Ideal for new start up business or up to 2 year old business with limited financial information
Selective invoice finance
Ideal for more than 2-year-old business with good financial information
Overdraft (Revolving credit facility)
Unsecure business loan
Secured business loan
Ideal for strong financial company who is looking to expand its services and grow.
Overdraft (Revolving credit facility)
Unsecure business loan
Secured business loan
Ideal option for established business which is declining financial performance and/or stressed
Why compare business loans?
If you're looking to compare financial products, there are a lot of things you need to bear in mind. With a wide variety of consumer and commercial finance options on the market, each designed for growth projects, small businesses or short terms, it can be difficult to know where to start.
With so many lenders now offering different eligibility criteria, interest rates and overall costs, it can be tough knowing which one can truly benefit your business. Let's take a look at everything you need to know before you compare finance rates.
This all depends on the level of cover you want. Getting the right commercial finance product for your business will depend on the type of loan you take out and the amount of interest you would be happy to pay each month.
Secured loans - secured business loans only available to homeowners as your debt is linked to your property. The amount you are eligible to borrow will depend on the amount of free equity you have in your property - the smaller your mortgage is, the more you can borrow.
Unsecured loans - unsecured business loans are funding that usually requires a personal guarantee from the lender. Lenders will only grant a loan based on the finance health of a business
Revolving credit facilities - Revolving credit facilities, such as credit cards, are a type of credit that does not have a fixed number of payments and can be spread out for as long as you require.
Business cash advances - this is a type of lending based on future revenue. While it can come in a variety of different forms, the most common is a merchant cash advance, also be known as a revenue loan, a turnover loan, or revenue-based financing.
Each option comes with different criteria. Make sure to consult with your lending manager before making an application.
Secured vs Unsecured business loans
Before you begin your application, you must decide whether the loan you wish to take out is secured or unsecured. It's vital to know the difference between secured and unsecured business loans as this can affect your application.
Secured Loan - this loan is connected to a piece of collateral, such as your car or home. Failure to repay your loan will result in the lender taking possession of the collateral, in order to pay off the balance. This one is typically easier to get as there is less risk to lender.
Unsecured Loan - this loan is not protected by collateral, which means the lender cannot automatically take your valuables if you default on repayments. These can also offer more flexibility as lenders often offer repayments ranging from one month to three years.
How long do you need to pay it back?
The length of your business loan will ultimately depend on your company's overall outgoings and the type of product you take out. Before you make an application, it's vital to be realistic about how much you can afford to pay back each month.
Each of the direct lenders and brokers we compare provide a variety of repayment periods, ranging from a month to 15 years. While a short-term business loan may have higher monthly repayments, you will pay less interest overall. Longer term loans will have much lower monthly payments, but you will pay more interest back over this period of time.
How difficult is it to get a business loan?
Many businesses feel getting a business loan is impossible. However, the truth is, it depends on a variety of factors, including you! Before you apply, ask yourself, how does your business look on paper and how easy will it be to get your money back? Lenders need to be 90% sure that you won't default on the loan, so they won't lose money. As a result, you should try to see your business from the lender's perspective, whilst ensuring your financial documents are meticulously detailed.
What do I need to compare business loans?
To compare business loans with Free Price Compare, you will need to provide the following details:
Businesses current address
Age of your business
6 months bank statements
An overview of how you plan to use the funds.
It's important to note that each lender has a different criteria for approving business loan applications. One could approve your application based on your business's minimum annual revenue decides the success of your application, while another could look more closely at your personal credit score, how long you've been in business and the collateral you're able to put up.
As a result, it's vital to research the specific lender you are interested in, so you know exactly what they are looking for before you apply. Otherwise, your application could be rejected.
Why compare business loans with Free Price Compare?
We know how important it is to find the financial product to help your business reach new heights. At Free Price Compare, we understand that choosing the right business loan can be confusing and time consuming. That's why we offer an impartial and independent comparison of business loans from over 200 the UK's providers. That way, you can choose the right finance product that works best for you and ensures you see the best terms.
