Business Loan Requirements: What You Need to Apply in 2026

What a Business Loan Requires: The Checklist

You’ll get through approval faster if you treat a business loan as a checklist, not a gamble. Lenders want five things from you: the legal basics, your documents, a personal guarantee, proof you can afford it, and — for a secured loan — an asset.

Assemble the pack before you start your application, not during it.

We walk through each requirement below, flagging what changes for a startup, a sole trader, or a secured loan. Where a requirement has its own guide, we link you straight to it.

The Legal and Account Basics

You clear the basics first: a UK-registered, trading business, and an applicant who’s 18 or over and a named director, partner, or majority shareholder with the right to work here.

You also need a business bank account — but not necessarily with the lender. Barclays, NatWest, Lloyds, and HSBC all lend to non-customers; NatWest simply opens a fee-free servicing account to collect repayments if you bank elsewhere.

One catch for sole traders: Funding Circle now lends only to limited companies and LLPs (a February 2026 change), and iwoca serves limited companies and partnerships — so check the structure rule before you start your application.

The Documents You Must Provide

You should have six months of business bank statements ready, downloaded as PDFs from your banking app — they’re the first thing a lender reads to check your cash flow.

You’ll also need your filed accounts, plus up-to-date management accounts if your year-end is more than six months old, and often on larger facilities over £100,000. Recent VAT returns and director ID, with proof of address from the last three months, complete the pack.

That’s the easiest delay you can avoid.

You carry an extra ask as a startup: a business plan, a 12-month cash-flow forecast, and a personal survival budget. We set out the full checklist in our documents guide.

The Personal Guarantee Requirement

You’ll almost always sign a personal guarantee for an unsecured loan to a limited company — Funding Circle, iwoca, and Capify all require one, and the banks usually do too.

That guarantee makes you personally liable if the company can’t repay, reaching your home, savings, and earnings if a bad month leaves you short on payroll. It survives the company if the business folds.

You should treat a personal guarantee as a headline term, not small print. We cover caps and insurance in our personal guarantees guide; the short version is you can size the exposure but not remove it.

Security and LTV for a Secured Loan

You only meet security requirements if you borrow against an asset. A secured loan needs a professional RICS valuation, which adds weeks and upfront fees you pay whether or not the loan completes, before your cash flow sees a penny.

Property typically secures 70-75% loan-to-value, machinery and equipment 50-70%, and stock 30-50% — lenders won’t advance the full value, and the more liquid the asset, the more you can borrow.

You buy a lower rate and a longer term with security, but you put the asset on the line. We’d only secure a loan against something the business can afford to lose if a year turns bad.

The Affordability Test: Debt-Service Coverage

You have to prove you can afford the repayments, and lenders measure it with a debt-service coverage ratio. They want your free cash flow to cover the new repayment with room to spare — usually at least 1.25 times.

A ratio of 1.5 or higher reads as strong and earns you a better rate. Below 1.25, that’s usually a decline, because there’s no margin left when a quiet month hits.

Your existing debt is the silent killer here. If a merchant cash advance is already sweeping your card takings, it drags the ratio down and can turn an approval into an automatic no.

Trading History, Turnover and Credit

You’ll meet a trading-history and turnover bar that varies by lender. High-street banks and Funding Circle want two years; Capify wants twelve months; iwoca sets no fixed minimum and even funds startups. Turnover runs from £10,000 a year at iwoca to £100,000-plus at the banks.

Your personal credit matters even behind a limited company, and a director’s CCJ can trigger an automatic decline. No UK lender publishes a hard score, but a clean file in the 700s earns the best terms.

Match the lender to your credit file and trading history before you apply, not after a decline. We go deeper on who qualifies in our eligibility guide.

Start-Up and Government Scheme Requirements

You face lighter requirements with the government Start Up Loans scheme when you’re early-stage. It needs no security and no guarantor, lends each founder up to £25,000 at a fixed 7.5%, and accepts businesses trading up to five years.

You’ll still need a business plan, a 12-month forecast of your cash flow, and a personal survival budget — the scheme assesses you, the founder, not just the company.

You can use the Growth Guarantee Scheme as an established firm short on security. It backs the lender 70%, but you stay 100% liable. It isn’t a softer credit test — the lender still runs its own checks.

What Holds an Application Up

You can avoid most delays by clearing the usual culprits before you apply. Picture submitting on a Friday with last year’s accounts still unfiled at Companies House — the automated check reads distress and declines you before Monday.

You’ll also get held up by incomplete documents, no business bank account, too little trading, or a weak affordability ratio. Each is a requirement you can tick off in advance.

That’s what costs you a month instead of a week.

We’d file anything overdue, connect open banking so the lender sees your cash flow, and right-size the ask before submitting. Each step moves you from an automatic no to a real decision.

Business Loan Requirements FAQs