Introduction
You might need a business loan to expand your company.
You might need it to purchase new equipment to make your existing business run better.
This guide will tell you what you need to know about low-interest business loans, including what they are, when they might be required and the different types of business loans.
What’s in this guide?
Let’s take a closer look!
Top 9 low-interest business loan providers
1. Boost Capital
Type: Alternative Finance Provider
Loan amount: £3,000 – £500,000
Typical APR: 1.5% – 2.5% monthly APR
Loan term: 4 to 18 months
Boost Capital is a highly recommended alternative finance provider in the UK, with many customers giving this lender five stars on trusted websites such as Trustpilot.
They offer fast funding, with minimal paperwork, approval in 24 hours and access to your funds in around two days.
Representative: Borrow £10,000 for 12 months at 47.9% representative APR. Interest rate of 36.74% p.a. (fixed). Total amount payable is £12,100.
Company rating on Trustpilot: 5 / 5
2. ABC Finance
Type: Alternative Finance Provider
Loan amount: £5,000 – £500,000
Typical APR: 3%
Loan term: 6 to 5 years
ABC Finance is a company which was founded in the year 2000 and claim to specialise in business loans, commercial mortgages and invoice finance amongst others.
With a high rating on Trustpilot, ABC Finance want to become the first point of contact for companies looking for finances.
Company rating on Trustpilot: 5 / 5
3. Funding Circle
Type: Peer-to-Peer Lender
Loan amount: £5,000 – £500,000
Typical APR: Rates start from 4.5% AER
Loan term: 6 months to 5 years
Funding Circle is one of the peer-to-peer lenders that have been sprouting up around the UK in the last few years.
With a peer-to-peer platform, the lenders are regular citizens that want to help their savings grow by investing in UK businesses.
For businesses, this means low AER and only a couple of extra fees.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,752 a month, with a completion fee of 2.5% and interest of around £526. Total amount payable is £21,026.
Company rating on Trustpilot: 5 / 5
4. Shawbrook Bank
Type: Bank
Loan amount: £250,000 to £25 million
Typical APR: 0% to 19.9%
Loan term: Bespoke repayments
Shawbrook Bank offers their business customers a range of services tailored to their companies, like asset finance, working capital solutions, the point of sale finance and structured finance, as well as commercial mortgages too.
This means that for startup businesses you could finance for the road ahead with equipment and salaries, or even established companies can benefit from more substantial amounts to help you fund expansions.
Company rating on Trustpilot: 5 / 5
5. Government Startup Loan
Type: Government Loan
Loan amount: £500 – £25,000
Interest: Fixed 6% interest p.a.
Loan term: 1 year to 5 years
Government loans are loans that are funded by government-backed organisations, who usually offer either regional or national businesses different loans depending on their location.
With this loan, in particular, it is aimed at startups less than 24 months old who could benefit from not only finance but mentoring, to help your business grow and thrive.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,721.33 a month, with interest of around £655.94. Total amount payable is £20,655.94.
Company rating on Trustpilot: 5 / 5
6. NatWest small business loan
NatWest is one of the most well-known banks in the UK and has roots that go back centuries from the merging of two different banks called 1968 National Provincial Bank (est.1833) and Westminster Bank (est.1836), which ended up as National Westminster Bank.
They have around 33,000 employees and their parent company RBS had an operating profit of £2,239 million (2.239 billion) in 2017.
The amount you can loan: £1,000 – £50,000
The rate of your interest: Check out the NatWest website.
Loan length: One to 10 years.
7. HSBC small business loans
HSBC originally acquired the Midlands Bank in 1992, which was one of the most significant banking mergers at the time.
According to data from 2017, HSBC has around 229,000 employees globally and has a revenue of approximately $51.445 billion.
This makes HSBC one of the most successful banks in the world, being a goliath in the market with 38 million customers.
The amount you can loan: £1,000 – £25,000
The rate of your interest: APR of 7.4%.
Loan length: One to 10 years.
8. Santander small business loan
Santander bought a bank named Abbey National in 2004, who had roots that went all the way back to 1849 when they used the savings of members to provide mortgages for people building their own homes.
