Last year, banks lent over 65bn to UK SMEs, at an average loan amount of £14,000. In fact, the business loan market just keeps on rising year by year.

Taking out a business loan can provide vital capital, but you’ll need to be diligent to source a loan with the best rates and terms. There’s a huge range of lenders out there, and if you act in haste, you will repent at leisure, as the old saying goes.

My guide examines the top business loans available in 2023 based on rates, flexibility, qualifying criteria and other key factors.

business loans illustration

What’s the Best Loan for Your Small Business?

I’ve spent time combing the market for the best business loan deals based on fees, interest rates, terms, lender reputation and security features. Also important in my calculations were the speed of funding, eligibility requirements and the level of customer support.

All of the Annual Percentage Rates (APRs) were correct at the time of writing but, bear in mind these can change very regularly, so check carefully with the lenders when you make contact.

So you understand the terminology, here are the main loan types:

Fixed Rate vs. Variable Business Loan

Fixed-rate loans have a constant interest rate, ensuring stable monthly repayments, which aids in financial planning. Variable-rate loans, however, have fluctuating interest rates based on market conditions, leading to potentially lower costs in some periods but adding uncertainty due to possible repayment increases.

Unsecured vs. Secured Business Loan

Unsecured loans don’t require collateral but usually have higher interest rates and stricter eligibility criteria due to the higher risk to lenders. Secured loans are backed by collateral, such as property, leading to lower interest rates and better terms, as the lender’s risk is reduced.

LenderLoan AmountRatesTerm LengthCollateralTime in BusinessVisit Site
Nationwide Finance£6,000 – £10,000,000CompetitiveNot specifiedYes, secured financingNo minimumVisit Site
Tide£500 – £250,000Not specified1-5 yearsNoneNo minimumVisit Site
Start Up Loans£500 – £25,0006% fixed1-5 yearsNone< 3 yearsVisit Site
Funding Circle£10,000 – £500,0004-8% fixedNot specifiedNone> 2 yearsVisit Site
PayPal Working CapitalUp to 40% of annual revenue10-18% of loan amount3-8 monthsNoneNo minimumVisit Site
HSBC£1,000 – £25,0007.1% fixed1-10 yearsPersonal guarantee typicallyNo minimumVisit Site
Barclays£1,000 – £100,00010.4% fixedUp to 10 yearsUnsecured, no collateral typicallyNo minimumVisit Site
Lloyds Bank£1,000 – £25,000From 11.8% fixed1-25 yearsPersonal guarantee sometimes12 monthsVisit Site
Business loan terminology explained
APR (Annual Percentage Rate): The APR is the total cost of borrowing money over the course of a year, expressed as a percentage. It includes the interest rate, as well as any other fees associated with the loan, such as origination fees, prepayment penalties, and late payment fees.

Our Small Business Loans

(1) British Business Bank: Start Up Loan: Best New Business Loans

The government’s Start Up Loan scheme provides fixed-rate loans of £500 to £25,000 to businesses under 3 years old.

The average loan amount is £7200.

With a low 6% APR fixed rate, no collateral, and free mentoring, this is one of the most affordable sources of financing for startups.

Funds can be received in days after approval.

Start-up-Loans

Pros

  • Low 6% interest rate
  • No collateral required
  • Fast funding after approval
  • Easy eligibility focused on business plan
  • Free mentoring provided
  • Flexible 1-5 year terms
  • No fees

Cons

  • Maximum loan amount of £25,000
  • Time needed for detailed application
  • Only for startups under 3 years old
  • Credit scores still checked
  • Ongoing financial reporting required
  • Approval can take 1-2 months
CriteriaDescription
Business LocationBusiness based in the UK
Loan Amount£500 – £25,000
Loan Term1 – 5 years
Interest RateFixed 6% APR
FeesNo application or setup fees
SecurityUnsecured – no collateral required
Replayment FrequencyMonthly (amount depends on loan size & term)
Application RequirementsBusiness plan, cashflow forecast, personal budget
CheckCredit check

Funding Circle: Best Business Loans for 2-year-old businesses +

Funding Circle’s peer-to-peer lending platform offers business loans up to £500,000 with rates as low as 4-8% APR fixed.

By connecting investors directly with borrowers, they can offer cheaper rates than banks.

