Best Business Loans for Small Businesses

Business loans are financial tools used to get extra money in a time of need. 

Loans are borrowed from a lender, such as a bank, building society, or private lender. Certain rare kinds of loans exist that do not actually incur interest, such as Islamic loans.

But in most business cases, you will be charged an interest rate, which means the amount you pay back will be greater than what you borrowed. Failing to pay back on time can lead to extra charges, bankruptcy, and even legal issues.

Before we look into the best business loans below we have highlighted some pros and cons.

At a Glance, Pros and Cons

If you’re looking for an overview of the advantages and disadvantages of getting a business loan for your small business, this is the section for you.

Have a look at the Buying Guide section on how debt affects your mental health. Take time to read it before deciding to take out a small business loan.  

Pros

✔️ Flexible. Although commercial lenders will analyse your business plan to review how you will use your loan to enhance your company, they do not actually have a say in how your business is one, or how you manage your borrowed funds. They also have no right to your profits or savings — they can only take concern with your repayments.

✔️ Lower interest, tax-deductible. Small business loans can have low interests compared to many other funding routes, such as credit cards, and financing companies) although there is a wide variance in repayment terms relative to the lender and more. Also, interest paid on your small business loan can, in some cases, be deductible from taxes.

✔️ Can be large. Small business loans can also be quite sizeable depending on the actual circumstances and objectives of your company. This money becomes instantly available for use and can be used to fund expansions, infrastructure and more.

Cons

❌️ Lengthy review process. In terms of start-ups, commercial lenders need to adhere to rigid guidelines and need lots of information — they will need to delve deeply into your business, its structure, mission and financial information including possible investors — which can be a long review process. They’ll also have to check your credit rating, to test your level of trustworthiness in being able to repay the loan.

❌️ High rates, dangerous cycle. Lender rates vary widely according to policies and market dynamics. So your rates may change during the length of the contract, to a degree that you cannot match them with your profits. Small business loans also tend to have high-interest rates and this can climb further as you borrow more. 

❌️ You risk losing everything you own. The majority of commercial institutes will request some kind of security or collateral. So you will need a property asset such as a home, portfolio of instruments, and so on, in order to secure a loan. In the event that your business crumbles and you cannot repay the loan, a lender will be able to get its debt back by liquidating your securities. 

❌️ It’s a liability that affects your business valuation. The loan belongs to whoever the lenders are, be it a bank or building society. Therefore, your loan will appear as a liability on the balance sheet for your business. This impacts the potential valuation of your business. 

Best Business Loans for UK Small Businesses

Without further ado. It’s time for the leading small business loans. Each can be obtained in the UK and offered by a regulated financial service.

1. Tide — Top-Pick Business Loans for Small Businesses

The challenger bank Tide acquired Funding Options in 2022, expanding its lending and funding options to include cash flow and business financing.

Tide relies largely on open banking services, which allow any business, regardless of its banking provider, to connect securely to Tide's app and exchange financial data. Tide is able to quickly gather data and apply its algorithms for loan approvals because to this technology.

Tide provides several different kinds of loans, including those for working capital, invoice discounting, and new business start-ups. There are a variety of funding options, including grants, grants, and merchant cash advances.

Visit Tide

Fast Open Banking Opening 

There is currently no speedier loan option for companies. With the advent of open banking, Tide is able to advertise the ease and speed with which loans are authorised. According to the Tide website, the average time it takes to get a business loan authorised is 3 minutes and 24 seconds.

Tides loans provide a flexible repayment plan without any hidden fees or penalties. You may get a smaller loan without putting up collateral or undergoing rigorous credit checks.

Overall, the product's good reputation and a large number of pleased consumers make Tide a formidable competitor. They have taken over Funding Options and now have access to a wealth of financial knowledge inside the company.

Tide Business Loans is a very new business, therefore it might be difficult to find negative reviews from consumers who have actually used the product.

2. Capital on Tap

If you’re looking for an alternative to working directly with a bank lender or a high APR lender, Capital on Tap might be a good option for you. This is a credit card rather than a loan, but the concept is the same. You’re borrowing funds from a provider and paying them back with interest.

