Business finance options for UK companies

A business loan is a lump sum repaid in fixed instalments over an agreed term. The main choice is whether to offer security.

• Unsecured business loans need no specific asset as security, though directors are usually asked for a personal guarantee.
• Secured business loans are backed by property or other assets, which can support larger amounts or longer terms.
• Short term business loans are repaid over months rather than years and suit one-off or time-sensitive needs.
• Business debt consolidation loans replace several existing facilities with one repayment.

For a side-by-side comparison of every loan type, read our guide to types of business loans.

Lenders look at different things depending on how the business is set up and how long it has traded. These pages explain what applies to you:

• Start up business loans for businesses with little or no trading history.
• Small business loans and micro business loans for smaller firms.
• Sole trader loans and self employed business loans for unincorporated businesses.
• Limited company business loans and finance for large businesses for incorporated and larger firms.
• Bad credit business loans where the business or its directors have a weaker credit history.

Asset finance lets you acquire equipment, vehicles, machinery or technology and spread the cost over time. The asset itself usually acts as security, so you may not need to offer property.

• Hire purchase: you pay in instalments and own the asset at the end.
• Finance lease: you rent the asset for most of its useful life without taking ownership.
• Operating lease: you use the asset for a shorter period and hand it back.

Asset refinancing releases cash from equipment or vehicles you already own. A lender buys or lends against the asset and you repay over an agreed term while continuing to use it. As with any secured finance, the asset may be at risk if repayments are not kept up.

Business bridging loans are short-term loans, usually secured on property, that cover a gap between needing money and receiving it from another source, such as a sale or longer-term refinance. Every bridging loan needs a clear exit: the lender will want to know exactly how it will be repaid.

Tax loans spread a large HMRC bill over monthly instalments, so you can pay on time without draining working capital. The lender pays HMRC, or pays you to settle the bill, and you repay the lender.

• VAT loans cover quarterly or annual VAT liabilities.
• Corporation tax loans cover the tax due on a limited company's profits.

Tax loans are usually short term and can often be arranged unsecured, subject to the lender's assessment. See our HMRC loans overview for income tax and other liabilities.

For day-to-day working capital, cash flow finance includes working capital loans, revolving credit facilities, merchant cash advances and invoice finance. Each suits a different pattern of trading and repayment: invoice finance, for example, works best for businesses that sell on credit terms to other businesses.

Larger businesses with a substantial debtor book, stock and plant can sometimes combine these into a single asset based lending facility, where the amount available moves with the value of the assets rather than being fixed at the outset.

Most UK trading businesses can qualify for some form of business finance, but which product and how much depends on trading history, affordability, credit profile and the security available. Whatever the product, lenders typically assess:

• how long the business has traded and its turnover and profitability
• cash flow and the ability to afford repayments
• the credit profile of the business and its directors
• any security available, and whether directors will give a personal guarantee
• what the money is for

Most will ask for recent accounts, business bank statements and, for larger or newer requests, management accounts or forecasts. Once a lender approves, it issues a formal offer with conditions; any security, guarantees and legal documents are completed and signed before the funds are drawn down.

Business finance typically takes anywhere from a few days to several weeks, and the product chosen is the biggest factor. Smaller unsecured loans and VAT or corporation tax loans are often decided within days once bank statements and accounts are supplied. Asset finance usually follows quickly once the lender has the supplier invoice and details of the equipment. Invoice finance takes longer to set up because the funder reviews the sales ledger and debtor book before the first advance. Anything secured on property, such as secured business loans or bridging loans, needs a valuation and legal work, which often adds weeks. Having up-to-date accounts, management figures and ID ready shortens every one of these timescales.

The security needed depends on the product: some finance is secured on the thing being funded, some on property and some only on a personal guarantee. With asset finance, the equipment or vehicle is the security. Invoice finance is secured on the debtor book, usually alongside a debenture over the company. Unsecured business loans and tax loans take no specific asset, but directors are normally asked for a personal guarantee. Secured loans, bridging and commercial mortgages take a legal charge over property, which can support larger amounts or longer terms. If a guarantee is a concern, see our pages on business loans without a personal guarantee and our guide to personal guarantees.

Grants are funds that usually don't need to be repaid, provided you meet the conditions and spend the money as agreed; if the conditions are broken, some grants can be clawed back. They are offered by government, local authorities, devolved administrations and other bodies, often for specific purposes such as research and development, energy efficiency or growth in particular regions.

• Grants are competitive and have strict eligibility criteria.
• Many require match funding, so you may still need finance for part of the project.
• Sole traders, partnerships, limited liability partnerships and limited companies can all be eligible, depending on the scheme.

Search current schemes on the GOV.UK business finance and support finder, and check your local council or growth hub for regional programmes.

The Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme closed to new applications on 31 March 2021, and the Recovery Loan Scheme closed on 30 June 2024. It was replaced from 1 July 2024 by the Growth Guarantee Scheme, which gives accredited lenders a government guarantee to support lending to smaller businesses; the business remains fully liable for the debt. Check the British Business Bank for current availability.