How to Get a Business Loan? (Quickly & Easily in 2024)

Find how to get long-term business loans for your SME, in this review by CompareBanks.

Updated: July 1, 2024
Matt Crabtree

Written By

Matt Crabtree

|
Rebecca Goodman

Edited By

Rebecca Goodman

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You may be thinking about getting a business loan if you don’t have the spare cash needed to invest in things like new facilities, machinery, personnel, or advertising for your company.

There are many different types of loans to choose from, and the type you go for will depend on the nature and size of your company, the reasons for needing a loan, and also your financial history.

In this article, we'll go over some of the most often-asked questions concerning business loans, as well as the basics of getting one, the requirements for applying, and possible alternatives.

We'll also look at the steps you need to take to apply for a loan and explain what you can do to increase your chances of approval.

ProviderScoreDetails
1. Capital on Tap★★★★★Learn more
2. Tide★★★★★Learn more
3. Metro Bank★★★★★Learn more

The pros and cons of a business loan

In this section, we round up the advantages and drawbacks of getting a business loan for your company.

ProsCons
✔️ Your company may expand. If you decide to take out a loan, this money could help your company to grow and boost your revenue.❌ There may be stringent requirements to meet. When considering making a loan to a startup, banks exercise caution and are often concerned they will not get their money back on time.
✔️ Straightforward. Most business loans are applied for, taken out, and then paid back. If you stick to the rules and make repayments on time, the whole process should be relatively easy.❌ Not all of it is certain. You may not be able to get all the money your firm requires, because a bank sees your request as too high-risk or because they believe the amount you've requested is too high.
✔️ Interest rates. A bank loan is usually a better and cheaper alternative over an overdraft, a personal loan, or a credit card.❌ There is a potential for loss. If you take out a secured loan, you run the danger of having some of your assets seized if you can't make repayments.

What is a business loan?

Business loans are usually taken out by small businesses and paid back, with interest, over a set period of time.

What exactly is a ‘start-up loan'?

Since its inception in 2012, the government-backed start-up loans initiative has had a significant effect, helping to fund roughly 68,000 firms to the tune of £543.8m.

The Start Up Loans website, which is a division of the British Business Bank, provides funding for an average of 31 new enterprises every day, with loans averaging a little over £8,000. Everything from a mermaid school to a real crime museum has benefitted from these loans and it works in a broad variety of fields.

The project specialises in giving loans to companies who have been unsuccessful elsewhere, 35% of its borrowers have been jobless, for example. Some of the advantages of these loans are:

  • A simple, fixed interest rate of 6%
  • Get a loan of up to £20,000
  • Costs for prepayment are waived.
  • Repayment plans ranging from one to five years
  • Free mentoring for students for a year

Guidelines for seeking a seed capital loan

Applying for a business loan can be easier than other financing options, but there are a few items you should have on hand to speed up the process. You will need to show a range of documents, those which relate to your personal finances and those related to your business. These can include:

  • 📖 Your National Insurance number
  • 📖 Your address for the last three years
  • 📖 Your full bank account number and sort code

Once you have that, you can begin.

Step 1: Verify eligibility 

The first step is to verify online that you are a UK resident, legally eligible to work in the country and the owner of a company that has been operating for less than two years. Those who have had a company for two years or longer may be ineligible for start-up loans. Although there is no universally accepted definition of “trading”, HMRC includes the following scenarios as examples:

  • Engaging in commercial pursuits (as in a trade or profession)
  • Purchasing and selling items for the purpose of financial gain or excess
  • Performing functions
  • Accumulating any business profit
  • Taking charge of investments
  • Making money in any other way

Step 2: Registration details 

Easy peasy, you only need your name, birthdate, personal email, and phone number. If you're unsure whether or not the name you're using matches the one on your passport or driver's licence, you'll need to get those documents out and compare them.

After you've done this, an email with a confirmation link will be delivered to your inbox. Visit the link in your private email, create a password, and log in.

After signing up, you can begin the application process. First, provide your full name, title, personal email address, and phone number (all of which should already be filled in for you; double-check against your passport/driver's licence).

