How to apply for a small business loan
Growing a small business is exciting. There’s plenty to look forward to – onboarding your first hire, putting the key in a new commercial property, driving that freshly leased company car straight out of the dealership.
But growth can also be expensive. That’s why many companies look to business loans to help them expand. Here’s everything you need to know about applying for a small business loan.
Benefits of small business loans
Small business loans can provide a range of benefits, including:
Fuel growth
Fund marketing, sales, and expansion efforts with a small business loan.
Manage cash flow
Small business loans can help manage cash flow and improve stability.
Retain ownership
Unlike funding rounds, which require a portion of your business in exchange for the investment, small business loans are provided on the basis of regular repayments with the addition of interest.
How does Funding Options work?
Tell us how much you need
We’ll ask a few questions about your business and the reason for your loan.
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Our smart technology will compare quotes from up to 120+ lenders to help you find the ideal business loan.
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Types of small business loans
Asset finance
Whether you’re planning to sign a Range Rover lease to enhance your fleet or considering purchasing brand new computers to support your remote workers, asset finance is here to help you acquire new assets. It’s important to be aware that some types of asset finance may include a balloon payment, which is a large payment that needs to be made at the end of the term period before the asset is considered yours. You should also be aware that asset finance typically requires an upfront deposit and there is less flexibility with early repayments. Terms and conditions may vary by lender.
Working capital finance
If you’re expanding into new markets or looking to take on bigger contracts, you might want to look into working capital finance. To calculate how much you are eligible to borrow with this type of finance you simply subtract your liabilities from your assets. Unpaid client invoices are included among current assets.
Start up business loans
Finding a suitable loan can sometimes be difficult for new companies. If you’re struggling to find a small business loan and your business is under five years old, you might like to look into start up loans. It’s important to be aware that start up loans are usually personal loans taken out by the business owner and as such you may be liable to repay the loan even if your business doesn’t grow. In some cases, your start up loan provider may help you create your business plan. Be aware, business plans created with the help of loan providers do not guarantee loan approval.
Secured loans
Secured business loans are backed by assets or property. On the one hand, this can result in more favourable terms or interest rates, however, these loans also come with the risk of asset possession in the case of a default.
Unsecured loans
Unsecured loans do not require assets to be put up as security against the loan. While this reduces the risk of property and asset possession, these loans usually come with less favourable terms. Examples of unsecured business loans include revolving credit facility and business overdrafts.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
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Total interest
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
What is a small business loan?
A cash injection
A small business provides your business with a lump sum of money.
For business expenses
That sum can be used to fund business expenses, for instance, growth or operational costs.
Interest-based repayments
You then repay the business loan over an agreed period with the addition of interest.
What can you use a small business loan for?
Expand your team
Small business loans can be used to make payroll giving you the ability to expand your team. By hiring new resources to enhance your capabilities or onboarding new sales people you could be able to achieve greater growth.
Develop new offerings
Whether you use the loan to fund R&D or to take a new service to market, small business loans can enable you to deliver and sell new products and services.
Invest in stock
Don’t get caught out by large orders. A small business loan can help increase your inventory ensuring you can always fulfil incoming orders.
Learn more about small business loans
How much do small business loans cost?
The cost of a small business loan depends on your provider and personal circumstances. The provider will usually run a credit check and your creditworthiness (aka how trustworthy you are as a borrower) will likely impact the cost. A good credit score usually lowers interest rates, whereas a poorer credit score will result in higher interest rates. Here are some examples of possible costs:
The total repayment amount for a £10,000 loan at a 6.5% APR paid over 5 years would be £11,687.40. The monthly repayment would be £194.79 and the total cost of the loan would be £1,687.40.
The total repayment amount for a £5,000 loan at a 9.9% APR paid over 3 years would be £5,764.02. The monthly repayment would be £160.11 and the total cost of the loan would be £764.02.
The total repayment amount for a £50,000 loan at a 12% APR paid over 10 years would be £83,968.30. The monthly repayment would be £699.74 and the total cost of the loan would be £33,968.30.
Are you eligible for a small business loan?
Eligibility varies by provider. At Funding Options by Tide, we help match you with a suitable financing solution from our network of over 120 lenders. We can confirm your eligibility without affecting your credit score.
How can I apply for a small business loan?
Applying is easy for UK businesses. Just click the link below and let us know how much you’d like to borrow, what type of loan you’re looking for, and input your company details and we’ll help you find a match. If you have any questions or need any support just chat to one of our experts on hand to help walk you through the process.
What are some of the drawbacks of small business loans?
Small business loans are a great way to boost your growth and cover expenses, however, there are some drawbacks it’s important to bear in mind.
Any assets used as security against the loan could be seized
If you delay repayment your credit score could be impacted
Late payments may incur a fee
Carefully consider how much you can confidently repay before taking out a small business loan.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
