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The 6 Best Small Business Loans for UK Business Owners

Does your business need more cash? If so, you probably need a loan. Here are the 6 best small business loans for business owners in the UK.

Keyword(s): small business loans

Are you a small business owner? Or are you looking to be one soon?

Whether you're starting a business or already have one, you've probably considered funding options. And unless you have a bunch of money ready to be used, you've probably thought about getting a loan.


Small business loans can really help you get your business off to a great start. And while they are loans, they don't have to be hard to deal with.

Many loan options exist, including ones with great terms.

So how do you know what the best loan is for you? You'll have to do some research and comparison based on your specific situation, but we have some suggestions to get you started. Here are six of the best small business loans you can go with.

1. Line of Credit

One of the most traditional ways of funding a small business is to use a line of credit. This allows you to get your business up and running without borrowing a large sum all at once.

Money will be available when you need it, but you won't have a large amount of debt looming over you. You'll have the funds to protect your business, without the stress from knowing you owe a bunch of money back to someone.

Lines of credit are great for short-term financing options but do not work well for long-term situations.

2. Government-Backed Start-Up Loans

A government-backed loan is probably one of the best options out there for small business owners who are in need of financing. These loans are unsecured personal loans that are given for business purposes.

If you use The Start Up Loans Company to get this type of loan, you'll receive all the great benefits of this type of loan, plus 12 months of business mentoring, free support, and help writing your business plan.

Government-backed loans allow you to borrow between ?500 and ?25,000 with a fixed rate of 6%. The loan will need to be paid back over a term of one to five years.

These loans come free of application and early repayment fees, making them even more appealing. But your business must be in planning or have been trading for less than two years.

3. Keep It in the Family

For a non-traditional business financing option, consider turning to family and/or friends. These are the people who are most likely wanting to support you, and they may have the funds to do so.

Loans from family members can have whatever terms you and the lending family member(s) set up. This means more flexibility and potentially less cost to you if a low-interest rate is agreed upon. Some family members may not even require an interest rate.

Be careful when pursuing this method of financing, though. Money and relationships don't always mix well, so make sure this is what you want before pursuing it! Family loans can be highly convenient, but they can also cause big problems if they aren't handled well.

4. Financial Institutions

Banks are a great and traditional option for small business loans. They may be harder to get than from other places, though. This is due to potentially-stricter lending criteria.

You may be required to provide assets or a personal guarantee to get the loan.

Bank loans offer fixed or variable rates, with terms from one to 25 years. NatWest offers a fixed rate loan from ?1000 to ?50,000 with a term of one to ten years. Their small business loans don't require any assets, but you will have to provide a personal guarantee.

5. Special Category Loans

Loans may be available for special circumstances. For instance, grants are available specifically for women entrepreneurs.

Do your research to see if your company or circumstances fall into any special category. If they do, look at your special funding options. You may get some benefits you hadn't previously thought of.

6. Peer-to-Peer Loans

Peer-to-peer loans are a newer form of financing that brings investor and borrows together. This eliminates the need for a bank.

Interest rates can be lower than bank loans, and they're often at least comparable. But, this financing method usually involves extra fees. And in order to get this type of loan, it's likely you'll have to provide a trading history of at least two years.

Peer-to-peer loans offer fixed rates and terms of six months to 5 years.

Funding Circle, a popular peer-to-peer platform, offers unsecured loans as small as ?5000 and up to ?500,000. They also offer secured loans of up to ?1 million.

Funding Circle rates start as low as 3%.

Small Business Loans: A Summary

There are many types of small business loans and many institutions and individuals who are willing to provide them. While we may have touched on one that suits you, you alone will know what option is best for you.

Take into consideration the different types of loans and what they would mean for you and your business. To keep yourself on track, ask yourself some questions as you compare financing options.

What do you actually want the loan for? How much money do you need or want to borrow? How much will the loan cost you when interest rates are applied?

You should be asking yourself specific questions about each loan, as well. How long will it take you to pay the money back? What is the term length and the interest rate?

The last thing you want to do is sabotage your business right from the get-go, so do your research and make sure you're really going with your best option.

We would love to help your business be successful. You can apply for a commercial loan directly on our website, even if you have bad credit. Got questions? Give us a call.