Business loans
A business loan is a sum your business borrows and repays with interest over a fixed term, in regular instalments.
A business loan is a sum your business borrows and repays with interest over a fixed term, in regular instalments.
The lender prices it on the risk it reads in your accounts, your bank statements and any security you offer. Compare offers on the total you will pay in pounds, counting every fee.
A term loan puts a lump sum in your company’s account on day one. You repay it over an agreed term with interest on the balance still owed, and the schedule is fixed at the start, so you know what leaves the bank account each month. That suits spending with a long life and a known cost: a fit-out, a machine, an acquisition, a move to bigger premises, or a large tax bill you want to spread over a year.
A term loan fits badly with a gap that opens and closes every month. If customers pay late and suppliers want paying early, a loan sitting in the bank costs interest on money you do not need for most of the year. A revolving credit facility, an overdraft or invoice finance suits that pattern, because you pay interest only on what you draw.
Before anything else, a lender asks three questions. Can the business afford the repayments from the cash it generates? What can the lender fall back on if it cannot? Who stands behind the debt? Each type of loan in this group gives a different answer to those questions, and the answers decide how much you can borrow, for how long and at what price.
The lender takes no charge over specific assets. It relies on your trading record and can ask the directors for personal guarantees. Sums are smaller and pricing higher. Unsecured business loans.
Backed by a charge over property or equipment, or over the company’s assets as a whole through a debenture. Security supports larger sums and longer terms. Secured business loans.
Under the Growth Guarantee Scheme the government guarantees 70% of an accredited lender’s loss on the outstanding balance. The business remains liable for the full debt.
A government-backed personal loan of up to £25,000 per person at a fixed 7.5% a year, at November 2026, with up to 12 months of mentoring. Start Up Loans.
A long-term loan secured on business premises you are buying or already own. Commercial mortgages.
Senior debt to buy another company, alongside vendor finance and the buyer’s own money. Acquisition finance.
The interest rate is the lender’s price for the risk it sees, on top of its own cost of money and its margin. High-street banks fund themselves cheaply and lend to businesses with a clean record and good security. Specialist and online lenders take on younger businesses, thinner accounts and weaker security, and charge more for doing so. One company can receive offers several percentage points apart on a single application, because each lender reads the risk differently.
Rates are quoted in different ways. A fixed rate stays the same for the term. A variable rate moves with the Bank of England base rate or the lender’s own reference rate, plus a margin. Some short-term lenders quote a flat rate or a factor rate, which charges interest on the original sum for the whole term, so the annual cost is much higher than the headline figure suggests.
Fees sit on top. An arrangement fee is charged when the loan is drawn, either deducted from the money advanced or added to the balance. A secured loan can carry valuation and legal fees. A broker may charge, and an early repayment charge applies if you clear the loan before the end of the term. A comparison of interest rates leaves all of these out. Compare the total you will pay in pounds over the life of each loan.
Affordability comes first. The lender takes your operating profit, adds back depreciation, and compares that cash with the repayments on all your debt, old and new. The ratio between the two is debt service cover. Each lender sets its own minimum, and a business that covers its repayments with little to spare will be offered less or asked for more security.
Then the record: filed accounts at Companies House, management accounts for the current year, recent business bank statements, and the credit files of the company and its directors. Many lenders read bank statements through open banking. Missed payments, county court judgments and an overdraft that never returns to zero count against you.
Then the people: how long the directors have run the business, what they have put in, and whether they will guarantee the debt. What lenders look at and the documents a lender asks for go through each check.
Illustrative example
Two lenders offer your company £100,000 over five years, repaid monthly. Lender A quotes an assumed rate of 9.5% a year and no fee. Lender B quotes an assumed 8% a year with an assumed 3% arrangement fee taken at drawdown.
Lender B pays you £97,000 against a £100,000 debt, so if you need the full sum in the bank you would borrow more and the gap would narrow. Put your own offers into the loan comparison calculator, and add any early repayment charge if you might clear the loan before the end.
