Most UK businesses that borrow are small, and most small-business borrowing is a plain term loan: a lump sum now, repaid in fixed monthly instalments. Here is how to judge one before you apply.
What counts as a small business loan
There is no legal definition. In practice lenders use the phrase for term loans from a few
thousand pounds up to the low hundreds of thousands, made to sole traders, partnerships and limited
companies with modest turnover. The product itself is the same as any business term loan: you
borrow a fixed amount, agree a term, and repay capital and interest in instalments until the
balance is zero.
What changes at the small end is how the lender assesses you. A business with a short history,
one or two directors and thin accounts gives a lender less to go on, so the decision leans more on
your bank statements, your credit files and whether a director will stand behind the debt
personally.
Where small businesses borrow
- High-street banks. Often cheapest for an established customer with a long banking
history, but usually slower, and some lend only to businesses that already bank with them.
- Alternative lenders. Online lenders that decide from bank data and accounts, often in
hours or days. Typically unsecured, with a director’s personal guarantee.
- Government-backed schemes. The Start Up Loans programme, run by the British Business
Bank, lends to newer businesses at a fixed rate with mentoring attached. It is in the table
below.
- Community development finance institutions (CDFIs). Not-for-profit lenders that serve
businesses mainstream lenders turn down. Slower and smaller, but a real option after a
decline.
The costs to check, beyond the headline rate
The rate a lender advertises is rarely the whole cost. Before you compare offers, put each one
in the same terms:
- Arrangement or completion fee. Often a percentage of the loan, sometimes added to the
balance so you pay interest on it too.
- Early repayment charges. Some lenders charge for settling early; others do not. If you
might repay from a future contract or sale, this matters more than a small difference in rate.
- Total repayable. The single number that captures rate, fees and term together. Ask for
it in writing and compare that, not the monthly figure.
- Security and guarantees. A personal guarantee puts your own assets behind the
business’s debt. Read what it covers and whether it is capped.
What lenders look at
Time trading, turnover and profit, how cleanly money moves through your business account,
whether your accounts and confirmation statements are filed on time at Companies House, existing
debts, and the credit files of the business and its directors. A strong application answers the
obvious question (how will this be repaid?) before the lender asks it: what the money is for, and
the cash flow that services it.
Is a small business loan the right tool?
A term loan suits a one-off need with a clear payback: a fit-out, a hire, a marketing push with
measurable returns. It is a poor fit for a gap that keeps recurring, such as customers who pay
slowly every month. That is usually better solved with
invoice finance or an overdraft-style
working capital facility, which you draw only when you need
it.
- Amount
- £10,000 to £750,000
- Term
- up to 6 years
- Rate
- from 6.9%a floor, not typical
- Speed
- Decision in as little as 5 minutes; funds typically within 48 hours.
Fees, security and eligibility
- Fees
- No fee to settle early. A completion fee applies and is added to the loan.
- Security
- Unsecured
- Eligibility
- 2+ years trading generally expected; latest accounts and bank statements requested.
- Speed in full
- Decision in as little as 5 minutes; funds typically within 48 hours.
- About the rate
- Rates from 6.9% per year is a floor for the strongest applicants, not a typical rate.
- Amount
- Up to £25,000
- Term
- 1 to 5 years
- Rate
- 7.5% APRrepresentative
- Speed
- Weeks rather than days: it is an assessed government scheme, not instant lending.
Fees, security and eligibility
- Fees
- No application fee and no early repayment fee. Includes free mentoring.
- Security
- Unsecured
- Eligibility
- For businesses trading under 3 years (or pre-start). One loan per person, up to £25,000 each, subject to affordability.
- Speed in full
- Weeks rather than days: it is an assessed government scheme, not instant lending.
- About the rate
- A fixed 7.5% per year, the same for everyone, which is unusual: most business lending is priced on risk. The trade-off is the £25,000 cap and the assessment.
- Amount
- £1,000 to £25,000
- Term
- Terms between one and 10 years
- Rate
- 11.2% APR representative overall (£1,000 to £25,000)
- Speed
- Money usually within 48 hours of signing the paperwork; existing customers may get an immediate decision.
Fees, security and eligibility
- Fees
- No arrangement fees. No fees for repaying your loan early.
- Security
- Unsecured
- Eligibility
- Apply in Online Banking or the app if you already have a Barclays business account. Loans aren't available for all industries; subject to lending assessment, status and application. Amounts above £100,000 need a secured business loan.
- Speed in full
- Money usually within 48 hours of signing the paperwork; existing customers may get an immediate decision.