Barclays plc is a multinational investment bank and financial services company. Barclays currently offer a range of commercial finance options, including secured and unsecured business loans, commercial mortgages and asset finance, up to £100,000. Barclays range of finance options allows you to adapt your loan to suit the needs of your business, with Barclays team of experts on hand to provide support when you need it most. Additionally, Barclays provides various customer service options, such as social media, via its app or ‘help and support’ on your online account.
Esme is a paperless commercial finance lender, founded on the belief of a simple, faster and fairer approach to funding. They currently offer loans ranging from £10,000 to £250,000 up to 5 years to help your business make the next move. Esme are dedicated to making the process of funding as quick and stress-free as possible, with no early repayment charges or arrangement fees.
Fleximize was founded in 2014 with a mission to revolutionise the way companies obtain funding. They provide flexible finance for businesses across England and Wales, including both secured and unsecured options, up to £500,000. Fleximize aim to have the money in your account within 24 hours of your application approval, with each loan tailored to your businesses individual needs to ensure your funding works for you. Metro Bank is another alternative for businesses seeking funding, offering a range of financial services without the need for physical branches or an app-based customer service.
IWOCA is a commercial lender that is ‘custom built for small businesses. Founded in 2012, IWOCA aims to make finance more accessible to Europe's small businesses by offering secured and unsecured options, from £1,000 to £200,000; with no hidden fees and rates starting from just 2% a month.
Bibby Financial Services
Bibby Financial services are the UK's leading independent financial services partner. They provide a variety of funding solutions, including Construction, Export, Recruitment and Trade finance, that are custom made to suit individual businesses. They also offer a variety of other financial management services to ensure your businesses reaches its full potential.
InterBay Commercial is a commercial mortgage lender offering buy to let, HMO, bridging, semi-commercial and commercial mortgages. Interbay provides a supportive service, offering a flexible criteria, combined with manual underwriting to ensure an open-minded approach to commercial property purchases.
Liberis is a government backed alternative finance lender who provides business finance that's designed to work seamlessly with your cash flow. Liberis currently offer a variety of commercial finance options, up to £300,000 and in as little as 24 hours. Their range of finance options provides business owners with the flexibility to adapt their loan to suit the needs of their company.
Lloyds Bank plc is a British retail and commercial bank with branches across England and Wales. Lloyds currently offer three types of loans including Base Rate, Fixed Rate and Commercial Fixed Rate, all including secured and unsecured business options up to £500,000. Lloyds also provide a variety of borrowing options, including credit cards, asset finance, business overdrafts and mortgages, to ensure your business has the right funding it needs.
Merchant Money is the UK's number 1 specialist finance provider for flexible business finance. They offer two types of commercial funding; unsecured business loans up to £150,000 and Merchant Cash Advances up to £500,000. Merchant Money currently has a 90% approval rate, with approval granted within 24 hours of your application submittal to ensure you can get back to your business sooner.
Launched in 2006, Nucleus is an award-winning online commercial finance platform. They currently provide Flexible funding Solutions, including business loans, property finance, cash advance and asset-based lending from £10k to £50m. Nucleus also comes with a multi-product offering to ensure you have the right access to finance when you need it most.
Santander is a Spanish multinational commercial bank and financial services company. They currently provide a variety of products for UK registered business, including credit cards, business current accounts, business loans, insurance and mortgages. Their range of commercial finance options allows business owners to obtain the funds their business needs to grow.
Start Up Loans was established in September 2012, with the aim of helping new and early stage UK businesses obtain access to affordable commercial finance and support, including small business loans. They currently offer loans between £500 and £25,000 with a fixed interest rate of 6% per annum. The Start Up Loans Company provide a consistent approach to supporting applicants by ensuring responsible lending decisions are made throughout all stages of the application.
Business loans can be an excellent way to obtain the funding you need to drive growth and success. Although the process of finding and securing a business loan may seem daunting at first, we have put together this list of frequently asked questions to demystify and streamline the process so that you are free to focus on what you do best - leading your business towards recognition and profitability. This finance option is available for existing companies or startups and works in a similar way to a personal loan. For example, your business borrows an amount of money and then this is repaid in instalments over an agreed time by the lender.
What do businesses most commonly use loans for?