The cool thing about Capital on Tap is that you have the ability to earn rewards and cashback, which you can put back into your business.

Visit Capital on Tap

In addition, there is no annual fee, which means the APR and the payments you make are clear, with no added expenses to worry about.

The APR that you end up with is going to depend on your credit as a business and as an individual. In addition, the interest rates may vary depending on what you charge to the card so it’s good to get to know the basics and understand how interest gets applied. 

More Than a Loan

Capital on Tap understands that your business just needs solutions. This one provides you that and more. APR ranges anywhere from 15.22% to 35.15% (variable) and you have an open line of credit to charge things when you need to and pay them off. It’s revolving so you can cover expenses, pay if off, and do it all over again. Very few loans are revolving like this. 

You can give as many employees as you want access with unlimited cards to hand out, allowing you to manage the business and not worry about who has access or when. Every pound you spend on the card results in a 1% reward that you can use for whatever you choose. 

While this is great for small businesses, it may not be ideal for nonprofits or sole proprietor situations so keep that in mind.

3. Metro Bank

Metro Bank believes in making it simple for their customers to handle business all in one place.

While you do need to be one of their business customers to qualify, their small business loans are a really nice choice.

You can set up the terms to meet your business needs and keep all of your business in one location. They have physical branches all over the UK so you can get help in person when you need it.

Their interest rates can vary based on the markets, but you can anticipate being somewhere near 9%.

Visit Metro Bank

Apply for a loan up to £25,000 to handle your capital requirements and keep your business running smoothly. It’s possible to get an unsecured loan through this avenue, but you may be required to come up with a guarantee or security measure of some sort. 

Eligibility and Repayment

Metro Bank does require any small business loan applicants to have a small business bank account with them. While this is a slight nuisance, it can be convenient to have everything in one spot. It’s also a form of security and protection to have it all under one roof. The small business loan is really for small businesses with less than £2 million in annual turnover. 

The repayment will generally be on a monthly basis and your total payments are derived from the assigned APR and the term that you choose. These loans can be set up anywhere from 1-5 years. What works for you might depend on the amount as well as the repayment terms that your business can handle. 

In some cases, Metro Bank also charges early repayment penalties so this may be a detail to consider as you set up the term of the loan.

4. NatWest

The NatWest small business loan is a great choice and while the APR is starting to get a little too high, it’s still in a reasonable range and far better than alternative loan options out there.

They have a lot of great details that accompany this loan offer, starting with the fact that you can repay it at any time and not have to worry about early repayment fees or penalties of any kind.

Visit NatWest

The maximum loan amount also trends much higher than some, which is what makes them so great. They provide some flexibility that opens the door to more options.

You will need to have a small business checking account, but it can be at any bank and not necessarily here. In addition, they also require security to post up as a guarantee, which means you will be held personally responsible for the loan in some way. 

Loan Terms and Details

The NatWest small business loan is advertised in a specific range, which is pretty flexible. And on top of that, they sometimes make other exceptions to things like the repayment term if you make a special request.

Pay off the loan when you can or continue on the steady repayment term until the end. 

This loan has an APR that ranges from 11-15%. While this is getting high, it’s not awful. In addition, you can get higher capital than a lot of contenders with the ability to borrow up to £50,000. The repayment terms advertised are for 1-7 years, but this is an area of flexibility where you may be able to request up to 10 years for repayment. 

And don’t forget, you can pay off early if you want to! 

5. Yorkshire Bank

The Yorkshire Bank small business loan is a neat option, and they have some unique qualities that you won’t find at other banks. The first is that it’s possible to get a wholly unsecured loan, which is often a challenge.

If you’re a small business that has nothing to secure a loan, this might be an option for you. In addition, you can apply and complete the process completely online. Approval is provided within 48 hours in most cases.

Visit Yorkshire Bank

This lender offers some of the highest approval amounts, as well as the highest turnover allowances, before they cut you off as a “small business”. You could get approved for up to £150,000, which is almost unheard of in the small business industry. 

As far as turnover, there are no minimums, but they are unique here too. Where most small business lenders cap this much lower, they allow you a maximum capping position of £5 million per year, which is one of the top ranks for this detail. 

