Small Business Loans UK

A guide to helping you understand and compare small business loans online


What are Small Business Loans?

You may be a startup business, or you might simply wish to grow your company. To do this it is more than likely that you will require funds over and above what you, your business partners, or friends and family can afford, this is where Small Business Loans can help.

The benefits of applying for a Small Business Loan online

Apart from the obvious benefits of applying for a business loan from the privacy and convenience of your own office, there are many other advantages to heading online instead of visiting your local branch of Barclays, Natwest, Lloyds, HSBC or the Halifax.

In recent years Small Businesses struggled to find funding due to the centralisation of the top five banks’ credit processes, which in turn meant that loan products from these banks became near on non-existent or expensive. As a result, the UK has experienced a sudden surge in alternative funding bringing many benefits to Small Businesses:

  • Quick loan turnaround - Compared with banks, alternative lending providers are smaller, nimbler organisations. They can make decisions quickly, without the red tape that banks have to contend with.

  • Flexibility in lending policies and lower interest rates - The money in most cases will be lent off a lender’s own balance sheet, allowing them flexibility in their lending policy meaning that businesses can sometimes enjoy lower interest rates.

  • Less need to secure a business loan - Most banks have many financial and reporting covenants, and often require security against the family home of the business owners. Alternative lending providers are more relaxed when it comes to covenants, and unsecured lending is often supported by personal guarantees, without security against homes.

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How to access alternative funding providers and others

Here at Business Comparison we take the strain out of searching for business finance and will compare high street banks, challenger banks and many independent and small specialist lenders to find the best deal suited to you.

Simply enter your details into our Finance Finder tool and we will do the rest.

What are the different types and how do Small Business Loans work?

A secured Small Business Loan is normally an option for a business that has a bad credit rating, or no credit history at all. The lender can ensure that they will regain the lent amount by securing it against a property or high-value assets should the business fail to make the repayments.

Upon application, the lender will wish to take a detailed look at any commercial mortgages that you have on your premises and the worth of your business assets. Alongside this, they will require recent bank statements and filed accounts.

Once the valuation has taken place, you’ve agreed a loan amount and repayment schedule, the lender will be able to make legal claim over the secured premises and assets should any repayments be missed.

An unsecured Small Business Loan, most importantly this type of loan is not secured against any of your business assets and is purely based upon the future potential of your business. The funds tend to be available quicker than if you applied for a secured loan, as the lender will not have to take the time to value your business; although they will wish to have a thorough understanding of your company’s profile, your personal credit history and assets.

Personal guarantees and Unsecured Small Business Loans - A personal guarantee means you as the business owner or partner will become personally liable to repay a loan if the business fails to pay. This may sound overwhelming, but it can help influence the lenders decision especially in the case of a start-up business.

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What Information will I need before applying for a Small Business Loan?

Although some people are of the opinion that Small Business Loans are hard to get, it really depends what you are after, and whether it’s a Secured or Unsecured Loan. Essentially lenders wish to understand your business and the likelihood of you maintaining your repayments. Below are some examples of the areas that lenders will most likely look at, but if you require an Unsecured Loan they are likely to delve into more detail:

  • Turnover, revenue and profit, these are the basic indications of your business’ success. They demonstrate the business’ ability to maintain a steady cash-flow and consequently keep up any repayments towards a loan. Bank statements from the last 3-6 months and your last set of filed accounts from Companies House are normally required by the lender to understand your business’ financial health.

  • Your business’ trading history. Understandably, it will be difficult for start-up businesses to provide this sort of information. But for the more established businesses this helps the lender understand the past performance of your company.

  • Directors’ histories, lenders tend to like to understand if any Directors are of a potential financial risk to the business, also if any CCJs or Winding Up Orders have been filed against them or the business.

  • Forecasts and business plans alongside information about your clients and customers. Lenders ask for this information to get a thorough understanding as to how profitable the business is. They want to understand what returns you expect, how volatile the market that you are trading in is, and essentially how likely they are to get their loan repaid.

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How a Small Business Loan can help you

Many people ask, “are Small Business Loans a good idea?” You can be assured that you are not the only person investigating finance options.

For example, the British Business Bank recently stated: “Smaller businesses all showed significant growth in 2017, while net bank lending remained relatively flat. The value of equity investment was up 79% in 2017, asset finance up 12% and peer-to-peer business lending was up 51%.” (Source: British Business Bank)

To give you further peace of mind that there are many other businesses in the same boat, we have outlined our top cases below:

A boom in business, more work means increased revenue for your business. But in order for you to fulfil your clients’ needs you will most likely need more resources than you currently have, for example: production equipment, raw materials or more employees to get the job done. This is where finance for expansion comes in and helps you increase your working capital. Most importantly, you can normally gain funding very quickly, in potentially a matter of days, enabling you to take advantage of the opportunities that have arisen.

Purchasing extra equipment. There are financing options designed specifically so that you can gain access to the tools and assets that your business needs as it grows. By borrowing the money, it means that you can act quickly, without having to pay large amounts of money up-front. Consequently, this mean that the business will maintain a good cash-flow position, so you can still pay the other overheads during times of expansion.

Moving in to new premises. Whether you’re looking to purchase a new office, warehouse or trading outlets, or you simply wish to get a head-start with the first few months’ rent. A growing business doesn’t just do it through sales, but also requires a financial injection potentially via a Small Business Loan.

Getting started in a new market. A new market can mean a greater demand for your products and services. To avoid any overwhelming orders or unforeseen problems, it is always wise to make provisions in your funding by taking out a Small Business Loan, that way your cash-flow will not be affected should anything occur, and you can reap the rewards of the new market.

Mergers, acquisitions and takeovers. A great way to grow companies is through taking over existing businesses, perhaps rivals, or merging with them. Raising finance for this type of growth is essential and something that a Small Business Loan may be able to help with.

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Should I take out a Secured or Unsecured Small Business Loan?

A Secured Loan is usually cheaper due to there being less risk to the lender although the amount available to borrow is determined by the overall asset value, usually 50-70%. Furthermore, the business seeking finance will incur costs associated with valuations and legal fees which usually need to be paid for up-front, and the amount of work and evaluation that needs to be undertaken means the process is longer.

An Unsecured Loan, this type of loan tends to be more expensive due to the increased risk that the lender is undertaking, although it takes less time for the funds to reach the borrower. As there is no need to secure the finance, there is no need to have physical assets in your business and there are less costs up-front.

The Best Small Business Loans in the UK

Here at Business Comparison we offer a huge variety of market-leading Small Business Loans and many exclusive deals; from merchant cash advances to working capital and many more, we are certain to find you funding to suit your business needs.

We compare Small Business Loans ranging from £1,000 to £20,000,000 with many different finance packages. What’s more all of our Secured and Unsecured Loans have flexible repayment options giving you the ultimate control as to how long you’d like them for.

How to apply for a Small Business Loan

To help us understand your requirements and to find the best Small Business Loan to suit your needs, please make sure you fill out our Finance Finder, it takes only a few minutes and it is the first step towards that much needed cash-injection for your business.

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If you need some free advice our business experts would be happy to help

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