Many commercial businesses experience debt, particularly in the early years, which is why the concept of borrowing money to make money has been viewed as a solid business decision for decades. In fact, borrowing money via a business loan can often be the smartest choice to make, provided that you secure the best loan for your needs and fully understand how your loan's rates and associated charges may impact your finances in both the short term and the longer term.
Business loans can be used for a variety of different purposes, from facilitating the purchase of a new or larger business premises to purchasing stock, paying for the costs that are associated with the day-to-day running of a business, and addressing cash flow issues.
Here are some of the most common reasons why successful enterprises borrow money:
1. To cover start-up costs
All businesses require investment before they can start to trade. The level of investment varies and may simply include the cost of purchasing a computer and a stable internet connection. However, many businesses need additional capital to cover everything from business premises to the procurement of stock, advertising and marketing, and staff wages.
2. To use as working capital
In general, suppliers expect to be paid for their services before a customer makes a purchase, which means that cash flow is constantly under pressure for many businesses. Working capital ensures this purchasing cycle can continue running smoothly and while it is something that can be drawn solely from business profits later down the line, new businesses getting off the ground often need to borrow to avoid running into issues. Additionally, having sufficient working capital means that the company has more than enough resources to cover its short-term debt, and there is residual cash should all current assets be liquidated to pay this debt.
3. To invest
Even successful businesses opt to borrow money via business loans because they use those funds to tap into new opportunities. When these opportunities prove to be successful, the profits made often far outweigh borrowing costs. This is a tactic businesses use to remain agile in changeable markets and make swift decisions ahead of their competition.
What types of security or collateral do lenders accept for business loans?
Secured business loans allow you to offer some form of collateral as the basis of your borrowing agreement. For new or small businesses that don't have enough assets, directors of the business may be required to offer personal assets as collateral. The more assets your business has, the better the likelihood that your lender will approve your business loan. Secured loans often come with lower interest rates than unsecured loans as they represent less risk for the lender.
Lenders generally prefer what are known as hard assets over soft assets because they offer greater security. Examples of hard assets include cash, land, stock, and commercial equipment. However, property remains one of the most common forms of collateral largely because it is highly likely to increase in value over time
But remember, if you are unable to maintain repayments, your lender will seize and sell this collateral to cover their costs.
Do all business loans require personal guarantees from directors?
There are some situations when directors will be required to sign personal guarantees to obtain finance from a lender. A personal guarantee is simply a form of security for the lender because although the business itself will be liable for all repayments, if those repayments are not made, then the lender can expect the director(s) to use their own personal funds to cover the remaining balance.
Personal guarantees are typically only applicable when a business is looking to take out an unsecured loan, whereby assets are not offered as part of the application. However, a personal guarantee can also help a business to secure a loan because it demonstrates that directors have confidence that the business will be a success. Additionally, if a lender doesn't have full confidence that your business will successfully meet the repayment requirements, a personal guarantee can offer that extra bit of reassurance needed to secure approval.
How quick is it to apply for a business loan?
As lenders know that businesses often need quick and easy access to business loans, many ensure that the application, processing and decision-making processes are completed as quickly as possible.
Depending on the financial health of your business, your circumstances, and how much you want to borrow, you may find that it is possible to complete the application process in as little as 10 minutes if you have all the relevant information to hand and your requirements are fairly straightforward. The approval process generally takes a little longer, however, if you are approved for a loan, the funds could be in your account within 24 hours, providing you with the certainty and confidence to take your business to the next level.
When considering your business loan, your lender will look at your business credit score using one of the leading checkers, such as Equifax or Experian. They are also likely to run credit checks on company directors, particularly if you are a start-up business that hasn't yet established a credit history. Lenders will also seek to understand whether your business is up to date with accounts reporting and tax liabilities, which may increase the time it takes for you to receive a decision on your application.
Do business loans offer flexible repayment features?
A flexible business loan can be the ideal choice for many companies, particularly those that are likely to experience fluctuations throughout the trading cycle. When taking out this type of business loan, repayment features will be set out from the beginning and can account for the peaks and dips that your trading forecast has highlighted. This finance option is available for existing companies or startups and works in a similar way to a personal loan. For example, your business borrows an amount of money and then this is repaid in instalments over an agreed time by the lender.