Did we mention there are no fees for early repayment or online applications? 

What Do They Look At? 

When it comes to getting qualified, Yorkshire Bank is one of the few business lenders that offer unsecured loans.

While unsecured loans are for much lower amounts, it’s still nice to have the capability. In addition, even with unsecured lending, the APR is reasonable and caps out around 20% for that category. Most loans range between 3.5% and 19% for their APR. 

Since they work with these primarily online and do a lot of unsecured debt, understanding qualifications is a good idea. The details they look at the most include whether or not you have been established for very long.

If you’ve been around for more than 18 months and you meet the maximum turnover levels, you are likely to be approved. And if you don’t fall in this category, you still may find approval in some cases. 

6. British Business Bank

The British Business Bank start up loan is a great choice if you’re a small business looking for that push to get off the ground.

This truly is for startup purposes, so if you have a trading history, you aren’t going to qualify. However, it’s one of the most competitive loans in the industry, making it a great choice to consider for your capital needs.

And they create this loan to be user-friendly to the startups. Obviously, you don’t have a lot of capital probably so they give you a low, fixed interest rate and they give you a reasonable repayment term too. While the startup loan is geared towards businesses with no trading history, there are options for businesses that do have a trading history also.

Visit British Business Bank

Standing Apart with Service

Not only can you borrow up to £25,000 with no trading history and pay only 6% interest, they don’t leave you to figure out the business industry all on your own.

You get the loan to provide you with much-needed capital, but the British Business Bank also gives you a personal business mentor as part of your agreement. That mentor is free to you for 12 months, which is amazing! 

For those who have a trading history, as long as it is less than 36 months, you can still qualify for some of their loans and this nice benefit too. They don’t charge their customers any fees for the loan or for repayment so you are in control. In addition, no personal guarantee will be required. This is a bank that gets it. 

7. HSBC

HSBC is Europe’s largest bank in terms of its value, which is more than £2.5T… 

HSBC is one of the most well-known banks in the world, offering financial services in more than 60 countries. HSBC is a multinational universal bank with headquarters in London, England. This British bank is Europe’s largest bank in terms of its value, which is more than £2.5T (opening of 2022).

Founded in 1865, you might be surprised to find out that it stands for the Hong Kong and Shanghai Banking Corporation group.

Visit HSBC

This may be surprising because it was actually founded by a Scottish banker, Thomas Sutherland. But the first location was indeed in Hong Kong, which was at the time a British colony.

Today this banking group offers general banking, asset management, financing and insurance services to businesses and retail consumers. You will find, to no surprise, an immensely varied list of offerings for small business loans.

That means it’s very difficult to give any specific loan offer for SMBs — overall, one of the main attractions to using this service is that there is potentially more guarantee of the lender remaining liquid than with a smaller-scale private lender.

Nonetheless, it does bear worth saying that Europe is entering into a financial collapse which is far more serious than that of North America. This will especially get deep during the winter crisis of 2022. HSBC faced intense criticism up until it eventually resorted to cutting ties with Russia, which means it has incurred losses.

And we are already seeing certain EU member states like Germany entering into food rations and energy rationing. To some degree, there will be a financial collapse.

The maximum size of the loan you can request will depend on the nature of your business. You may also get preferred rates if you are 35 years old order. You may also need to make a deposit of at least ten per cent of a security, such as your property. 

Interest Rates

Once again, there will be a massive variance according to your business circumstances, the current interest rate guidelines for HSBC and how it is responding to the very volatile market conditions today.

The nature of your loan will vary according to whether it is secured or unsecured by assets. An unsecured loan will one up a more expensive interest rate because there is no backing by collateral. 

Requirements

In some ways, British banks like HSBC and others are struggling to compete with digital-only banks. But they are still behemoths. To qualify for a small business HSBC loan, you need to be a British resident, have a good enough credit score and disclose the prerequisite documentation.

These documents include financial information about your business, including its revenue and expenses, the profit margin a number of staff members. This will need to be up-to-date, to give HSBC an understanding of the current state of your organisation. The true test, overall, is whether you are able to repay your loan.

