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The 9 Types of Business Loan Can You Get in The UK

Types of Business Loans

Introduction

Have you ever struggled to try and work out the difference between the many different types of loans?

Don’t worry, ExpertSure have got you covered.

This guide will tell you everything you need to know about the different types of loans, including what they are, where you can get them from and how they can help you.

What’s in this guide?

 

FAQ

What is a business loan?

A business loan allows a lender like a bank to temporarily loan you some money so you can pay for things like property or tooling.

There are sometimes many costs associated with loans, such as completion fees or arrangement fees, which is the one-off fee that your lender might charge you for arranging your loan.

Loans can come from many different places, so you should always try and compare many different lenders to find the best deal.

What are the different types of loans?

Luckily for businesses, there are many different types of loans and financing available for companies of all sizes and needs.

The 9 types of UK business loans you can get are: 

  1. Short term loans
  2. Longer-length loans
  3. Variable loans
  4. Fixed-rate loans
  5. Working capital loans
  6. Commercial mortgages
  7. Equity finance
  8. Asset financing
  9. Invoice financing

Interested in learning more?

What is a short-term loan?

For your business, a short-term business loan is a quick injection of cash that can help launch your business to the next level.

This could be for hiring some new workers or purchasing things such as a business vehicle or other office supplies.

And, instead of making repayments for years, a short-term loan allows you to pay back this money quicker.

This could be for a term between 1 month to 2 years.

What is a long-term loan?

A long-term loan, on the other hand, is usually paid back over many years which could be as much as 20 years or as little as three.

This gives you an opportunity to have much lower repayments to payback, which can help you regarding keeping your cash flow consistent and if you have a fixed rate loan, these types of payments won’t change over the length of your contract.

You can usually get loan term loans from most banks and alternative financial providers, while peer-to-peer platforms often encourage shorter-term loans to provide a quicker return for investors.

What is a fixed rate vs a variable rate loan?

Generally speaking, a fixed rate loan means that your monthly repayments will be set for a specific term, usually for the length of the contract whether that is for five years or twenty.

A variable rate loan, on the other hand, means that your repayments would fluctuate depending on the market rate.

This can mean saving on your repayments. However, it might be hard to budget when you’re unsure what your costs will be.

This is why fixed-rate loans are often more popular than variable rate loans, as you know what to expect.

What is a secured loan?

A secured loan is when you take out a business loan, and you utilise your business assets to put up in the case of non-payment.

In other words, so the bank or lender can take your property if you don’t make your repayments.

This isn’t usually the best type of loan for many businesses, as you can only usually borrow for up to ten years and there might be upfront costs like administration fees.

However, the positives are that you can often borrow a much higher amount than unsecured loans, plus your repayments might be lower, and it’s better for those with a poor credit history.

Do all loans require collateral?

While secure business loans may require for you to put up assets such as your home or car, for instance, unsecured loans allow you to borrow without putting up security.

You should keep in mind that unsecured loans mean that you can’t borrow as much, as secured loans give your lender more security that you will be able to pay your loan back.

What is an unsecured loan?

An unsecured business loan is a loan which you do not need to secure.

In other words, while some loans will require security like your home in case you don’t make payments, unsecured loans don’t.

Because of this you usually are only able to borrow a smaller amount and for a shorter period, to lower the risk to the lender.

What is a working capital loan?

A working capital loan fills any financial gaps that could grind your business to a halt.

For instance, if you run a company that produces shirts and you have suddenly had a large order, but you don’t have the materials or the workforce to fulfil it, you could use a working capital loan to ensure you can make the request.

Or you might have fewer website sales than you had before, so it makes sense to take out a loan for a new marketing campaign.

As long as you can be sure that the pros outweigh the cons, working capital loans can be a great short-term solution for your company’s productivity.

What is asset-based lending?

Asset-based lending is when you utilise the assets that your business has, to free up some capital.

This could be things such as any property your business owns, any vehicles you have, your unpaid invoices or things such as your stocks.

In some instances, this can help your company to raise millions of pounds, which can help you to refinance, restructure or even expand your business.

Asset-based lending allows you to free up that cash, so you can continue running your business with capital.

This lending is usually more suitable for large companies that have a lot of assets, but also need regular cash flow for accepting new contracts or when expanding their business further.

This usually means that you can borrow in the millions.

What is invoice financing?

Do you often have invoices that are unpaid?

Did you know that this could be the key to unlocking quick capital?

Invoice financing is where you sell your invoices to a third party. Usually for a percentage of how much the invoice is worth.

Usually used when there’s an emergency need for cash to help your cash flow or as working capital, this is an essential finance option for businesses when a loan doesn’t necessarily fit.

What is equity finance?

Equity finance is when you sell shares of your business in exchange for cash.

This is often used by early-stage companies who might need more capital than they currently have to develop things such as technology, or a product for instance.

