We compare hundreds of loan providers, including high street banks, challenger banks, and alternative lenders to find finance that fits your business.
Business finance is a catch-all term that covers a range of funding options open to businesses of all sizes, including business bank accounts, overdrafts, loans, commercial mortgages, and everything in between.
Business loans are a way of borrowing money to support your business. There are several different types of loan available, but all involve borrowing a set amount of money that you pay back to the lender with interest, usually over an agreed period.
Different loans are available for different circumstances, so before you compare business finance loans, you need to have a clear idea of exactly what you need the money for.
There are several ways you can take out a business loan in the UK, and you should explore all your options before deciding.
The most straightforward option is often to go to your existing bank or building society, but if you do a bit more shopping around you could find one of the many challenger banks or alternative lenders offer better rates or a more suitable type of loan.
Uswitch has partnered with Think Business Loans to provide our business finance comparison service. Think are part of Bionic, the UK’s leading business switching service. We’ll work with high street banks, challenger banks and alternative lenders to match you with the right business finance solution.
Here’s how to compare business finance and get a UK business loan in three simple steps:
1. Tell us about your business
Give us a few details about your business and why you need funding and we’ll use smart data to match your business against thousands of potential lenders and facilities. Our eligibility check means your credit score won’t be affected.
2. Compare business finance
Once we know how much you can borrow, a member of the finance team will talk you through the options to help you find the best type of loan for your business. Upload your supporting docs, or connect via OpenBanking, for a quick decision.
3. Get your finance
Use the online portal to track the progress of your application in real time. Once approved, the team will work to get your funds released as soon as possible, so you can you can get back to doing what you do best - running your business.
Taking on any type of finance isn’t a decision that should be taken lightly, so you need to ask yourself the following questions before you apply:
Why are you looking for finance?
How much do you need to borrow?
How long do you need to repay the loan?
How much can you afford to pay back each month?
You’ll need to pay particular attention to the final two questions, as they will help you find the most suitable loan for your circumstances. If you choose a loan with lower monthly repayments, you’ll repay more interest overall but might find this makes the loan more manageable. If you can afford higher monthly repayments, you’ll be able to pay back the loan in less time and pay less interest.
When you apply, your lender will look at affordability alongside the information held on your credit file, so you need to be realistic about how much you can afford to borrow.
You’ll also need to compare different types of business loan to find out which is the most suitable for your current circumstances. Here are some of the options that could be available to you:
Unsecured business loans - This is when the lender provides funds without asking you to put up any assets, equipment or property as security.
Asset finance – This is a type of secured finance whereby you borrow money against the value of any assets your business has.
Working capital - This is a type of short-term loan used to help with cashflow and other day-to-day running costs.
Bridging loans - Most often used in property and development projects, this short-term funding option can cover the costs while you wait for funds to clear from the sale of property or an asset.
Commercial mortgages – This is a long-term loan used to help fund the purchase of a business property.
Peer-to-peer loans – Also known as P2P loans, this is when your business borrows money from investors, instead of a bank.
Invoice finance - Often used to help with cashflow, this is when a lender buys your unpaid invoices and provides you with a percentage of its total value.
There are even more types of business loan you might want to consider before signing on the dotted line, but it’s important to pick the loan and lender that’s most suitable for the needs and circumstances of your business.
CBILS is a government-backed funding programme designed to provide financial support for all viable small businesses affected by Covid-19. CBILS offers access to loans, overdrafts, invoice finance and asset finance.
CBILS isn’t a grant and you will need to pay back anything you borrow, including interest. Funds are provided by banks or other lenders, which means your business credit rating could be affected if you're unable to meet your repayments. This could cause problems for future borrowing.
This type of business interruption loan is backed by the government, which offers an extra level of security to lenders that should encourage them to lend when they might not otherwise.
The amount you can borrow depends upon your current circumstances and how your business has handled credit in the past. Lenders consider your income and expenditure alongside the information held on your credit file and any existing borrowing you might have before deciding whether to lend to you.
It also depends upon the lender, as each will have their own limit on how much they’re prepared to offer businesses.
If your application is successful, the amount you can borrow and the interest you’re charged may differ.
You should only ever apply for an amount that your business can afford to repay. If you're unable to repay your loan, it can impact your business's credit rating and affect future borrowing.
Business loans can be repaid over a few weeks or several years, and the time it takes to repay your loan will depend upon the amount you borrow, and the repayment terms you agree with your lender.
It’s usually the case that repaying a loan over a shorter period means that your monthly repayments are higher, but you’ll pay less back overall.