Qualifying requires being established for at least 2 years with over £50,000 in annual revenue.

funding circle loans

Pros

  • Low 4-8% fixed rates
  • Large loans up to £500k
  • No early repayment fees
  • Fast funding possible
  • Use for any business purpose

Cons

  • Minimum 2 years trading
  • £50k+ annual revenue
  • Application paperwork
  • Monthly repayments
  • Personal guarantee required
CriteriaDetails
Loan CostDepends on the loan amount, interest rate, and loan term. There’s a one-off completion fee. No fee for early repayment. All loans are fixed rate.
Loan Amount£10,000-£500,000
Interest RatesCalculated based on a number of factors, including the borrower’s credit score and financial situation.
Loan DurationInformation not provided
Personal Guarantee Required?yes
Documents Required8 months of bank statements and the latest complete accounts including detailed Profit & Loss, and Balance Sheet info.
Loan RepaymentsMonthly repayments start one month after the loan is funded. Payments are taken via direct debit up to 5 days before the due date.
Early Repaymentyes, with no additional fees
EligibilityMust have been trading for at least one year.

PayPal Working Capital: Best Instant Loan

Businesses that take PayPal payments can get an advance of up to 40% of their annual PayPal revenue.

There are no fixed monthly payments or due dates. Instead, a fixed percentage is deducted from each PayPal sale until repaid.

Costs and repayment terms depend on monthly sales volume.

This is more of a working capital loan than a traditional business loan but the speed and ease of it is quite remarkable if you qualify.

paypal working capital logo

Pros

  • Quick application process
  • Funds in minutes if approved
  • No fixed repayments
  • Flexible payback from sales
  • No collateral required

Cons

  • High fees of 10-18%
  • Only for PayPal merchants
  • Approval based on PayPal sales
  • Deducts % of each sale
  • Short 3-8 month term
Terms Details
Loan AmountUp to 40% of annual PayPal sales volume; Minimum $5,000
EligibilityTypically 3 to 8 months; Repaid as a percentage of daily PayPal sales
PaymentsFixed percentage of daily PayPal sales deducted until loan plus fee is repaid
Loan Fee10% to 18% of loan amount; Based on risk assessment
Loan TermTypically 3 to 8 months; Repaid as percentage of daily PayPal sales
Application ProcessApply online; Instant decision; Funds available in minutes if approved
Security NeededNone, uses PayPal sales as collateral
Early RepaymentAllowed anytime; No prepayment penalty

Tide Business Loans: Best Business Loans for Instant Approval

Tide offers fixed-rate loans from £500 to £250,000 over 1-5 years for online sole traders and limited companies.

A unique feature is connecting Tide bank account data to assess creditworthiness based on cash flow, letting new businesses qualify.

Approval can be instant with same-day funding.

tide business loans

Pros

  • Fast online application
  • Decision in minutes
  • Same-day funding is possible
  • Loans from £500 to £250,000
  • Uses business data for approval

Cons

  • Rates not disclosed upfront
  • You have to download the Tide app and link your bank account
FeaturesDescription
EligibilityMust be based in the UK and operate as a sole trader, partnership, or limited company.
Application ProcessCan be done in minutes. Funds could be available within around 24 hours, depending on the loan.
Application TimeCan be done in minutes. Funds could be available within around 24 hours depending on the loan.
Impact on Credit ScorePerforming pre-eligibility checks for business loan options will not impact your credit score.
Necessary DocumentsBasic information about your business and bank statements covering the past year.
Business Loan OptionsBoost cash flow, grow business, or cover operational costs. Additional options include Start Up Loans, Business Cash Advance, Invoice Finance, and other partner products.
Secure Open Banking IntegrationAllows connection of any business accounts to the Tide platform in a few simple steps.
Credit Builder FeatureHelps to boost your credit score and widen your small business funding options.

Nationwide Finance Business Loans: Best Guarantor Loan for Wide Acceptance

Nationwide Finance was founded in 1999 and is headquartered in Olney, Buckinghamshire. They have helped over 50,000 businesses access finance and have approved over £3 billion of secured finance over the past 20 years.

