Best business loans

A business loan is when a financial company lends money to a commercial entity, which is then repaid with interest over an agreed period in monthly instalments.

To get a business loan, compare lenders to find the best business loan rates for your circumstances - look at the APR, repayment terms, any arrangement fees and whether you need to provide security or a personal guarantee. You’ll typically need to provide business accounts, bank statements, proof of revenue and a business plan. Most lenders will also run a credit check on the business and sometimes the director personally.

Yes, small businesses and start-ups can get business loans, though lenders will often look more carefully at your personal credit history and business plan if you’re new and don’t have established accounts. Some lenders specialise in startup business loans with lower eligibility requirements. Government-backed schemes such as the Start Up Loans programme are also worth exploring for early-stage businesses.

The main types of business loans include: unsecured business loans (no security required, typically for smaller amounts), secured business loans (backed by business or personal assets, often lower rates for larger amounts), revolving credit facilities (a flexible credit line you can draw on as needed), invoice finance (borrowing against unpaid invoices) and merchant cash advances (repaid as a percentage of card sales). The right type depends on your business’s situation and what the money is for.

Business loan rates vary significantly depending on the lender, your business’s credit history, the amount you borrow, the loan term and whether the loan is secured or unsecured. Rates can range from around 3% to over 20% APR. The best business loan rates are typically available to established businesses with strong credit histories and financials. Comparing quotes from multiple lenders is the best way to find the most competitive rate for your circumstances.

It depends on the type of business and loan. For sole traders and partnerships, a business loan will usually involve a personal credit check and may be reported on your personal credit file. For limited companies, business loans are typically taken in the company’s name and reported to business credit files. However, if you provide a personal guarantee (common for smaller businesses), the guarantee may appear on your personal credit report.