Introduction
Did you know that unsecured loans are some of the least risky, as you don’t need to put anything up for collateral?
Or that there are many different loans on offer, giving you a lot more choice than you might have expected?
This guide will tell you everything you need to know about unsecured business loans, including what they are, which loans are on offer and where you can get them from.
What’s in this guide?
Let’s take a closer look and find out more.
Top 10 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. Capify
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
3. Funding Circle
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
4. Shawbrook Bank
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
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. Spotcap
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
7. iwoca
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
8. Ezbob
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
9. Fleximize
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
10. Danske Bank
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
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.
Tips to get the best loan
Now let’s take a look at the top tips to getting the best loan for you and your business.
1. Build a great credit score
If you are looking to get the best deal for business loans, one of the best things you can do is build an excellent credit score.
Having a credit score that is above 700 will help you much in your loan application.
Most lenders will check both your business and personal credit score, as it shows how reliable you are as a business owner and personally.
2. Be truthful in your application
Being honest in your business loan application can mean the difference between succeeding in applying for a loan or failing.
It’s easy to get carried away with talking about the strengths of your business, but you should never try and adjust the numbers to paint a better picture.
3. Know your loans
Sometimes, you may need a secured loan when you have a poor credit rating, or you might need a loan within days.
Knowing everything about the different business loans available means getting the right deal for your company, and avoiding getting into a difficult situation.
There are loans for most circumstances, which you can read about here.
4. Work on your business plan
Having a traditional business plan can be very beneficial because it should cover every area that your lender will want to know.
For instance, this could include your concept, strategy and industry.
It allows you, and the lender, to view your business objectively and in detail.
5. Find the right loan for your industry
Did you know that some banks won’t lend to hotels or restaurants?
When comparing business loan providers, you should always ensure that you check that the lender will allow you to borrow with your business in a specific industry.
If nothing else, it will save you time so you can move onto the next potential lender.
Unsecured business loans on offer
So, what business loans are on offer today?
Let’s take a look.
| Company Name | Loan Type | Loan Amount | Representative APR | Loan Term |
| Funding Circle | Peer-to-Peer | £10,000 to £1,000,000 | – | Six months to 60 months |
| Ultimate Finance | Short-term loan | £5,000 to £100,000 | 36.8% APR | Up to 12 months |
| Esme | Unsecured term loan | £10,000 to £150,000 | 10.82% APR | 12 months to 60 months |
| IWOCA | Short-term loan | £1,000 to £200,000 | 49% APR | One month to 12 months |
| White Oak | Short-term loan | £5,000 to £500,000 | – | Three months to 60 months |
| Spotcap | Short-term loan | £50,000 to £250,000 | 22.8% APR | One month to 24 months |
| Nucleus | Unsecured term loan | £25,000 to £1,000,000 | – | One month to 15 months |
| CubeFinder | Short-term loan | £5,000 to £100,000 | 51.45% APR | Three months to 12 months |
| Yorkshire Bank | Bank Loan | £10,000 to £150,000 | 12.8% APR | Six months to 60 months |
| Alius Finance | Unsecured term loan | £10,000 to £1,000,000 | 11.28% APR | Three months to 60 months |
Types of business loan providers
Banks
- Banks can offer their customers secured and unsecured loans.
- Interest rates are usually higher for an unsecured loan
- Banks will often run much harder checks on your finances to make sure you can afford to repay the loan – this is known as underwriting.
- Since the financial crisis, banks are a lot tighter when it comes to lending out money.
- Some banks still offer very competitive pricing and low arrangement fees.
Peer-to-Peer Lenders
- Peer-to-peer lenders allow regular citizens to make the most out of their savings by investing in a range of different businesses.
- For businesses, this can sometimes mean getting better rates than you might find with banks.
- Lends businesses money with unsecured loans with terms of up to five years.
- One of the negatives is that you may have to pay extra fees like arrangement fees.
Specialist Business Lenders
- Specialist business lenders compete with banks in this market.
- They often offer short-term unsecured loans.
- These interest rates are usually higher than with banks or peer-to-peer lenders.
- The lending criteria are usually less strict.
Government Schemes
- The government backs a wide variety of business loans for companies in different industries.
- Offers loans to both startups and existing businesses.
- Enables businesses to get loans where they may not have been able to before, for a competitive rate.
- The application process for these schemes are usually longer, but they can be an excellent option for a business that can budget in advance.
FAQ
What is an unsecured business 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.
However, 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.
Can I get a loan with bad credit?
Yes, you can! But your choices will be more limited.
The best thing to do before you get a loan is to try and build up your score, but a loan can also help you do this, as it’s proving that you can borrow money and pay it back.
Peer-to-peer lenders like FundingTree or Funding Circle allow ‘investors’ to invest in your business, with a credit agreement in place that will help you to repair your credit score.
But, these interest rates will likely be very high due to the fees and costs involved.
Another option is revenue advance facilities, which are repaid from a percentage of your future revenues.
This means that it’s almost impossible to default on payments, which is why it is available to businesses with a low credit score.
Typically, you’ll be able to borrow one or two times your monthly sales figures.
Do I need to put up collateral?
No, with unsecured loans you don’t have to put anything up for collateral, like your home or car.
Are unsecured business loans right for me?
This will depend entirely on your personal and business circumstances.
If your business requires a more substantial sum of money, it might be better to try and view the different secured loans on offer.
In the circumstance that you have bad credit, an unsecured business loan could help you build your score.
Do unsecured loans hurt my credit score?
They can, but only if you don’t make the repayments.
If you are strict with your budgeting and make every repayment on time, your loan could help to repair your score.
Unsecured loans pros and cons
✔ The main advantage is that you don’t have to put your assets at risk
✔ You can usually borrow money from £500 to £500,000 depending on the lender
✔ Business loan terms can be from 1 month to 60 months
✗ Unsecured loans are generally more expensive
✗ Costly repayments could negatively affect your business
✗ You can’t borrow as much as with secured loans