A personal guarantee is your promise, as a director, to repay the company’s debt from your own money if the company cannot. It turns company borrowing into personal borrowing at the point the company fails. Lenders ask for them on unsecured loans, on many secured loans and on government-backed lending. Under the Growth Guarantee Scheme a lender may take a personal guarantee at its discretion, but it cannot take your main home as security within the scheme.
Read the cap, the scope and the release terms before you sign. A guarantee limited to a fixed sum is far easier to live with than an unlimited one. An “all monies” guarantee can cover every debt the company owes that lender, including facilities taken out years later. Ask whether the guarantee ends when the loan is repaid or whether you need a written release. What a personal guarantee means for a director covers the effect on your home, your family and your estate.
A funding search through Swoop is for limited companies and LLPs, and for sole traders and partnerships borrowing more than £25,000. A sole trader or small partnership borrowing £25,000 or less can apply to the government’s Start Up Loans scheme directly or go to its own bank.
Borrowing without a charge over company assets, and the personal guarantee lenders ask for in its place.
Read more →Borrowing backed by a charge over property, equipment or the whole company, and what the lender can do if it goes wrong.
Read more →The British Business Bank scheme that guarantees 70% of an accredited lender's loss on loans to smaller businesses.
Read more →The government-backed personal loan of up to £25,000 for new and young businesses, with up to 12 months of mentoring.
Read more →Your own money, Start Up Loans, angels, grants and asset finance for a business in its first years.
Read more →Senior debt, asset-backed lending, vendor finance and equity stacked to fund the purchase of a business.
Read more →How a management team buys the business it runs: the new company, the debt, the seller's deferred money and the team's stake.
Read more →Replacing existing business debt with a new loan, and clearing the old guarantees and charges when you do.
Read more →Borrowing secured on patents, software, trade marks and the income they earn.
Read more →Funding the franchise fee, fit-out, equipment and opening cash for a new or resale franchise unit.
Read more →Bank guarantees, bond support and insurance from UK Export Finance for businesses selling overseas.
Read more →The monthly repayment on a business loan, the interest over the term and the total you repay with the arrangement fee.
There is no fixed multiple of turnover or profit. A lender works out how much repayment your cash flow can carry after your existing debts, then looks at the security and guarantees that support it. A company with steady profits and assets to charge can borrow more, for longer, than one with a short record and nothing to secure. The business loan calculator turns a sum, a term and an assumed rate into a monthly repayment, so you can test what fits. How much a business can borrow goes further.
Yes, but the choice is narrower. Mainstream lenders want filed accounts and a trading record to judge affordability. A business that is new or has traded for up to 60 months can apply for a Start Up Loan of up to £25,000 per founder at a fixed 7.5% a year, at November 2026. Asset finance on a van or equipment is another route, because the asset itself secures the debt. See whether a new business can get a loan.
Not always, but lenders ask for one on most unsecured lending to small companies and on many secured loans too. The guarantee lets the lender pursue you personally if the company cannot pay. You can negotiate a cap, a limit to one facility and a release when the loan is repaid. Under the Growth Guarantee Scheme a lender cannot take your main home as security for the guarantee within the scheme.
A secured loan is backed by a charge over property, equipment or the company’s assets as a whole, which the lender can sell if the loan is not repaid. An unsecured loan has no such charge, so the lender relies on cash flow and personal guarantees. Security supports larger sums, longer terms and lower pricing, at the cost of putting assets on the line. Secured or unsecured compares them side by side.
Usually yes, but read the agreement first. Some loans carry an early repayment charge, set as a percentage of the balance or a number of months’ interest. Some short-term loans priced with a factor rate charge the full cost whatever the date you repay. Start Up Loans carry no early repayment fee. Repaying a business loan early covers the charges and how to ask for a settlement figure.
Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.
Borrowing without a charge over company assets, and the personal guarantee lenders ask for in its place.
Read more →Borrowing backed by a charge over property, equipment or the whole company, and what the lender can do if it goes wrong.
Read more →The British Business Bank scheme that guarantees 70% of an accredited lender's loss on loans to smaller businesses.
Read more →Replacing existing business debt with a new loan, and clearing the old guarantees and charges when you do.
Read more →Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.
If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.