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A business loan is a financial tool that some businesses use. 

But, with that comes risks. If you are not cautious and know what you’re doing, borrowing money from a bank or lender can end up costing you much more than it would have if you had been more careful.

Business Loan

Businesses today must choose to be creditors vs. debtors - the first pathway means you’ll lend money (because you are so productive and free), while the second means borrowing it and being in debt.

That said, let’s review the 5 popular business loans in the UK.


Our Top Findings of Business Loans (UK) ๐Ÿ‡ฌ๐Ÿ‡ง

Considering a business loan to enhance your business? First look at your savings - the global economy is under lots of pressure, becoming a debtor may be unwise.


1. Cheap HSBC Business Loans Review โ€“ Among the UKโ€™s Popular Business Loans

HSBC is one of the most reputable banks in the UK and a British banking and financial services group with operations in around 200 countries and territories.

It provides general commercial banking, financing, asset management, and insurance services for consumers and businesses.

Its list of products makes it one of the most popular business loans, and it may be one of the most cost-effective banks in the world. It is one of the top low-cost banks for small business owners in the UK. That’s why it is one of the best business loans in the UK (2022).

You can borrow up to £200,000 with HSBC. The maximum amount you can borrow depends on your income and whether you’re self-employed or not. You can also use an existing mortgage to top up your loan. If you’re over 35 years old, you can get a fixed rate of between 4 and 5%. You’ll need a deposit of at least 10% of the value of the property. With HSBC, you can choose from a range of properties. If you want to move house, you can use the equity in your previous home to help buy a new one.

What is the interest rate?

With wide variance according to the business applicant, the guideline interest rate on HSBC business loans is currently at 2.4%. This is only for unsecured loans, which usually fall under the category of personal loans. Unsecured loans are generally more expensive, as they are not backed by collateral. Unsecured business loans are available from a rate of 4%. 

Input your text here! The text element is intended for longform copy that could potentially include multiple paragraphs.These are the most expensive loans, but they are also the most secured. The main risk with unsecured business loans is that they can be difficult to repay when the business ends up in liquidation or dissolves. Unsecured loans are typically available to small and medium-sized businesses.

What are the requirements?

In order to qualify for a HSBC business loan, you will need to be a UK resident, have a good credit score, and be able to provide business documentation. You may need to also be able to supply information about your business, such as the total value of its sales, its profit margin, and the number of employees it has. Other pieces of important data include your company’s finances and its current state.

Ultimately, as long as you can demonstrate that you can repay a loan, have a good credit score, and meet the other basic requirements, you have a good chance of being approved for a HSBC loan.

PROS

  • Available to SMBs
  • Loans are unsecured, but backed by business assets
  • Interest rates on HSBC business loans are typically around 4-5%

CONS

  • If you fail to repay a HSBC business loan, the bank may take legal action against

2. Funding Circle Business Loans โ€“ Popular Private Business Loans

Previously known as Funding Circle, this is an online peer-to-peer lender. It has a rating of 4.6/5 on Trustpilot and an average review of 4.5/5 on GetMyLoans.

Which makes it one of the most popular online business loans services in the UK. Apart from providing loans, it also gives you a 0% APR deal on all its products. It is also relatively easy to apply for a loan with Funding Circle. You can get a loan of up to £200,000 with this business loan provider.

Funding Circle does not actually offer business loans. Instead, you can use its matchmaker service to find individual investors who want to fund active businesses. These investors can be as little as a few thousand dollars, so you do not need to have a huge asset base to get funding.

Funding Circle is a marketplace where investors can fund businesses in exchange for equity. The investor’s risk is relatively low. Let’s say you have a funding target of £50,000. Based on data from investors, Funding Circle can estimate that there is a 1 in 6 chance that you will be unable to repay the investment, which comes out to a 5% risk. Because of this low risk, investors are willing to offer you funding at lower interest rates than traditional lending businesses.

The typical process for applying for a business loan through Funding Circle takes about two business days. While the interest rate for a business loan through Funding Circle is typically lower than the interest rates offered by traditional lending businesses.

Though, we would recommend learning how to do DIY activities on a budget, eg. starting a podcast, rather than taking out a loan, when it comes to venturing on a small project.

Plus, you’ll be helping to support a growing network of investors, who can offer a variety of different types of loans to other businesses. This means that you won’t get just one type of loan, but a variety of different ones, which will ensure that you’ll continue to receive interest rates that are always at least competitive. If you want to grow your business and hire new staff, a business loan through Funding Circle can help you to do that.

