What is a secured business loan?

A secured business loan is a type of business loan that allows you to borrow money against the value of an asset as collateral, providing security. This lowers the risk of lending, resulting in lower interest rates compared to an unsecured loan. It also opens up the possibility of borrowing a greater sum of money.

What is an unsecured business loan?

An unsecured business loan is a type of business loan that assesses the finances of your business to determine the likelihood that you’ll be able to repay the money when required.

What is a small business loan?

A small business loan is a lump sum payment or a flexible line of credit designed to help entrepreneurs start or expand their business operations.

Can I get a business loan?

Yes, most people can get a business loan. However, you’ll need to meet the criteria set out by your lender before an application is approved. Many lenders offer an eligibility checker before you submit a business loan application. This will give you an idea of how likely you are to obtain a business loan and identify any potential issues before you undertake a formal credit check.

How hard is it to get a loan to buy a business?

It can be challenging to get a loan to buy a business. According to business loan statistics from the BVA BDRC, around two in five UK SMEs had their business loan application rejected in 2024. The most commonly cited reason for this was the current performance of the business (26% of cases).

How to get a business loan

To get a business loan, there are several steps you should take to make your application as successful as possible. Have a business plan in place; this will provide the lender with a clear vision of your business model and how you intend to repay the loan. Calculate how much you need to borrow - this should be enough to support the growth of your company and reduce the likelihood of having to borrow more in the future. Consider how long you need the loan for - choosing a longer term can reduce your monthly repayments, but could mean paying more in interest. Check your business credit score - this may influence your chances of approval (i.e. those with a better score are likely to be granted the amount of money they want to borrow). Get your finances in order by settling any outstanding debts, as this can improve your credit rating ahead of your business loan application. Before agreeing to a business loan, it’s essential to make sure you can comfortably repay the money borrowed without damaging the success of your business. Consulting an independent advisor is a step in the right direction to help you make a decision that is right for you and your company.

How does a business loan work?

A business loan is obtained by applying to a lender. They will consider the financial stability of your business, how creditworthy a loan would be to its success, and the likelihood that you will repay the borrowed money in the future. Once approved, the lender will transfer the agreed-upon amount as a lump sum to your business bank account, allowing you to start investing.

How much of a business loan can I get?

How much of a business loan you can get will depend on several factors, such as the type of loan you’re after, your business’s credit history, and what your lender feels you can realistically pay back. Depending on the above, the amount of borrowing for an unsecured loan could be as much as £750,000, while for a secured loan, it could be up to £15 million. Alternatively, for those getting their business off the ground, you could borrow up to £25,000 from a government-backed Start Up Loan.

What is the average business loan amount in the UK?

Around three-fifths of UK SMEs borrow up to £24,999 when it comes to taking out a business loan.

What are business loan interest rates?

Business loan interest rates refer to the additional sum of money that must be repaid, in addition to the initial amount borrowed, when you took out the loan. For example, if you borrowed £100,000 over three years at an agreed interest rate of 9%, your total repayment would be £114,479, making the cost of the loan (excluding any fees) £14,479.

What is the average business loan interest rate in the UK?

As of June 2025, the average business loan interest rate in the UK stood at: 6.17% for Private Non-Financial Corporations (PNFCs), and 5.96% for SMEs on the stock of outstanding loans. 5.94% for new loans to PNFCs and 6.51% for new loans to SMEs.

How big is the business loans market in the UK?

The UK business loans market was worth a reported £485.9 billion as of 2024, a 1.3% decrease from the previous year.

What is the value of SME lending in the UK?

The total value of SME lending in 2024 stood at £62.1 billion (a 4.9% increase from 2023).

Asset-based lending Asset-based lending is when a business uses an asset, such as a building, premises or inventory, as collateral in order to acquire finance. Government grant A government grant is a sum of money awarded to your business by the UK government. You do not have to pay back these sums. Grants are typically awarded to companies to fund specific developments. Gross lending Gross lending refers to the total amount of loans a bank or institution advances over a given period. It excludes repayments and other adjustments. Hire purchase Hire purchase is where a business or individual acquires an item without paying the full purchase price at the outset. Instead, they make pre-arranged payments according to an established schedule. Invoice finance Invoice finance is when a business uses unpaid customer invoices as collateral to acquire funding from a lender. Overdrafts An overdraft is a form of debt that allows you to take out more money than you have in your bank account. You are said to be overdrawn if your balance falls below £0. There is generally a limit to your overdraft and a charge for being overdrawn. Start-up loans Start-up loans are supplied as part of a government-backed scheme in which prospective new businesses (or businesses that have been trading for less than 36 months) can receive funding to help with costs like equipment, stock, premises, marketing and promotional expenses.

Business loans FAQs

Business loans glossary

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