With a flexible business loan, you can work with your lender to agree a preferred repayment pattern which will essentially allow you to make overpayments during periods of additional profitability and improve your cashflow. You may also wish to agree to a low-start repayment schedule, however, it is critical to understand the later implications to ensure that it is the right option for you.
What happens if you need to borrow more after taking out a business loan?
If you already have an existing business loan and need additional funding, you may be eligible to take out another loan in a process that is known as loan stacking. However, it is important to note that lenders will look carefully at the terms of your existing loan when reviewing your application and may ultimately decide that they are not willing to take the risk and approve your request for additional funding. One of the main reasons for this is that if a borrower defaults on their repayments for multiple loans, each lender will find it more difficult to recoup their losses.
Although loan stacking may seem like a fairly straightforward thing to do, taking out multiple loan agreements can put additional pressure on your finances and quickly lead to a cycle of debt that is difficult to emerge from. Additionally, when taking out an additional loan, you must be clear that doing so will not violate the terms of your initial loan agreement to avoid setting that automatically into default.
There are alternatives to loan stacking which may be more beneficial for your business, including:
1. Approaching your existing lender to secure additional funding
Many lenders already have policies in place that provide borrowers with the opportunity to receive more funding, especially if at least 50% of the initial loan has already been paid back. However, if you are seeking a significant increase in capital, you must be prepared to support that request by demonstrating that your business deserves the extra funding and that you can back up your request with clear, tangible results such as increased revenues.
2. Refinancing your business loan
Simply by taking out a business loan and keeping up with your repayments, your credit score will increase. This can be enough to ensure your eligibility for refinancing, which involves applying for a second loan that will both pay off your first loan and incorporate the costs into your second loan. Refinancing is generally viewed as a smart way to protect the cash flow of your business and ensure that you don't need to keep up with the requirements of several different loans from numerous different lenders. Plus, you will also save money on interest in the process.
3. Seeking complementary loan products
Issues with loan stacking generally arise when a business has taken out multiple loans with similar repayment terms and uses the same assets as collateral. As there are different types of loans available, it may be possible to take advantage of asset-based refinancing, a complementary financial product for businesses. With asset-based refinance, the company offers the assets they own as collateral for a loan. There are myriad examples of complementary financial products for businesses, including factoring.
Line of credit and equipment financing
A loan and a business credit card
A short-term loan and business line of credit
Complementary financial products work harmoniously because the funds from each are being used for distinct purposes. Additionally, the collateral for each financial product will be different, which enhances the lender's confidence that they won't experience any losses.
Is it best to approach your business bank first for a loan?
Although it is perhaps reasonable to assume that your business bank will be more likely to approve the type of loan you need to push your business forwards, this isn't always the case.
Now, it is certainly worth exploring the business loan options offered by your business bank, particularly as they can easily look at the financial history of your business as part of the approval process. However, it is also in your best interests to compare different options from different lenders, including SME loans, in order to successfully obtain the maximum level of investment at the right rate.
Lenders often run special offers which could be beneficial, but don't automatically assume that every offer will directly benefit your business. Instead, ensure that every financial decision you make is informed by your business objectives and financial status.
What factors do lenders consider when assessing a business loan application?
Not all lenders approach the business loan review process in the same way, however, there are a number of factors that you should aim to cover to ensure you are putting yourself in the best possible position for approval.
1. Credit history
Naturally, lenders will conduct credit checks on your business and if you haven't yet had the opportunity to build up a credit history, they will instead conduct credit checks on directors and other individuals with control of the business.
2. Existing debt
If either your business or your director(s) have a significant amount of existing debt, lenders may decide that your application is too risky to approve. If they do decide to offer finance, you may only be able to secure a loan at a higher rate of interest.
3. Profit and loss histories/forecasts
For existing businesses, lenders may ask you to provide up to three years' worth of business accounts to support your application. Lenders may have policies in place that state only businesses with a certain turnover rate can be approved, however, this isn't always the case. Generally, this information is used by lenders to help them predict whether your business either already is or is predicted to generate profits that will allow you to make consistent repayments alongside your other financial obligations.
If you want to take out a secure loan, the amount of collateral you can use for the basis of your application will impact whether it is approved. This is because lenders are going to feel more confident that you aren't going to risk losing key tangible assets, such as vehicles, equipment and property.
