Loans for businesses of every size and industry, from top UK lenders including:
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A business loan is a form of finance that can be used to help support and expand your organisation.
As with personal loans, you borrow a sum of money, and pay it back, with interest.
One of the most important differences between personal loans and business loans is that with a personal loan, you will be personally liable for repaying the amount you have borrowed.
With a business loan, as long as the appropriate company structure is in place, that responsibility falls to the business instead. This will not be the case, however, if you are a sole trader, or you have secured your business loan with a personal guarantee.
You can also typically borrow more through a business loan, while the interest payments on your business loan may be tax deductible unlike payments on a personal loan.
Secured business loans require that you put down an asset such as property as security. Secured loans often come with lower interest rates than unsecured loans as they represent less risk for the lender. They may also give you access to a larger loan amount over a longer term. However, secured loans come with the added risk that you could lose your assets if you miss the payments.
Unsecured business loans are a type of finance that does not require security. These types of loans tend to have higher interest rates because there is a greater risk of the lender losing money if you can't pay off what you owe. Unsecured business loans also require a good financial history and credit rating as evidence that the business will be able to repay the loan.
There may be government-backed business loans you can access. Examples include the Recovery Loan Scheme, introduced to help with the financial stresses caused by the Covid-19 pandemic, which has now been extended. What schemes are available can vary depending on government policy and changing economic circumstances across the country. So it can be useful to regularly check the Department for Business, Energy & Industrial Strategy's search tool for guidance on the business loan schemes available in your region.
The Start Up Loan Scheme is a government-backed fund that currently offers personal loans of up to £25,000 to UK businesses owners that have been fully trading for less than 36 months or those looking to start a business. You can apply for free, and there are no early repayment charges. If your application is successful, you'll also get up to 12 months of free mentoring. Government Start Up Loans have a fixed annual interest rate of 6% and must be repaid over a period of one to five years.
Small business loans are for start ups and small businesses to access funding. They can be used for a variety of purposes from hiring new staff to managing cash flow. As with all loans, small business loans are repaid over an agreed time period with interest. Large business loans tend to be cheaper than small business loans because there is less perceived risk with lending to a bigger company.
Bridging loans work differently depending on which type you choose: open or closed.
A closed bridging loan has an actual date set in stone for when it needs to be paid off, although it’s also possible to pay off this type of bridging loan early, though fees may apply if you do.
Closed bridging loans are often used by those who have a clear plan of how and when they will be able to repay the loan as they have more certainty over when funds will become available. For this reason, interest rates are often lower, as there is deemed to be a lower risk compared to other types of bridging loan.
So, if you are just looking to bridge between buying a new property and the sale of your current one – and have completion dates already set for both – then a closed bridging loan may be worth considering.
An open bridging loan will still have a maximum term, of, say, six to 12 months, but you can pay the loan back at any point, or even piecemeal, during that period. An open bridging loan is often used by people who don’t have a clear strategy with a concrete timeline of how they will repay the loan, hence it is more flexible and ‘open’, usually with higher interest rates as well.
If you’re buying an investment property and plan to remortgage after carrying out some refurbishments, then you might prefer the flexibility that comes with an open bridging loan since you don’t know exactly when that work will be finished.
Yes, a bridging loan is a type of secured loan. That means that you’ll need to use a physical asset, such as a house, as collateral to borrow money in case you can’t repay your loan.
If you aren’t able to pay off your bridging loan, the lender keeps the asset to recover any money you owe.