- Rate in full
- 11.2% APR representative overall (£1,000 to £25,000). By amount: 14.9% up to £5,000; 11.2% £5,001 to £15,000; 8.5% £15,001 to £25,000
- Amount
- £1,000 to £50,000
- Term
- Starting from one year; between 1 and 10 years when you apply online
- Rate
- 11.2% APRrepresentative
- Speed
- The money could be in your account in 48 hours once the application is accepted.
Fees, security and eligibility
- Fees
- No arrangement fees or early repayment fees.
- Security
- Unsecured
- Eligibility
- Representative APR applies to unsecured loans for businesses with a turnover of up to £25 million. Must be at least 18, borrow at least £1,000, need the money for business purposes, and be a sole trader, partner or director authorised to borrow for the business.
- Speed in full
- The money could be in your account in 48 hours once the application is accepted.
- Amount
- £1,000 to £25,000
- Term
- Repayment terms of between 12 months and 10 years
- Rate
- 11.3% Representative APR for loans up to and including £10,000
- Speed
- Speed not published.
Fees, security and eligibility
- Fees
- No arrangement fee. No charges for additional repayments. Early repayment: may be entitled to an interest rebate, but one month and 28 days' interest is deducted from the rebate. If security is required, an administration fee is payable.
- Security
- Either (security may be required)
- Eligibility
- No requirement to open or maintain an HSBC Business Current Account unless a debenture or fixed charge over book and other debts is required. Security may be required, each case considered on its merits.
- Rate in full
- 11.3% Representative APR for loans up to and including £10,000. 8.6% Representative APR for loans over £10,000.
- Amount
- £1,000 to £100,000
- Term
- Loan terms from 1 to 7 years
- Rate
- 12.57% APRrepresentative
- Speed
- Apply in about 10 minutes; if approved, you could have the money within 24 hours.
Fees, security and eligibility
- Fees
- You won't pay set-up fees and early repayment or early closure fees.
- Security
- Unsecured
- Eligibility
- Aged 18 or over; a director of the business you're applying for; not declared bankrupt and no CCJ or Court Decree; hold a Business Current Account with any provider. May need to open a fee-free Loan Servicing Account. Over £50,000 and up to £100,000 is a separate online application.
- Speed in full
- Apply in about 10 minutes; if approved, you could have the money within 24 hours.
- About the rate
- NatWest's own example: a fixed 11.90% interest rate, £508.17 a month, £11,179.77 repaid in total. It says other amounts are available at alternative rates
- Amount
- £1,000 to £50,000
- Term
- Repay over 1 to 7 years
- Rate
- 11.2% APRrepresentative
- Speed
- After signed documents are checked, funds can take up to 3 working days to arrive.
Fees, security and eligibility
- Fees
- Overpay at no extra cost. Early settlement figure includes interest up to the repayment day (28 days assumed) and 'any charges that will apply'. No arrangement fee is published.
- Security
- Unsecured
- Eligibility
- Sole trader, partnership or private limited company with no more than 2 partners or directors who own the business entirely; all aged 18+ and UK residents; good credit history, not bankrupt, no IVA in the last 6 years. A personal guarantee may be required for limited companies and LLPs. Funds go to the business current account.
- Speed in full
- After signed documents are checked, funds can take up to 3 working days to arrive.
How to read the rate column. A representative APR is the rate at least 51% of accepted borrowers get, not a rate you are promised. “From” figures are a floor for the strongest applicants. “Priced per quote” means the lender does not publish a single rate and assesses each business. The only figure that binds is a lender's own quote for your business.
Frequently asked questions
How much can a small business borrow?
It depends on the lender and on what your business can afford to repay. The amounts in the comparison table are each lender's own published minimum and maximum; your offer is set by the lender's assessment of your accounts and cash flow.
Can I get a small business loan as a sole trader?
Yes, some lenders lend to sole traders and partnerships, while others lend only to limited companies and LLPs. Each lender's eligibility is shown in the table. Lending of £25,000 or less to a sole trader or small partnership can also be a regulated credit agreement, which brings extra protections.
Will applying affect my credit score?
A full application normally leaves a hard search on the business and often on the directors' personal files. Many lenders offer an eligibility check that uses a soft search first. Ask which kind of search a lender will run before you apply.
What is a personal guarantee?
A promise by a director to repay the business's debt personally if the business cannot. Most unsecured business lending asks for one. It means your own assets can be pursued, so read whether it is limited to a set amount.