8. Funding Circle

Funding Circle now operates as a commercial lender, however, it did not begin that way. 

It was originally a peer-to-peer lending exchange — a marketplace where the everyday public could directly lend money to small businesses and medium-sized businesses.

Via this business marketplace, small businesses were potentially able to get lower costs for financing than would be possible with a bank.

Visit Funding Circle

Private lenders, which could be any member of the public of the right age, would see metrics related to the risk of lending to each entity — they would then make their decision to lend based on their risk appetite and the potential ROI from directly lending to an actual business.

This somewhat revolutionary system meant that the public was able to become a high street lender and potentially get some ROI on their capital.

Sadly, the Funding Circle exchange closed for “retail investors” as the pandemic hit. Between 2020 and 22, this feature was stopped and it has since become permanently removed as a feature for retail investors.

During the length of its existence, Funding Circle has facilitated more than £13B in loans to small and medium-sized companies. The lending platform is also listed on the London Stock Exchange.

Terms and Conditions

Today, the company facilitates loans in its online marketplace. On the platform, investors can offer small companies money directly.

British businesses are able to borrow up to £1M. The limitations on the total amount are different in other countries. For instance, the limit is set at a bit over £350,000 for Northern America, and around £300,000 for Germany and the Netherlands.

In this way, Funding Circle does not itself offer business loans to small businesses. Rather, this marketplace is a kind of matchmaker where investors can find compatible small businesses that match the level of risk tolerance.

Investors are able to choose the size of the investment they are happy with. However, the loan can only be lent for a maximum of 60 months (5 years).

Keep in mind that the UK Financial Services Compensation Scheme (FSCS: how the FSCS works) does not cover loans that originate from crowdfunding or peer-to-peer services.

For this reason, Funding Circle cannot offer this guarantee of protection to its customers. So if the company goes completely liquid, there may not be a legal precedent for recapturing this lost money. 

The actual interest rate is set by Funding Circle itself according to how risky the small business request is considered and other criteria related to the loan term. This is a change that happened in September 2015 — beforehand, the loan rate was determined from an auction process.

Since December 2012, peer-to-peer lenders, Funding Circle included, became regulated by the British Financial Conduct Authority (FCA). 

9. Bank of Ireland 

The Bank of Ireland is Another major commercial lender. They’re headquartered in Ireland and are one of the so-called “Big Four” Irish banks.

The “big four” is a term that describes the four largest banks in Ireland according to market capitalisation. Each of these banks, of course, operates in the Republic of Ireland and Northern Ireland.

Each has a substantial global presence and is also able to issue banknotes in its regions. The four big names are the Bank of Ireland, Allied Irish Banks, Permanent TSB, and Ulster Bank (a subsidiary of NatWest bank).

Visit Bank of Ireland

In fact, the Bank of Ireland is the nation’s oldest bank that still has a continuous operation, if you discount closures that happened in certain decades in Ireland. Founded in 1781, it now has headquarters in Dublin. Banking services offered are diverse, ranging from personal to commercial, agricultural and industrial uses.

Provisions include typical deposit and checking services, overdrafts, mortgages, financing for global assets, debt financing, access to the foreign exchange markets and, of course, loans for small businesses.

One obvious attraction to using this bank is that it has some longevity and liquidity. This is quite considerable. The bank is large enough that it has the right to issue the production (money printing) of banknotes. This is despite the fact that it is not a central bank. It’s also a member entity of the European Banking Association. 

Loans

As with HSBC, there was enough diversity of offerings that you will need to apply in order to get a sense of what interest rate and the chance you have of succeeding is. Reportedly, small businesses can request a loan for buying equipment such as printers, telecommunications and computers. And loans can also be used for growth. 

You may also find that the 10% security by personal assets like a house also applies — in order to secure your loan. And nonresidents of Ireland may be charged an application fee of around £1000, by the Bank of Ireland. How competitive the business loan is will depend on the current market, the prospect of your business and more. 

This is another traditional banking name that is struggling against challenger banks like Monzo and Starling. 