Pros

  • Large loans from £6k to £10m
  • Competitive interest rates
  • Flexible terms and early repayment
  • Quick decision in 4 hours
  • Funding in 24 hours after approval
  • Accepts all credit scores

Cons

  • Secured loan, collateral required
  • Rates not disclosed upfront
  • High arrangement fees likely
  • Monthly repayments due
  • Extensive paperwork required
  • Only works with secured lending
FeaturesDescription
EligibilityNationwide has probably the broadest acceptance rates of any lender, assuming you have security.
Application TimeDecision within 4 hours and funds received within 24 hours of application.
Impact on Credit ScoreChecking eligibility and applying will not affect your credit score.
Loan AmountLoans range from £6,000 to £10,000,000.
Interest RateCompetitive rates, specific rates not provided.
RepaymentFixed monthly payments with early settlement discounts available.
Type of LoanSecured finance.
Credit ScoresAccepts all credit scores.
Extra FeaturesDirect lender (not a broker), no broker fees, and a dedicated contact for your loan.

HSBC Small Business Loan

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HSBC provides term loans from £1,000 up to £25,000 to support the needs of UK small businesses and startups. With fixed interest rates starting at 7.1% APR and no minimum turnover or trading history required, these unsecured loans offer accessible financing to fund equipment purchases, expansion plans, and other expenses.

Repayment terms range from 1-10 years, allowing borrowers to spread costs over time based on what aligns with their cash flow. HSBC also offers the flexibility to defer the first repayment by 3-6 months or take a payment holiday each January. There are no early repayment penalties, so the loan can be paid off faster if desired.

While a personal guarantee is often needed, the streamlined online application and rapid decision process makes HSBC an ideal lender for small and early-stage ventures looking for quick, affordable capital injections. These loans provide an additional financing option beyond overdrafts and credit cards to support business growth in a strategic manner.

HSBC business loans

Pros

  • Loans from £1,000 to £25,000
  • Low fixed interest from 7.1%
  • No minimum trading history
  • Option for a payment holiday
  • Allows overpayments
  • No arrangement fee

Cons

  • Need personal guarantee (usually)
  • Early repayment charge
  • Monthly repayments
  • Lengthy application process
  • Ongoing financial reporting
FeaturesDescription
Representative APR7.1%
Loan AmountLoans range from £1,000 to £25,000.
Repayment TermRepayment terms range from 1 to 10 years.
Representative ExampleBorrow £10,000 over 60 months with monthly repayments of £197.44. Total amount repayable will be £11,846.47.
EligibilityNo minimum turnover or trading history requirements.
Loan TypeUnsecured for sole traders and small partnerships, though typically a personal guarantee is required.
Overpayments and Repayment HolidayYes, the option to make overpayments and take a repayment holiday at the start of the loan is available.
Early Repayment ChargeYes, there is a charge of two months’ interest if you repay the loan early.
Arrangement FeeNo arrangement fee.

Barclays Unsecured Business Loans

Barclays provides fixed-rate term loans from £1,000 up to £100,000. Interest rates start around 10.4% APR fixed. No minimum turnover or time trading is specified.

Here are some specifics for their unsecured loan offering:

barclays business loans

Pros

  • Loans from £1,000 up to £100,000
  • Fixed rates from 10.4%
  • No minimum trading history
  • Unsecured loans available
  • Allows early repayment
  • No arrangement fee under £25k

Cons

  • Monthly repayments
  • Variable rates on some loans
  • Long application process
  • Ongoing financial reporting
  • New businesses may need security
FeaturesDescription
Representative APR10.4%
Loan AmountOffers the highest loan amount up to £100,000.
Repayment TermRepayment terms range up to 10 years.
Representative ExampleBorrow £10,000 over 60 months with monthly repayments of £212.15. Total amount repayable will be £12,729.01.
EligibilityNo minimum turnover or trading history requirements. Less established businesses may be subject to matched funding.
Loan TypeUnsecured, may not require a personal guarantee or security over a private property.
Overpayments and Early RepaymentYes, the option to make overpayments or pay off the loan in full without penalty.
Arrangement FeeNo arrangement fee for loans under £25,000.

Lloyds Bank Small Business Loan

Lloyds offers small business term loans from £1,000 to £25,000 over 1-25 years. Fixed interest rates start at 11.8% APR. Minimum 12 months trading required.