PROS

  • Low interest rates
  • Variety of loans to choose from
  • Quick and easy application process

CONS

  • May not be the best option for businesses due to private loan pathway

3. Cheap Bank of Ireland Business Loans Review โ€“ for Small UK Operations

The Bank of Ireland is one of the most established top business loans in the UK. And one of the most reputable banks in the country.

It is also a member of the European Banking Association. And perhaps one of the most cost-effective banks for small business owners in the UK. Aside from business loans, it also provides personal loans, mortgages, credit cards, savings, and insurance products. Its purpose is to help you on your entrepreneurial journey. It is one of the most trusted business loans in the UK.

The Bank of Ireland offers a range of business loans starting from £5,000. This can be used for purchasing business equipment such as computers, printers, or telecoms. It can also be used on expanding your business by purchasing additional equipment. Loans up to £50 million can be offered depending on your creditworthiness. The interest rate for the business loan is 5%, which is slightly higher than the rate for personal loans.

There are also strings attached with regards to collateral. You must provide a minimum of 10% of the value of the loan. This can be a part of your business, real estate, or personal assets. If you are not a resident of Ireland, the Bank of Ireland will charge a €1,000 application fee.

Some sources say that the Bank of Ireland offers competitive interest rates. The rates for business loans may currently be at a base rate of 4.99%. The rates for personal loans are reportedly at 3.99%.

PROS

  • Range of business loans starting from ยฃ5,000
  • Interest rate of 5%
  • Collateral required is 10% of the value of the loan
  • Application fee is โ‚ฌ1,000 for non-residents

CONS

  • May require some form of collateral

4. Lloyds Business Loans Review โ€“ Top Business Loans for SMBs

Lloyds Bank offers some of the most popular business loans in the UK, with a history of providing industry-leading financial crediting.

This business loan provider is also relatively easy to apply for a loan with. You can apparently get a loan of up to £1 million with Lloyds.

This is reportedly one of the most cost-effective banks for small business owners in the UK.

The application process is apparently straightforward, and the criteria for approval fair. Lloyds will take your personal information, such as your credit score and income.

Other factors that will determine your approval or rejection include where you currently live, your investment risk profile, and your experience in the stock market. This broker is licensed by the Financial Conduct Authority, and you will deal with a reputable broker. So if you want to invest in the stock market, and you want that inclusive integration, this broker is an interesting option.

The interest rate for this business loan is variable according to the situation, ranging from 0.5% to 4.5%. The length of the loan ranges from three months to five years, and it can be a short term loan or a long term loan. Your Lloyds business loan can be used for purchasing inventory, purchasing equipment, hiring employees, opening a retail store, expanding your business, purchasing real estate, and many other purposes.

The minimum amount that can be borrowed is around £3,500, and the maximum amount that can be borrowed is much higher. The interest rate for this business loan is variable, ranging from 0.5% to 4.5%.

PROS

  • Can be used for many purposes
  • Interest ranges from 0.5% to 4.5%
  • Length of loan ranges from three months to five years

CONS

  • Minimum that can be borrowed is around ยฃ3,500

5. Barclays Business Loans Review โ€“ Top Business Loans for Moderate Sizes

Another leading business loans provider in the UK with a history of providing global financial crediting. Reportedly, Barclays offers loans for small business owners.

Barclays business loans are relatively easy to apply for. You can get a loan of up to £100,000 -  but aside from business loans, Barclays also provides personal loans, mortgages, savings, and credit cards.

The amount that you can borrow with a Barclays business loan is £5,000 to £100,000. But the most common amount that people want to borrow is between £10,000 and £75,000.

There are no fixed sizes or amounts with a business loan. The amount that you can borrow depends on your credit score, the size of the loan, and your personal situation. If you are a UK resident, then you can apply for a business loan with Barclays in the United Kingdom.

PROS

  • Provides global financial credit
  • Offers loans for small business owners in the UK
  • Relatively easy to apply for a loan
  • Offers personal loans, mortgages, savings, and credit cards

CONS

  • Requires good credit history
  • May require collateral

Best Business Credit Cards โ€“ Buying Guide

Let’s have a look at some aspects of understanding how to choose the top business loans.

Once again it’s a serious step to become a debtor, and it’s probably usually wiser to opt for being a creditor, even if this requires a long period of slowly growing savings ๐ŸŒฑ.


What is a Business Loan?

A business loan is given to a company by a bank or financial institution to help it expand and create jobs.

You may need a business loan to create new products and services, to expand your company’s operations, or to acquire new assets.

