Business loans UK: how they work, what they cost and who lends

How business loans work

A term loan gives you a lump sum that you repay in fixed instalments, usually monthly, over one to five years and sometimes longer. A revolving credit facility sets a limit you can draw, repay and draw again, paying interest only on what you use. Revenue-based finance and merchant cash advances are repaid as a share of your takings, so repayments rise and fall with sales.

Unsecured loans rely on the strength of the business and often a personal guarantee from directors. Secured loans take a charge over property, equipment or the business itself, which can mean a lower rate and a larger amount.

What a business loan really costs

Compare loans on the same amount and term, and look past the headline rate: an arrangement fee taken from the advance reduces the cash you receive, early-settlement charges can make repaying early expensive, and a factor rate is not an annual rate at all.

Every provider card here shows the price basis (a published range, a representative example or price on application), the fees we know about, how repayments are collected and the date we last checked the source.

Who can borrow

Each lender sets its own criteria. The most common published conditions are:

Time trading, often a minimum of 6 to 24 months.
Annual turnover above a set level.
Business type: many lenders serve limited companies only.
Sector: some exclude sectors such as gambling or property development.

Verified providers

Compare all business loans side by side

We’re verifying the first providers for this route

Products appear here only once we have checked them against the provider’s own published information. Meanwhile, the calculator shows what this kind of finance could cost.

Business loan repayment calculator

Questions, answered

What is the difference between secured and unsecured business loans?

A secured loan is backed by an asset the lender can claim if you cannot repay, such as property or equipment. An unsecured loan has no specific asset behind it, though lenders often ask directors for a personal guarantee instead. Secured borrowing is usually larger and cheaper; unsecured borrowing is usually faster to arrange.

How much does a £50,000 business loan cost each month?

It depends on the rate and the term. At an illustrative 12% APR over one year, repayments are about £4,428 a month with £3,137 of interest in total. Over five years at 10% APR they are about £1,052 a month, with £13,107 of interest.

Will applying affect my credit score?

Exploring and comparing here involves no credit search. When you ask a provider for a quote, they tell you whether they will run a soft search, which does not affect your score, or a hard search, which leaves a visible record.

Do I need a personal guarantee?

Many unsecured business loans ask directors for one, which makes you personally liable if the business cannot repay. Each provider card shows whether a guarantee or other security is required, wherever the provider publishes it.