10. Lloyds Bank

Indeed, it’s the biggest retail bank in Britain, with lots of accessibility of brushes across the Wales and England regions…

Lloyds Bank is not an international bank like HSBC. Instead, it has branches covering Wales and England. Nonetheless, it is still considered one of the “big four” banks in the UK.

Indeed, it’s the biggest retail bank in Britain, with lots of accessibility of brushes across the Wales and England regions, including for ATMs. 

Visit Lloyds Bank

There are also some provisions for Scottish residents and those based there — Bank of Scotland has made an agreement for Lloyds customers to be serviced through it. In terms of infrastructure, there’s 24-hour availability of online and telephone banking services. Its total customer base, including small business accounts, reaches 16 million users.

It’s a long-lived banking company, founded in 1765 in Birmingham. It slowly expanded over the centuries. And, in 1995, merged with Trusted Savings Bank, after which it updated its name to Lloyds TSB Bank (which was changed back after a divestment).

Current headquarters are in London, with other HQ branches in Wales and even Scotland. Also find more in Yorkshire, Sheffield, Halifax, Birmingham, and Wolverhampton. 

Services and Availability

The main selling-point of this bank is that it has quite an extensive network, consisting of 1300 branches in Wales and England. Each of these offers financial and banking services. There are branches for the Channel Islands: Guernsey, Jersey and the Isle of Man.

They are well regulated by the Prudential Regulation Authority as well as the Financial Conduct Authority and more. On top of this, it’s a part of the Financial Ombudsman Service and the Financial Services Compensation Scheme.

As with the previous examples in this guide, small business owners in Britain will be reviewed — information about your business, credit score and net profit versus revenue. And interest rates will be variable according to your circumstances — possibly ranging from between three months to 5 years.

This means you could potentially take out a short-term or long-term loan. A few ways uses can possibly make for your loan include purchasing equipment, hiring staff, adding inventory, establishing a retail store, growing your business, purchasing land or property and more.

Overall, interest rates may be highly aggressive due to very pressing market conditions. 

11. Barclays 

According to Barclay’s own breakdown of its story and history, it began with a collaboration between two bankers, John Freame and Thomas Gold.

Both were in business in London in 1690. John’s son later partnered up with his brother-in-law, James Barclay — and the name stuck ever since.

Visit Barclays

Over the centuries, the company enjoyed multiple financial events, global wars and revolutions in industry and agriculture and technology. The original business between John and Thomas was strengthened due to communications with the Quaker religious organisation.

You could say that the true formation of the Barclays Bank group started in 1896 when several banks in English and London provinces United under the name Barclays and Co.

The bank expanded in the following decades, becoming nationwide.

Today, Barclays is listed on the London Stock Exchange and is also part of the FTSE 100 Index. With a secondary listing on the New York Stock Exchange. Currently operating in more than 40 countries, with over 80,000 staff — it’s the fifth-biggest bank in Europe according to the value of all of its assets.

Services

As with HSBC, this is a goliath. The disadvantage of this is that you may receive a less personable service.

However, as we are talking about debt, what may be most important is the degree of counterparty risk (how likely is the Barclays bank to breach contractual terms or spike interest rates during your contract length), level of regulatory fitness and range of offerings of small business loans. In this sense, you should find a diverse set of offerings. 

With the current market volatility that has already seen Lloyds shut down 60 of its branches in Q2 2022, this may have a large impact on your chances of getting a loan, and the specific offer that will be made.

But the bank is experienced in handling personal loans, business loans, mortgages, savings and more. Of course, how much you can borrow will also depend on the circumstances of your business and your credit score.

Popular Business Loans for Small Businesses: The Verdict 

We hope that section was a useful addition to your reading experience of this guide. It is extremely attractive in the short term but the secondary (long-term) consequences are a very different reality. Displaying self-discipline under pressure can save you a lot of pain later on down the road.

That said, there are many advantages and disadvantages to small business loans. In the end, you will need to balance out the various ratios, for instance, the pressure of repaying the loan with high-interest rates and the emotional, physical, and spiritual burden of it.

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• How Do Business Loans Work? (Detailed Guide for 2023)
• How To Successfully Secure A Business Loan
• How to Get a Business Loan
• Best Business Loans for Bad Credit