Small Business Loans Guide

small business loans
Find the best current small business loans available for UK small business owners in 2022.

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Whether you’re starting a new business or your business need an injection of capital, many UK banks and financial institutions offer small business loans in the UK. These are typically for amounts up to £25,000 and have repayment terms of 12-24 months.

In this guide, we have picked the current best small business loans available for UK registered companies in 2022. We recommend you seek professional financial advice before considering any loan or credit.

In this guide to small business loans…

6 Top Small Business Loans

1. HSBC Small Business Loans

HSBC is a reputable UK bank that offers a simple but effective small business loan. It has many benefits and flexible terms that small businesses should be able to manage.

Small business loans are available for values between £1,000 to £25,000. This is based on a fixed representative APR of 7.1% which is one of the lowest rates available at the time of writing (March 2022). You can also opt for a couple of special repayment terms. Firstly, there is the option to defer your first repayment for 3 to 6 months. Secondly, you can set a January holiday repayment option – this means that you do not have to make any repayments in January for the lifespan of the loan.

This small business loan is also beneficial as anyone can apply – you do not need an HSBC currency account or business account beforehand. The loan can also be tracked and payments managed online.

Features

  • A secured loan (unsecured also offered)
  • Loan amount of between £1000 – £25,000
  • Repayment period of between 12 months to 10 years
  • Typical representative APR of 7.1%
  • Must provide cash flow forecast, business plan, and management accounts

2. Barclays Business Loans

Barclays is another well-known high street bank that offers a range of services for small businesses including credit cards and small business loans.

Their small business loan is available for values of £1,000 to £25,000. These are given with a typical APR of 9.3%. However, the APR representative is variable depending on the loan amount and loan term. You can use the loan calculator on their website to look at APR rates, repayments, and the total repayable amount.

Barclays also offers other flexible features for loans. This includes the option to choose fixed or variable APR, and the option to make interest-only repayments. We also like that they offer a repayment holiday subject to application. This allows you to defer your first loan repayment for 6 months at the start of the term.

Loan repayments can be set for up to 25 years, and for unsecured loans, you can borrow up to £100,000.

Features

  • An unsecured loan (secured also offered)
  • Loan amount of up to £100,000
  • Repayment period of between 12 months to 10 years
  • Typical representative APR of 9.3%
  • Must be a sole trader, partnership, Ltd, charity, or club association

3. Lloyds Small Business Loans

If you want a flexible small business loan with simple terms, and the option to make early repayments, Lloyds has a great option. Lloyds is a reputable UK bank and has some great services for small businesses.

We like their small business loan as there are no charges for early repayments. This means that if you want to repay the loan quicker you can do it without being penalised.

Their loans are available for values between £1,000 and £25,000 with repayment plans of between 1 to 25 years. This means you can spread the costs as you wish to suit your business cash flow. You can also choose either fixed or variable APR rates. The fixed-rate is 7.1%, and the variable rate has a base rate of 7.5% – both of these are reasonable.

To be eligible, you must only use the loan for business purposes and be a sole trader, partner, or director.

Features

  • Offers both secured and unsecured loans
  • Loan amount of £1,000 to £25,000 (large loans are available on request)
  • Repayment period of 12 months to 25 years
  • Typical representative APR of 7.1%
  • The loan must be used for business purposes only

4. NatWest Small Business Loans

NatWest has the benefit of having hundreds of high street branches if you prefer to manage your finances face to face. They also have some brilliant small business services including a decent small business loan with flexible terms.

You can borrow between £1,000 to £50,000 subject to approval. Also, these loans have no initial arrangement fee, and you can choose to make early repayments free of charge too. The standard repayment plans can be set from 1 to 7 years, although you can request a 10-year payment plan too.

The interest rates are not as visible as other banks which may put some people off. Essentially, you can get a fixed APR, but this depends on several factors including the value of the loan and repayment period. Generally, their rates are in line with current standards. We also like the relatively quick and simple online application process.

Features

  • A secured loan
  • Loan amount of £1,000 to £50,000
  • Repayment period of 12 months to 7 years (10 years available by request)
  • Variable representative APR dependant on loan size
  • Must have a good credit rating with no CCJs or bankruptcy

5. TSB Business Loans

TSB is a great option for small business loans and they offer one of the largest loan values for UK banks. Small businesses can apply for loans between £1,000 up to a staggering £1,000,000. You can also choose either secured or unsecured loans with fixed APR rates. The representative APR is 9.94% which is a little higher than some other options, but still OK.

Loan repayment periods can be selected between 1 to 10 years too. To apply for a small business loan, you have to be a partner, sole trader, or director. Also, the loan can only be used for business purposes.

They also offer capital repayment holidays so you can defer the initial loan repayment to help with initial cash flow problems.

Features

  • Offers both secured and unsecured loans
  • Loan amount of £1,000 to £1,000,000
  • Repayment period of 12 months to 10 years
  • Typical representative APR of 9.94%
  • Must be a sole trader, partner, or director

6. Metro Bank Business and Commercial Loans

Metro Bank offers flexible business and commercial loans with a decent representative APR. You can use their online calculator to show potential repayment terms and interest totals.

The loan value has to be between £2,000 to £25,000. This is higher than other banks as most allow a minimum loan amount of £2,000. However, they offer flexible repayment plans and the average representative APR is 9.6%. 

To apply for a Metro Bank small business loan, you must also have a Metro Business Bank Account. Also, the loan is subject to other potential requirements. For example, they generally only offer loans to businesses with a turnover of £2 million or more.

We like that for loans under £25,000, there are no arrangement fees. Also, the application process is easy and incredibly quick, and you can typically get approval within a short period. For existing Metro Bank customers, this is one of the best small business loans available. For those not wishing to switch business bank accounts – this may not be a great choice.

Features

  • Secured business loan
  • Value of up to £25,000
  • Repayment period of 12 months to 5 years
  • Typical representative APR of 9.6%
  • Must have a Metro Business Bank Account first

Secured vs Unsecured Small Business Loans

When choosing a small business loan it is important to consider the benefits of secured vs unsecured loans. Unsecured loans require no collateral. The financial institutes are essentially lending your business money based on your credit rating. These loans typically have a higher representative APR as a result. The benefit is that if you default on this loan, there is no collateral (like business assets) that could be used as payment.

In contrast, secured loans are backed by collateral. In business terms, this could be your business assets such as your premises, machinery, or even product stock. Due to the collateral backing, these loans usually have a lower representative APR. The downside is that your business assets could be at risk if you default on the loan.

Apply for a Small Business Loan Today to Make That All-Important Purchase

As you can see, there are some excellent small business loans available. Before taking a loan, it is important to consider your long-term financial situation, and your ability to make consistent repayments. Defaulting on a loan could seriously damage the financial standing of your business and result in credit issues.

However, if you are confident that you can repay the loan, it could be an excellent investment. A small business loan could give you a short term cash injection that could ultimately benefit your business in the long term.

Keep an eye out for some of the digital banks offering credit and loan facilities. We recommend that prior to applying for a loan or business credit, you have your business finances organised well as they will be scrutinised. The easiest way to do this is by using an accounting software or a CRM system to show the health of your business.

If this small business loans guide helped you, please recommend DigitalSupermarket.

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