Step 3: General background data

There is a need for a little more information here, including the following:

  • Gender (with the choices “Non-binary” and “prefer not to say”)
  • Date of birth
  • Status in marriage
  • Your National Insurance number
  • Position held at the moment
  • Birthplace
  • Highest education level 
  • Yearly gross (before-tax) income plus perks
  • If you have any prior convictions that have yet to be served

Step 4: Payroll and credit verification

The next step is a review of your credit history. To begin, decide how much money you want to borrow and how long it will take you to pay it back. You will be able to modify these figures at a later date, but they are required for the credit check.

Your personal bank account information, including account number and sort code, must now be entered. If you still get paper bank statements or have access to internet banking, you will see them listed.

Step 5: What happens next?

Your application will be reviewed, and you will hear back within a few days. The length of time this takes is unpredictable once it has started; it might be as short as two to three weeks for those who need little help, or it could take over three months for those who require considerable support.

Cooperating vendors

Even if your selected lender is in charge of everything from start to finish, after you've submitted your application, you'll then be connected to a third party. They will then make the final decision on whether or not your loan is accepted.

You can see a complete list of third parties, or delivery partners, on the service's website, but in general, they are companies that focus on a certain area or industry and employ knowledgeable business consultants who can help you along the way. If you're successful, they'll set up coaching services and assist you in fine-tuning your company strategy, cash flow projection, and budget.

You may choose your preferred delivery partner throughout the application process. If you don't volunteer for a certain sector or region, you'll be automatically allocated to one. Once the delivery procedure has begun, you will not be able to switch delivery partners, so be careful to specify your selection.

How to get a business loan: reviews

Here we look at some popular providers of business loans, before you choose one always double-check it is covered by the FSCS, which covers up to £75,000 of your money if a bank goes into administration.

1. Capital on Tap — our top small business loan option

Capital on Tap might be an excellent choice if you'd rather not deal directly with a bank or a lender with a high interest rate. 

While not technically a loan, a credit card can serve the same purpose. You are taking out a loan from a financial institution and repaying the money plus interest.

Capital on Tap also allows you to get incentives and rebates that can be re-invested into your company.

With an infinite supply of cards, you may provide access to as many workers as necessary without sacrificing control of the company. The card gives you 1% cashback on every purchase, and you can use that money towards whatever you like. 

2. Tide

Tide's app is able to connect securely with any business's banking provider, regardless of whether or not they use open banking services. 

This technology allows Tide Business Account to rapidly collect data and use its algorithms for loan approvals. Working capital, invoice discounting, and loans for new businesses are all available from Tide. Grants, grants, and merchant cash advances are just a few of the many financial alternatives out there.

There is no more immediate source of funding for businesses. Open banking has allowed Tide to boast about how quickly and painlessly they can approve loans. The typical time it takes to acquire approval for a business loan is 3 minutes and 24 seconds, as stated on the Tide website.

3. Metro Bank

Metro Bank is committed to providing a convenient, one-stop banking experience for its clientele. Their small business loans are excellent, but you must be one of their business clients to apply.

As well as online access, you can also go into any of their several UK locations and speak with a real person.

Their interest rates are market-sensitive and might be anything from 9% to 12%. If you need money to pay bills or expand your company, you may apply for a loan of up to £25,000.

In order to qualify for an unsecured loan via this method, you may need to provide a guarantee or security.

How to get a business loan: The verdict 

Finding a business loan requires looking at all the options and seeing which one fits your needs the best.

Consider the following when making your decision:

✔️ Interest rate: the annual percentage rate (APR) of a loan is the total amount of interest and fees calculated over the life of the loan. By comparing annual percentage rates, you can see which company loans are the most and least expensive.

✔️ Fees: there may be up-front or annual fees with a business loan, or fees for late repayments

✔️ Terms of repayment: typical loan terms are between one to twenty-five years. Choosing a longer loan term will reduce your payments each month, but it will raise the total amount of interest you pay.

✔️ Faster financing: business loans from large banks may provide attractive rates for customers with excellent credit, while online lenders often provide quicker access to finance for those without a perfect credit score.

The steps required to get a company loan from a bank might differ depending on the specific financial institution chosen.

You'll usually need to include details about the company's name, the year it was founded, annual gross sales, and the combined annual household income of all proprietors.

FAQs

Can I get a personal loan to launch a company?

Is it OK to use a personal loan for commercial purposes?

How much money can I get for my company if I get a loan?

Can a person get a loan from the government to establish a business?

What are the consequences if I fail to repay a business loan?

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