Types of business loans:

What is a Business Loan
  • โ˜‘๏ธ Fixed term - Repaid in one lump sum at the end of the term. The term is agreed upon between you and your lender, and if the terms are not met, the lender will take back the loan with a very high interest rate. 
  • โ˜‘๏ธ Variable term - Repaid over a certain period of time, such as a period of 5, 7, or 10 years. The amount and interest rate are agreed upon at the time of signing the agreement. 
  • โ˜‘๏ธ  Equity-financed - A lender funds part of the company’s equity. The company owns a portion of the loan, so when it is repaid, the equity is returned.

Why Decide on a Business Loan?

Once again, it could be very unwise to tie yourself to a business loan, as being in debt today may be an avalanche of second-order consequence problems. By comparison, being a creditor (having cash saved and being the person loaning money, if you wish) probably means positive secondary consequences.

However, there are many reasons people opt for taking out a loan. Here are a few:

  • Growth - With a business loan, you can borrow the money you need to allow your company to grow. 
  • Expansion - With a new product and additional capacity, a business loan can help you get the product to market faster. 
  • Debt Consolidation - A business loan can help you break the cycle of additional debt.
  • Acquisition - An investment or acquisition loan can help purchase another company or assets.

Common Types of Business Loan

There are a variety of business loans that exist and strategies employed, depending on your specific needs and goals. Here are some examples of different types of business loans to help you to understand the range that is available:

  • Equipment Loan: This is a loan for purchasing equipment, such as a new computer, phone system, or truck. The repayment schedule is usually either a set amount each month or a fixed number of payments per year. 
  • Trade Secured Loan: This is a loan that is secured by a specific type of asset, such as inventory or physical real estate. 
  • Short-term Bridge Loan: This is a short-term loan to help a company catch up on its debt payments. 
  • Long-term Bridge Loan: This is a long-term loan, also known as a bridge loan, that keeps a struggling company afloat until it gets its finances in order.
Common Types of Business Loan

Depending on your specific situation, short-term loans may be offered to you. If you have decided to become in debt, you can use them to bridge the gap between when you have enough cash flow to pay the bills and when that cash flow is coming in. 

If you have decided to become in debt, you can use short-term loans to pay for things like payroll, utility bills, insurance claims, or repairs to keep the business running. However, once you use these loans for one purpose, it is difficult to apply them for another purpose. 

If you use them for one thing, you want them to pay for another, but if you want to pay for something else with a short-term loan, it’s difficult to get that something else approved.

For startups, the following are the most common types of business loans, which is dependant on your company’s stage of development:

  • Growth Loans: These are short-term loans designed for a start-up reaching its financial goals. 
  • Expansion Loans: Long-term loans designed for a start-up hitting its financial goals.
  • Acquisition Loans: Long-term loans designed for a start-up acquiring new assets or purchasing another company.

Best Business Credit Cards UK ๐Ÿ“’ โ€“ FAQs

1. What Are the Different Types of Business Loans?

There are many different types of business loans across time horizons (long or short), including:

  • personal business loans
  • small business loans
  • business loans for investment
  • bridge financing
  • startup small business loans
  • expansion small business loans
  • growth small business loans

There are also a few different types of business loan for investment, including:

  • angel investor funding
  • venture capital funding
  • private equity funding.

2. What is Bridge Financing? ๐ŸŒซ๏ธ

Bridge financing is a type of business loan that allows businesses to bridge a short-term cash shortage. This can be helpful in the early stages of a business when it is difficult to raise money from traditional lenders.

3. What is a Personal Business Loan?

A personal business loan is a loan that is used to purchase personal assets, such as real estate or equipment. This type of loan is often used by entrepreneurs who are starting their own business.

4. What is a Small Business Loan?

A small business loan is a loan that is used to purchase small businesses, such as restaurants or boutiques. These loans are often available from private lenders and can provide much-needed capital for businesses that are just starting out. 

5. What is the Difference Between a Business Loan and An Investment?

A business loan provides short-term financial assistance to help your start-up grow or expand. An investment, on the other hand, provides long-term financial assistance in the form of shares or ownership in a company - in one sense, you become the loaner when you invest in a company. 

6. What Are the Interest Rates for Business Loans? ๐Ÿ“ˆ

The interest rates for most business loans vary, but they tend to be lower than personal loans. You should probably expect this to increase with time in the UK, which is experiencing inflation. 

7. How Long Does it Usually Take to Receive a Business Loan?

Usually, it takes about two weeks to receive a loan decision from a lender.

To summarise, there are many business loan benefits to be had by taking out a loan, but just as many potential disadvantages to consider, such as the pressure of paying the loan back with high interest rates and the spiritual burden of being in debt. Which is why starting small can beat taking out loans. Still, there are a variety of business loan options to choose from depending on your specific needs and goals.