Pros

  • Loans from £1,000 up to £25,000 available
  • Fixed interest rates starting from 11.8%
  • Flexible repayment terms of 1-25 years
  • Option to make overpayments or repay early with no penalty
  • No arrangement fee for loans under £25,000
  • Online application and rapid decision process

Cons

  • Monthly repayment structure may not suit all businesses
  • Minimum 12 months trading history required
  • Personal guarantee likely required, especially for non-limited companies
  • Early repayment charges apply in some cases
  • Higher interest rates than some competitor offerings
  • Lengthy application involving substantial paperwork
FeaturesDescription
Representative APRFrom 11.8% (fixed).
Loan AmountLoans range from £1,000 to £25,000.
Repayment TermRepayment terms range from 1 to 25 years.
Representative ExampleBorrow £10,000 over 60 months with monthly repayments of £218.45. Total amount repayable will be £13,107.22.
EligibilityNo minimum turnover or trading history requirements.
Loan TypePersonal guarantee may be required in some circumstances, particularly for non-limited companies.
Overpayments and Early RepaymentYes, the option to make overpayments or pay off the loan in full without penalty.
Arrangement FeeNo arrangement fee for loans under £25,000.

What’s our methodology for comparing business Loans?

To determine the top business loan providers and products for 2023, I’ve evaluated over a dozen leading online lenders, banks, peer-to-peer platforms and private finance companies.

The key factors I assessed were:

  • Interest rates and overall cost of borrowing
  • Loan amounts offered
  • Loan terms available
  • Speed of funding after approval
  • Flexibility of repayment options
  • Requirements on time in business and revenue
  • Use of security or collateral
  • Fees and other costs
  • Overall reviews and reputation of lender

This allowed us to identify loans offering the most competitive rates and terms combined with flexible qualifying criteria for different business situations. Our rankings aim to provide the most affordable financing options accessible to both new and established businesses.

What is a Business Loan?


A business loan, in its most basic form, is typically a term loan. This type of loan is when a bank or other lender provides a fixed amount of capital upfront, which the borrower must pay back, with interest, over a set period. The borrower receives the full amount of the loan upon approval and will begin to make regular, often monthly, repayments to repay the principal amount along with interest.

Companies of all sizes typically use business loans to cover expenses they cannot afford upfront, from operational costs, hiring staff, and purchasing equipment to investing in expansion or other large-scale ventures.

The characteristics of a business term loan include:

While various business financing options are available, such as lines of credit, invoice financing, merchant cash advances, etc., a business term loan is a more traditional form of borrowing.

It offers more predictability as you know your exact repayment amounts and schedules in advance, which makes budgeting easier. However, it’s essential to understand the terms and conditions of any business loan before committing, as failure to repay can have serious implications for your business.

Pros and Cons of Taking a Business Loan

Pros of Business Loans

  • Access to capital: Business loans can provide businesses with access to large sums of money that they may not be able to obtain from other sources, such as personal savings or crowdfunding.
  • Flexibility: Business loans can be used for a variety of purposes, such as financing growth initiatives, purchasing equipment, or covering unexpected expenses.
  • Tax benefits: The interest on a business loan is generally tax-deductible, which can reduce a business’s taxable income.
  • Improved credit score: Making timely payments on a business loan can help to improve a business’s credit score, which can make it easier to qualify for future loans and other types of financing.

Cons of Business Loans

  • Debt: Taking out a business loan creates debt, which can be a financial burden if the business is unable to generate enough revenue to make the loan payments.
  • Interest: Business loans typically charge interest, which can add to the cost of the loan.
  • Collateral requirements: Many business loans require collateral, such as business assets or personal assets, which can be put at risk if the business defaults on the loan.
  • Application process: The application process for a business loan can be complex and time-consuming.

Who is Eligible for a Business Loan?

