrow money from a lender, a repayment plan is agreed upon as part of the lender’s terms of the agreement. The money then gets paid back, with interest, in scheduled monthly payments over a pre-agreed repayment period.

What is an unsecured business loan?

Photo: Insurance
Photo: Insurance

An unsecured business loan is a loan that doesn’t require security. A secured loan uses assets as security — which means if things don’t work out, the lender can sell the assets to recoup the cost of the loan. The question of ‘secured vs. unsecured loans’ is really all about risk for the lender.

To consider a secured loan, you have to have security in the first place. But if you don’t have any assets, you’ll need to get a loan without security — an unsecured business loan.

These days, more and more companies are based on intangible assets — for example, if you’re a software or consultancy company you’re likely to have a rented office, a few computers, and not much else in terms of tangible assets. That’s where unsecured business loans come in.

In the world of alternative finance, there are lots of lenders who can lend upwards of £100,000 unsecured — even up to £250,000 in the right circumstances. Because there’s no security, trading history becomes more important and the lender might ask for a personal guarantee too.

What is a secured business loan?

Photo:  PDQ Funding
Photo: PDQ Funding

Secured business loans allow small businesses to borrow money on the condition that the business offers "security" if the company defaults on the repayment of the loan. This security includes business assets such as property and equipment. The lender will take these assets if the repayment fails.

These loans work best for small businesses with access to valuable assets that they can use as collateral. When applying for a secured loan, the lender will consider the proposed asset and may ask for a valuation to be carried out.

Once the asset, loan amount, and repayment structure have been agreed on, you will then give the lender ‘charge’ over the item. This ultimately means that the lender will hold the legal authority of the selected item if your business defaults and doesn’t manage to pay back the loan.

Please be advised that the amount of money you want to borrow will need to be equal to the value of the item you’re offering as security.

Top Tip: With secured loans, lenders prefer that you fully own your chosen asset. There are two types of assets you can offer to secured loan lenders, but most lenders are more likely to approve hard assets:

Hard Assets

Soft Assets

Commercial Vehicles

Office Equipment

Heavy Machinery

IT Equipment

Commercial Property


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What are the pros and cons of small business finance?

Photo: Fleximize
Photo: Fleximize

Business loans are a common source of funding, but even within this category businesses will have a large range of choices. As well as the traditional high-street banks, you can also get both long-term loans and short-term loans from online-only lenders, with term periods ranging from one to 25 years.

Loans are available for a range of business purposes. For example, you can apply for funding for start-up costs, improvements to premises, purchasing new equipment, expanding the workforce, purchasing stock, and other operational activities.

To cater to this variety of needs, lenders, including banks, have developed specialist products such as asset financing, invoice financing, and working capital loans in addition to their standard business loans, to help businesses find the right kind of finance for their situation, according to NerdWallet.

1. Advantages

Allow you to grow your business

Bank loans are a convenient way to get extra finance, without needing to wait until your business has generated enough profit to fund expansion yourself. Taking out a loan means you can put your plans into action much earlier and take advantage of any business opportunities that present themselves, enabling faster and more accelerated growth.

Even though it can take weeks, or even months, to apply and get approval for a bank loan, this is still a practical way to raise funds to grow your business.

You keep full control of your company

The main advantage of a bank loan, as with any kind of small business loan, is the ability to get an injection to their cash flow without losing any control of your company. With some other funding options, like equity finance, you will be selling company stock to investors to get immediate funding which means you will have to share out the profits while you have the investor(s) on board. A small business loan is a more temporary measure, so once you pay off the loan you will have no more obligation to the lender.


One of the factors that set a bank apart from other lending options is its familiar name and trusted reputation. Some small businesses may prefer to apply to a bank for a loan because of its long-standing name and the security they think this brings. The established high-street banks could appear a more reliable option in comparison to the newer, online-only lenders, but this view is perhaps growing less relevant as online lenders become a more popular and accepted source of funding.

No interference from the bank

One of the other advantages of a small business bank loan is that, as long as you make the repayments, banks shouldn’t interfere or set restrictions on what you use the loan for.

Of course, when you first apply for a bank loan, you will need to send in a business plan outlining how you plan to use the funds so the bank can assess the risk involved in lending to your business. However, once you have the funding, you have the flexibility to change your plans without any intervention from the bank, as long as you carry on repaying the loan.

2. Disadvantages

Strict eligibility criteria

One of the major disadvantages of a bank loan is that banks can be cautious about lending to small businesses. Their strict lending criteria can make it particularly difficult for start-ups and newer businesses to be accepted for a loan as they don’t have the financial or trading history to back up their application and, if they are accepted, the interest rates are likely to be increased to compensate for the added risk.