5. Companies House
This might seem like an obvious point, but you must ensure that information held by Companies House is accurate and up to date ahead of your application submission.
6. External issues
There are countless external factors that may play a role in whether your application is approved or refused, many of which you simply can't control. These factors may include the current state of the economy, issues that may be impacting the sector you operate within, and how much competition your business is up against.
Is it better to take out a business loan or angel finance?
When businesses are looking for funding, there are two primary options. One involves borrowing money via a business loan and the other is seeking investment from an angel or seed investor.
Angel finance involves selling a percentage of your business to an angel investor in return for an agreed sum of capital. Angel investors typically invest in new businesses and generally offer up to £1 million.
Many business owners specifically seek out angel investors because, in addition to capital, they can also offer experience, contacts, and expertise. But as finding the right angel investor is so important, the process can take significantly longer than obtaining a business loan from a traditional lender. Additionally, it will also be necessary to demonstrate to potential angel investors that you have also invested in your business, otherwise they will struggle to see why they should use their money to fund your operation. They will also want to see a strong business plan, a solid business model, and feel your enthusiasm for your enterprise.
There are pros and cons to both angel investors and business loans, so it is important to be clear on the details before you make your decision. With a business loan, you won't generally be required to part with a share of your business, however, you will need to make consistent loan repayments which could slow down your business growth. Conversely, with an angel investor, your business will receive an injection of cash with no requirements to make loan repayments, however, you will lose a percentage of your business as a result.
Should I take out a business loan or look for a business grant?
Both business loans and business grants can provide companies with vital funding at key stages of their growth. Business grants are awarded by a variety of private organisations and the government for a particular reason. They differ from business loans because the sum received does not need to be paid back and they differ from angel investment because you won't be required to give up a share in your business. Additionally, government bodies also offer loans to commercial enterprises, providing another option for businesses looking for financial support.
There are an array of business grants available across all industries, however, there are certain sectors such as innovation, export and energy, where they are more common. It is also worth noting that there are several different types of business grant, each of which has different terms. So, for example, grants can be paid upfront as a single lump sum or reimbursed to your business for purchases made with your own money. Also, some grants stipulate that your business will need to match the total value of the grant before it is paid to your business.
The good news is that business grants are available for all types of business, at all growth stages, and with all levels of turnover. It is well worth exploring your options here, however, do be aware that it is imperative to understand the specific terms of each grant you apply for to ensure it makes sense for your business.
How can I check my business's creditworthiness before taking out a loan?
As lenders will pay close attention to your credit score and history as part of your application, it is good practice to check your own creditworthiness so you aren't met with any unwelcome surprises. Some of the tools that lenders use are also available to you, including Experian.
With a service such as Experian, you can either sign up to consistently monitor your business credit which will enable you to receive regular access to this information. Alternatively, it is also possible to purchase a one-off copy of the credit report that lenders will review upon receiving your application for finance.
There are numerous benefits of consistently keeping an eye on your business credit score, including quickly identifying issues of potential identity theft or fraud. The sooner you are aware of problems such as credit applications you haven't made or new accounts appearing on your profile that you don't recognise, the sooner you can have them removed which will likely have a positive impact on your overall score.
It is worth noting here that every business credit bureau assigns different weights to each piece of data, which results in slightly different scores. However, each will look at information from a variety of sources, including suppliers, public records, collection agencies, court filings, and creditors.
Can I apply for a business loan entirely online or do I need to meet with lenders?
As business loans typically pose more risk for lenders than personal loans, you might easily assume that you will need to meet with lenders in person. However, while business loan applications are more comprehensive than their personal loan equivalents, it is still possible to complete the application process entirely online.
Larger, more traditional lenders may still prefer to meet with you in person and will help you to make an appointment to do so. However, newer lenders and those with a strong online presence have the tools to automate the application process, which will allow you to complete it online.
Following your online application, a representative from your prospective lender may contact you by phone to both confirm the information you have provided and to discuss certain aspects in greater detail. At this stage, they may also ask you to upload additional documentation, which may include financial statements, balance sheets, revenue statements, and your business plan.
However you apply, it is important to follow all guidelines to put yourself in the best possible position for approval.