Eligibility for a business loan can vary depending on the lender and the type of loan. However, there are some common criteria that most lenders will consider:

  1. Business Age: Most lenders require a business to have been operational for a certain period, often at least a year or two, before they are eligible for a loan. This demonstrates that the business is somewhat established and has a track record.
  2. Credit Score: Both the personal credit score of the business owner(s) and the business’s credit score may be considered. A high credit score demonstrates good creditworthiness and can increase your chances of getting a loan.
  3. Revenue: Lenders will want to see that your business has regular revenue coming in. This helps them ensure you can repay the loan. The minimum revenue required can vary by lender.
  4. Profitability: Some lenders may require your business to be profitable to be eligible for a loan. They will look at your business’s financial statements and tax returns to assess this.
  5. Business Plan: You may need to provide a detailed business plan for certain types of loans, particularly those intended for startups or significant expansion. This should demonstrate how you intend to use the loan and how it will contribute to your business’s profitability.
  6. Industry: Certain industries may be considered higher risk by lenders, and businesses in those industries may have a harder time qualifying for a loan.
  7. Legal and Financial Obligations: Your business should be in good legal standing, with no outstanding issues like tax liens or major lawsuits. In addition, lenders will look at your debt-to-income ratio if you have any existing debt.
  8. Collateral: For secured loans, you’ll need to provide collateral. This could be business assets like property or equipment.

Where Can I Get a Small Business Loan?

Many options exist for small business loans typically under £50,000:

  • Major high-street banks like Lloyds and HSBC
  • Specialist online lenders like Tide and OakNorth
  • Peer-to-peer lending platforms like Funding Circle
  • The government Start Up Loans program
  • Your local credit union
  • Invoice financing companies
  • Merchant cash advance providers

How to Apply for a Small Business Loan?

Applying for a business loan can be a somewhat complex process. However, by following these steps, you can increase your chances of getting your loan application approved.

  1. Understand the Reason for Your Loan: Before you even start the loan application process, it’s crucial to be clear on why you need the loan. Is it for equipment, inventory, expansion, or to cover short-term cash flow gaps? Your reason for borrowing could affect the type of loan you apply for and the likelihood of approval.
  2. Determine the Type of Loan You Need: There are different types of business loans, such as term loans, lines of credit, invoice financing, or equipment loans. Each type has its own requirements and is suited for different business needs.
  3. Evaluate Your Credit History and Score: Both your personal and business credit scores are important in the business loan application process. Lenders will check these to assess your repayment habits and determine your risk level as a borrower.
  4. Prepare a Solid Business Plan: Lenders want to see a detailed business plan that shows your business model, market analysis, revenue projections, and details about how the loan will be used. This can help them understand the potential for your business’s success and repayment ability.
  5. Organize Your Financial Statements: You’ll need to provide your business’s financial statements. This typically includes income statements, balance sheets, and cash flow statements. Some lenders may also want to see your tax returns.
  6. Calculate How Much Money You Need: Be clear about exactly how much you need and ensure it’s a reasonable amount that you can pay back. Overestimating can lead to excessive debt, while underestimating may leave you short of funds.
  7. Choose Your Lender Carefully: There are a variety of lending options for businesses, from traditional banks and credit unions to online lenders. Research different lenders to see their interest rates, terms, and loan requirements.
  8. Gather Necessary Documentation: The specific documents you’ll need will depend on the lender and type of loan. However, you’ll usually need financial statements, tax returns, a business plan, and personal identification.
  9. Submit Your Loan Application: Once you’ve gathered all necessary information and documents, you can submit your loan application. Be sure to thoroughly complete all sections of the application to avoid any delays in processing.
  10. Wait for Approval and Understand the Terms: After submitting your application, it can take a few days to several weeks for the lender to process your application and make a decision. If your loan is approved, make sure you understand the terms before accepting the loan.

Comparing Business Loan Lenders

When researching lenders, compare costs, qualifying criteria, loan amounts offered, funding speed, the flexibility of terms, required collateral, and other factors.

Online lenders like Funding Circle feature streamlined qualifying based on business performance data from accounting platforms. This allows faster approval and funding.

Banks have more rigid criteria but offer larger loans and lower rates. Ongoing financial reporting is required. Government start-up schemes have the easiest approval with minimal required documentation.

Invoice financing providers offer the most flexible access to capital but also have the highest rates. Merchant cash advances are easy to qualify for but deduct a fixed percentage of sales until repaid.

To get the lowest rate offer, have all financial statements ready and shop multiple lenders through online marketplaces like Funding Options. Compare total costs of borrowing, not just headline rates.

Which bank has the best business loans in the UK?