As a result, it’s more established businesses with a good credit history and good growth prospects that are likely to benefit the most from the advantages that a traditional bank loan can offer.

Lengthy application process

Preparing for a business loan application can also be a long and time-consuming process. Not only will you need to fill out an application form for each lender, but you will also need to provide a business plan, your account history, and your financial forecasts to show your business is a viable lending prospect. For more information on the application process, visit our Ultimate Business Loan Guide.

Traditional banks can take a long time to process this information and make a decision, especially if your business is applying for a large sum of money. Because of this, businesses wanting a quick injection of cash may struggle to get this from a high-street bank lender.

You may not receive the full loan amount

If your business loan is eventually approved by the bank, then there is a chance that you won’t receive the full amount that you applied for. A bank may decide your business doesn’t need that much money to carry out your project, or might deem it too risky to lend you the full sum. Because of this, businesses may want to prepare an alternative plan should they only receive a proportion of the requested funds.

Not suitable for ongoing expenses

One of the other disadvantages of a bank loan is that you can only use the funds for certain projects or purposes that will help grow your business, and not usually to cover any ongoing expenses. Banks will want to lend to businesses that will be able to repay the money, and so they will look for businesses that will use their money to invest, grow, and generate returns.

If a small business wants funding to cover a temporary cash-flow problem or wants a short-term injection of cash, other financing options such as overdrafts, credit cards, or working capital loans may be more suitable.

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Best small business loans in the UK (according to NerdWallet)

Photo:  World Top Investors
Photo: World Top Investors


HSBC Holdings plc is a British multinational investment bank and financial services holding company. It is the second largest bank in Europe behind BNP Paribas, with total equity of US$204.995 billion and assets of US$2.984 trillion as of December 2020. HSBC traces its origin to a hong in British Hong Kong, and its present form was established in London by the Hongkong and Shanghai Banking Corporation to act as a new group holding company in 1991; its name derives from that company's initials. The Hongkong and Shanghai Banking Corporation opened branches in Shanghai in 1865 and was first formally incorporated in 1866.

HSBC has offices in 64 countries and territories across Africa, Asia, Oceania, Europe, North America, and South America, serving around 40 million customers. As of 2020, it was the world's sixth largest bank by total assets and market capitalization. HSBC was the world's 40th-largest public company, according to a composite measure by Forbes magazine.

Loan amount: £1,000-£25,000

Repayment period: 12 months–10 years

Eligibility: You will need a cash flow forecast and business plan along with management accounts and historic accounts.

You don’t need an HSBC current account to apply for a small business loan. There are no charges for additional repayments to your loan, but you can have a three-or-six-month repayment holiday at the start of the loan.

2. Barclays

Barclays plc is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services.

Barclays traces its origins to the goldsmith banking business established in the City of London in 1690. James Barclay became a partner in the business in 1736. In 1896, several banks in London and the English provinces, including Goslings Bank, Backhouse's Bank and Gurney's Bank, united as a joint-stock bank under the name Barclays and Co. Over the following decades, Barclays expanded to become a nationwide bank. In 1967, Barclays deployed the world's first cash dispenser. Barclays has made numerous corporate acquisitions, including of London, Provincial and South Western Bank in 1918, British Linen Bank in 1919, Mercantile Credit in 1975, the Woolwich in 2000 and the North American operations of Lehman Brothers in 2008.

Loan amount: Up to £100,000

Repayment period: 1-10 years

Eligibility: You must be a sole trader, partnership, limited company, charity, club or association.

With Barclays, you can borrow up to £100,000 over 1-10 years, taking a six-month repayment holiday at the beginning of your loan if you wish.

Secured loans of up to £25,000 are also available, allowing you to stretch your repayments to 20 years and go interest-only. If that doesn’t work for you, you can opt for its asset finance product.

3. RBS/NatWest

NatWest Group plc is a majority state-owned British banking and insurance holding company, based in Edinburgh, Scotland. The group operates a wide variety of banking brands offering personal and business banking, private banking, insurance and corporate finance. In the United Kingdom, its main subsidiary companies are National Westminster Bank, Royal Bank of Scotland, Ulster Bank, NatWest Markets and Coutts. The group issues banknotes in Scotland and Northern Ireland; as of 2014, the Royal Bank of Scotland was the only bank in the UK to still print £1 notes.

Loan amount: £1,000 to £50,000

Repayment period: 1-10 years

Eligibility: Aimed at businesses with a turnover of more than £2m – or commercial customers – who have a good credit rating without a history of CCJs or bankruptcy.