Since then, they have grown to 14 million customers, £154.9 billion in mortgages and £1.8 million profit before tax.
The amount you can loan: £2,000 – £25,000
The rate of your interest: 4.9% APR.
Loan length: One to five years.
9. Yorkshire bank online business loan
Yorkshire Bank was first created in Halifax, in 1856.
Since then, they have merged with several banks such as National Australia Bank, and in future, they may very well become Virgin Money, after news of an acquisition in 2018.
Businesses can typically borrow from £10,000 to £50,000, with business banking that they say works for you.
The amount you can loan: £10,000 – £50,000
The rate of your interest: 8.75%
Loan length: Six months to five years.
The top 9 business loan providers take into consideration their customer reputation, the amount you can borrow and the typical APR or interest rates, to ensure that you’ll be getting the best deals for you and your company.
FAQ
What is a low-interest business loan?
A low-interest business loan is merely a business loan, but with a lower rate of interest, so you have less you need to repay.
These types of loans are very appealing to businesses of all sizes for understandable reasons, but first, what exactly is a business loan?
It’s when you ask a lender like a bank to loan you some money so you can pay for things like more employees – in return, you will pay back this money often over a set period.
Interest is when you have to pay back a little extra, as a sort of payment for being able to borrow that amount of money. Low interest means less that you have to pay back.
A business loan can come from many different places, so as a business owner you should always try and consider as many possible solutions as possible to find the best deal.
What are secured and unsecured loans?
First, what are secured loans?
This is when you can borrow funding as long as you provide your lender with security.
So they will lend you money as long as you can offer one of your assets like your house or a car.
Securing loans allow you to borrow more money than with an unsecured loan, as your lender will be satisfied that you are guaranteed to pay off your loan one way or another.
Repossessing your car or vehicle is the last resort for lenders, but you should still consider the risk.
Unsecured loans, on the other hand, don’t have any security so your lender will regard them as being much riskier.
With that in mind, banks usually only lend borrowers a small amount when it comes to unsecured loans, vs secured loans.
What are fixed and variable rates?
These types of loans show the contrast in loan interest rates.
Having a fixed rate loan means that your interest rates are set, or remain unchanged which is excellent when it comes to low-interest rates.
This makes it easier to predict how much your loan will cost, and your monthly repayments.
Variable rate loans, on the other hand, will change according to those set by the MPC (Monetary Policy Committee), which is an independent body.
What are the term lengths?
When it comes to the length of a loan, this can affect your interest rates a great deal because it will state the overall total that you pay back.
For instance, a short-term loan will usually have interest rates which are high, making financial sense for your lender.
However, longer-term loans often have the lowest interest rates as it will be stretched over a longer length or time, although you will end up paying more back as you’re incurring more interest over say ten years than you would with a 1-year loan.
What is the average interest rate of a low-interest loan?
According to many reports from different sources, the average interest rate it typically between 4% and 5%.
Of course, this can vary depending on the type of lender that you choose to get your loan from, but for a handy guide see the table below in the interest rate comparison section where you can find out more.
For instance, Shawbrook Bank can offer APR between 0% and 19.9%, whereas Funding Circle which is a peer-to-peer lending platform can usually offer their customers 4.5%.
Which interest rate loan would be best for me?
It is hard to say which interest rate loan would be best for you, as it depends on so many different circumstances and your personal preferences.
However, it is important to remember that opting for a variable rate loan is usually riskier than a fixed rate loan.
This is because you will run the risk of having to pay more interest depending on which way the market sways, and benefitting from a decreased interest rate is rarer.
Fixed interest rates can protect you from rising interest rates, so this is usually better for businesses that need a lower risk loan.
It could also depend on the funder themselves, as with many government loans, for instance, you can also benefit from getting free advice and mentorship.
Conclusion
In conclusion, there are many realistic options for customers to explore when it comes to low-interest loans.
However, you should always remember to compare all of your options to make sure that you are getting the best deal.
Take a look at the ExpertSure guides to find out more about the different choices available for both startup and established businesses.