The best bank for business loans in the UK depends on your specific needs and requirements, such as loan amount, interest rate, repayment terms, and industry. To find the right lender for your business, it is advisable to consult financial experts and compare different options carefully.

Major players in the UK business loan market include:

  • HSBC: HSBC offers competitive interest rates and flexible repayment options, catering to a broad range of industries with both short-term and long-term financing solutions.
  • Barclays: Barclays offers an extensive array of business loans, including unsecured options. The bank is praised for its quick approval process and digital banking services.
  • Lloyds Bank: Lloyds Bank focuses on offering tailored lending solutions for small and medium-sized enterprises. Their business support services are another feature that sets them apart.
  • NatWest: NatWest provides a wide variety of lending options, including asset financing and commercial mortgages. The bank is recognised for its efficient customer service.
  • Santander: Santander is known for their transparent fee structure and the flexibility of their loan offerings. They also provide specialised business support and advice.

How to Get the Best Business Loan?

The right business loan provides affordable financing that aligns with your capital needs and ability to repay. Follow these tips for securing the optimal loan:

  • Calculate exactly how much capital you need and by what date. Don’t take more than required.
  • Understand your current and projected financials, including sales, costs, profits and cash flow. Provide realistic forecasts.
  • Have all required documents ready before applying – financial statements, business plan, tax returns, accounting data, etc.
  • Shop multiple lenders to compare rate offers. An online marketplace simplifies this process.
  • Compare the total cost of borrowing, not just rates. Factor in all fees.
  • Select a loan type that matches your needs – upfront lump sum or flexible ongoing access to funds.
  • Make sure repayment terms fit your cash flow capabilities, allowing sufficient profit to remain.
  • Pick the longest repayment term you can afford to minimize monthly payments.

Taking time to find the right loan for your business needs can provide affordable financing to help your company grow and succeed over the long term. With this overview of the top business loan options for 2023, you can make an informed borrowing decision tailored to your unique situation.

Other Business Finance Options

Beyond traditional business loans, there are several other financing options available for businesses. Here are a few alternatives:

  1. Business Credit Cards: Business credit cards can be a good option for managing cash flow and purchasing items for the business. They’re relatively easy to get and can offer rewards such as cash back or travel points.
  2. Merchant Cash Advances: A merchant cash advance provides a lump sum of cash in exchange for a portion of future sales. While this can be an easy way to get cash quickly, the fees can be high.
  3. Invoice Factoring or Financing: Invoice factoring involves selling your outstanding invoices to a third party for a percentage of their total value, typically 80-90%. You get immediate cash, but at the cost of some of your profits.
  4. Equity Financing: Equity financing involves selling a stake in your business to investors. This can provide significant funding without incurring debt, but it does dilute your ownership.
  5. Crowdfunding: Crowdfunding platforms such as Kickstarter or Indiegogo allow you to raise small amounts of money from a large number of people. This can be a great option for product-based businesses or businesses with a strong social mission.
  6. Venture Capital: Venture capital is money given by investors to startups and small businesses with long-term growth potential. It’s a type of private equity and is typically high-risk, high-return.
  7. Microloans: Microloans are small, short-term loans typically used by startups or newer businesses. They’re offered by many different organizations, including non-profits and community groups.
  8. Grants: Business grants are essentially free money given to a business for a specific purpose. They’re often offered by government departments, foundations, and corporations. While grants can be a great source of funding, they can be competitive and often come with specific conditions.
  9. Trade Credit: Trade credit allows you to delay payment for goods or services. For example, a supplier may provide you with products but allow you to pay in 30, 60, or 90 days.
  10. Peer-to-Peer Lending: This involves borrowing money from individual investors who lend money directly to businesses, usually through online platforms. It can be easier and faster than traditional bank loans but may come with higher interest rates.

Remember, the best financing option for your business depends on a variety of factors, including your business’s age, financial situation, the amount needed, how quickly you need funds, and the specific purpose of the funds.

It’s always a good idea to speak with a financial advisor or consultant before deciding on the best financing option for your business.

Business Loan FAQs

What is the easiest UK business loan to qualify for?

What credit score do you need for a UK business loan?

How long does it take to get approved for a UK business loan?

Can I get a UK business loan with bad credit?

What documents do you need for a UK business loan?