You don’t have to be an RBS or NatWest customer to apply for their loans. However, in some circumstances you will be required to open a fee-free loan servicing account to facilitate your loan. It will be free of transaction charges.

No arrangement or early repayment fees apply. Repayment holidays are available to businesses affected by Covid-19. See the websites for more details.

If you’re trading in a partnership, LLP or limited company you will also need to provide three years’ address history for each of the directors/partners applying for funding.

You’ll also need the personal details of all the partners, directors, members or signatories of the business (including their home addresses for the last three years). On top of that, you’ll need your business details, including your company’s registration number (provided by Companies House) if you’re a limited company. Also, details of any countries you or your business is registered for tax purposes in and details of your business’ year-end accounts or cash flow forecasts.

4. Lloyds

Lloyds Bank plc is a British retail and commercial bank with branches across England and Wales. It has traditionally been considered one of the "Big Four" clearing banks. Lloyds Bank is the largest retail bank in Britain, and has an extensive network of branches and ATMs in England and Wales (as well as an arrangement for its customers to be serviced by Bank of Scotland branches in Scotland, Halifax branches in Northern Ireland and vice versa) and offers 24-hour telephone and online banking services. As of 2012 it had 16 million personal customers and small business accounts.

Loan amount: £1,000-£500,000

Repayment period: 1-25 years

Eligibility: You must need this loan for business use and must be applying for a minimum of £1,000. You must also be a sole trader, partner or director with authority to borrow on behalf of your business.

There are no arrangement fees or early repayment costs. Capital repayment holidays of up to two years may also be available.

5. Clydesdale/Yorkshire Bank

Clydesdale Bank is a trading name used by Clydesdale Bank plc for its retail banking operations in Scotland.

Loan amount: £25,001-£10,000,000

Repayment period: Up to 15 years

Eligibility: Much like RBS and NatWest, the Clydesdale and Yorkshire Bank offerings are identical.

You must be 18+ and have a UK-based business. An arrangement fee may apply.

6. TSB

TSB Bank operates a network of 536 branches across England, Scotland and Wales but has not had a presence in Northern Ireland since 1991. TSB in its present form launched on 9 September 2013. Its headquarters are located in Edinburgh and it has more than 5.2 million customers with over £20 billion of loans and customer deposits. The bank was formed from the existing business of Lloyds TSB Scotland plc, into which a number of Lloyds TSB branches in England and Wales and all branches of Cheltenham & Gloucester were transferred, and renamed TSB Bank plc.

Loan amount: £1,000-£1,000,000

Repayment period: 1-10 years


You must be a sole trader, partner or director who requires the loan for business use.

You have a choice of a base rate or fixed rate loan depending on your business needs. The fixed rate offering lets you borrow between £1,000 and up to £1,000,000 over one to ten years. Loans are available on a secured or an unsecured basis and the arrangement fee can be up to 1.5pc depending on how much you borrow.

Fixed rate loans can be taken on a secured or unsecured basis. Capital repayment holidays may also be available.

Base rate, as its name suggests, relies on the Bank of England base rate which is somewhat more precarious. It’s for loans from £25,001 and can be repaid over one to 25 years. Be aware that security might be required.

How to apply for a small business loan

You can apply for a small business loan by filling out an online application with an alternative lender or going to a bank. You will need to state how much you want to borrow and for how long you need to make repayments. You will also need to provide personal details and relevant business information.

If you’re looking to apply for a small business loan with SME Loans, follow the steps below.

• Step 1: Once you have decided how much you want to borrow, click apply and fill out our application form, which will ask for your personal details and business credentials.

• Step 2: Shortly after submitting your application, one of our dedicated account managers will be in touch as they match you to the most appropriate loan provider for your business.

• Step 3: After a match has been made, the lender will give you the terms of agreement for your small business loan.

• Step 4: After you have agreed to the lender’s terms and conditions, the loan amount will be deposited into your account, and you will be able to access it within 24 hours.

How can I make the most of my small business loan?

When it comes to your small business’ finances, keeping on top of admin is crucial. Sticking to a careful and concise budget will prevent you from making common business spending mistakes, and ensure that the money you have borrowed is used sensibly and effectively.

Where possible, it’s a good idea to keep the loan in a separate account to your usual business account, transferring the money across as and when required. This will prevent you from spending impulsively and increase your capacity to make bigger, important investments in the future.

Don’t spend the money in one go. A sudden influx of cash can be exciting and overwhelming, so it’s important to stick to your business strategy and loan plans and spend the money wisely.

Maintain a good rapport with your lender. Ensure you’re making all payments on schedule and update your lender on any issues or unforeseen circumstances you encounter with repayments.

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