Example: If you borrow £7,500 over five years at an APR of 3.7%, you'll pay £714 interest on top of your business loan amount. Your monthly repayments will be £136.90 and your total loan repayment will cost £8,214.
On the other hand, choosing a longer repayment period will bring down your monthly repayments but will see you repaying more in total.
Example: If you borrow £7,500 over 10 years at an APR of 3.7%, you'll pay £1,458 interest on top of your business loan amount. Your monthly repayments will be £74.65 and your total loan repayment will be £8,958.
The important thing is to choose the loan amount and repayment terms that best suit your needs and circumstances. It’s worth using a loan repayment calculator to find out what cheap business loans are available and work out a repayment schedule to suit your business.
Your business loan interest rate will be calculated by your lender, who will take into account the following:
The size of the loan
The length of the loan
Your business credit rating
The length of time your business has been running
The amount of money your business makes
Generally, businesses with a higher credit score are offered lower interest rates as lenders see them as a lower risk borrower. If your business has a low credit score, it’ll usually be charged a higher interest rate to reflect the greater risk to the lender.
It’s also worth noting the ‘Representative APR’ on any business loan you apply for is the rate offered to at least 51% of applicants. This means there’s a chance the loan you’re offered comes with a higher rate of interest that what you were expecting.
Secured business loans need you to put up one or more of your company’s assets as security for the lender, while unsecured loans are offered without this condition.
When you apply for a secured business loan, you can usually put up property, stock or machinery as security. Although this can improve your chance of acceptance and might even help you secure a lower interest rate, the lender can sell off any assets to get their money back if you can’t keep up with repayments.
Unsecured loans don’t need anything putting up as security but will often come with stricter lending criteria and higher interest rates to offset the risk to the lender. Some lenders will ask for a personal guarantee from a company director, which means they personally take on responsibility for repayments if the business can’t.
If you need business finance, there are some alternatives you could consider instead of, or even alongside, a loan, including:
Business credit cards - If you need funding to cover cash flow, everyday spending or even to upgrade existing equipment, a business credit card could be an option. But bear in mind that credit cards aren’t suitable for long-term borrowing as interest rates are often higher than those offered on business loans.
Business overdraft – This could be a good option if you need a flexible way to borrow money as the facility is always available, but you should only be charged interest when you dip into it. Some business accounts offer interest free overdrafts for a certain amount of time after you open them, but this tends not to last longer than 12 months.
Crowdfunding - One of the more inventive ways of raising money, crowdfunding secures funding by incentivising people to invest in your business. Incentives can range from exclusive merchandise to shares in your business. The major downside to this type of funding is that it can take a long time to hit your target.
Government grants - A range of government grants are available to help businesses in certain sectors or specific parts of the UK. Although not available for all businesses, if your business is eligible then you don’t have to pay the money back. Find out what business grants are available in your area.
Any type of business can apply for finance in the UK, but it’s important to find the right type of funding for your business. Here are some of the loans available for different types of business:
Small business loans are designed to meet the specific needs of small business owners, which could include buying new equipment, moving to a new premises, hiring more employees, or covering the cost of other business services.
Certain lenders specialise in loans for small businesses, so it’s important to compare lenders and loans to find the one that best meets your needs. Unlike some other business loans, small business loans often don't have minimum requirements where turnover or number of years trading are concerned.
Every business needs money to get off the ground, but it can be difficult to find funding when you’re a start-up, as lenders have no way of knowing how your business handles credit or even if it’s viable.
In this instance, it’s worth looking into the government’s Start Up Loan scheme, which provides access to unsecured personal loans and offers free support and guidance to help write your business plan. If you’re application is successful, you’ll also be eligible for up to 12 months of free mentoring.
Alternatively, you could take out a personal loan to set up your business, and then apply for a business start-up loan once you’ve built up some credit history with your new company.
You can compare personal loans here, but bear in mind you will personally be responsible for repayments and missing any will affect your credit score.
Some banks insist you have a business current account before offering you a loan, but it all depends on the individual lender and the type of loan you apply for.
No, most loans can be applied for by a registered company director.
This all depend upon the individual circumstances of your business, but using property, stock or machinery as security can improve you chance of approval. Your assets will be at risk if you do not keep up your repayments.
This depends on the type of loan you choose, whether it is secured and if you sign a director guarantee. Always check the terms and conditions carefully.
All lenders have their own criteria, but your eligibility for a small business loan will depend upon the size and finances of the business.
Yes. All businesses have a credit record that is affected by how it handles credit. If you’re a start-up, there’ll be very little information on your credit record, which can make getting credit more difficult.