The investor will get a chunk of your company in return for their cash. Often with voting rights and sometimes they might want to offer input into how your business is being run.

Top 10 business loan providers

1. Boost Capital

Boost Capital Logo

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

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2. Capify

Capify Logo

Type: Alternative Finance Provider

Loan amount: £3,500 – £500,000

Typical APR: 67.89% APR

Loan term: 6 to 10 months

Capify is another highly rated lender, who has been around since 2008 and they have helped thousands of business owners to grow and sustain their business.

Focused on small to medium enterprises, they aim to give you a decision within 60 seconds and solutions tailored to your business.

Representative: Borrow £24,000 for 12 months at 67.89% representative APR. Total amount payable is £29,472.

Company rating on Trustpilot: 5 / 5

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3. Funding Circle

Funding Circle Logo

Type: Peer-to-Peer Lender

Loan amount: £5,000 – £500,000

Typical APR: Rates start from 4.5% per year 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

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4. Shawbrook Bank

Shawbrook Bank Logo

Type: Bank

Loan amount: £250,000 to £25 million

Typical APR: 0% to 19.9% APR

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

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5. Government Startup Loan

Startup Loans Logo

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

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6. Spotcap

Spotcap Logo

Type: Alternative Finance Provider

Loan amount: Up to £250,000

Interest: 22.80%, which includes both interest and fee.

Loan term: 1 month to 24 months

Spotcap is a highly regarded alternative finance provider, who since their launch in 2014, has raised £90 million globally, 500 active partners and over 1000 customers.

Although they are a relatively young provider, they have already become a fast favourite according to their five star Trustpilot rating.

Representative: If you borrow £100,000 over 12 months at a representative rate of 24.2% APR, with an interest rate of 1.40% fixed, you will pay 12 monthly instalments of £9,111 which would mean a total repayment of £109,332.

Company rating on Trustpilot: 5 / 5

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7. iwoca

iwoca Logo

Type: Alternative Finance Provider

Loan amount: £1,000 – £150,000

APR: 49% representative APR

Loan term: 0 to 6 months

iwoca prides itself on providing their customers with fair decisions, lightning-fast applications, outstanding flexibility and service.

Thousands of companies have borrowed £500 million, and they could be an excellent fit for many different businesses regardless of size.

Representative: Borrow £10,000 for 12 months at 49% representative APR. Interest rate of 40% p.a. (fixed). Total amount repayable is £12,165. Actual rate may vary based on circumstances.

Company rating on Trustpilot: 5 / 5

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8. Ezbob

Ezbob Logo

Type: A lending platform for banks and financial institutions

Loan amount: £1,000 – £120,000

APR: 38.9% APR

Loan term: 1 to 12 months

Ezbob is bringing a change to the way that banks and other financial institutions lend to consumers and small to medium enterprises.

They act as a middleman between banks and customers, so they can offer the excellent rates that you’d typically find when looking to borrow from a bank, but their exceptional customer service.

Representative: Borrowing £50,000 over 12 months would mean you would be repaying £58,873. These payments would be £4,166 a month plus interest on your remaining balance.

Company rating on Trustpilot: 5 / 5

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9. Fleximize

Flexmize Logo

Type: Alternative Finance Provider

Loan amount: £5,000 to £500,000

APR: 46.8% APR

Loan term: 1 – 48 Months

Fleximize was named best business finance provider by the British Bank Awards in 2018.

They claim to allow your business to grow at the pace it needs to, by offering relatively long borrowing terms of up to four years, and up to half a million pounds.

This could be a perfect fit for companies looking to purchase their property or vehicles.

Representative: For loans of £25,000 or below: If you borrow £12,500 over 15 months at a Representative rate of 46.8% APR and an annual interest rate of 39.0% (fixed), you will pay 15 monthly instalments of £1,066.11. The total charge for credit will be £3,491.65, and the total amount payable will be £15,991.65.

Company rating on Trustpilot: 5 / 5

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10. Danske Bank

Danske Bank Logo

Type: A lending platform for banks and financial institutions

Loan amount: No minimum or maximum

APR: Interest is calculated daily and applied monthly.

Loan term: 12 months

Danske Bank, as the name suggests, is a subsidiary of Danske Bank Group which originates from Denmark.

They can offer their customers a bridging loan, which doesn’t have a minimum or maximum amount and can be used for things such as constructing premises, renovations or letting you close a deal without having to wait for another transaction.

Repayment is usually made in a lump sum at the end of your term.

Company rating on Trustpilot: 4 / 5

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This list of the top ten business loan providers mainly takes into consideration the companies customer reputation, how much your business can borrow and the interest your lender will charge you.

Conclusion

There are many different options for businesses that need loans or other financial assistance depending on where you are with your company. But, if you are still stuck, there’s more.

Take a look at the ExpertSure guides to find out everything you need to know about essentials for your business or fill out the form at the top of the page for your loan options.

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