What is a business loan?

A business loan is a type of borrowing that meets the financial needs of a company, rather than for personal use.

It provides a business with a sum of money that can be used to fund various business activities, such as starting a new business, expanding operations, purchasing equipment or inventory, covering operating expenses, or managing cash flow.

The terms of a business loan can vary widely depending on the lender, the type of loan, and how creditworthy the business is. 

Business owner that gets a business loan

Improve your cashflow

Fund business growth

Invest in new equipment

How do business loans work?

To get a business loan, you’ll need to apply to a lender who will decide whether to lend your business money. If you are approved for a business loan and accept the terms, you will receive the funds. You will repay the business loan, usually on a monthly basis with a fixed repayment until the amount is repaid in full, including interest. 

  1. Check what business loans you’re eligible for using the funding calculator
  2. Search for a match from our marketplace of 100+ lenders
  3. Talk with one of our funding specialists and upload your documents
  4. Apply up to 4 lenders in one application 
  5. Get funding in your account in as little as 48 hours.
chart that explains how business loans work

Would I be eligible for a business loan?

Your eligibility for a business loan will depend on factors such as your business’ finances as well as the lender’s individual requirements. 

Generally, to be eligible for a business loan, your business will need to have:

  • 6 months trading history 
  • A good business credit score
  • At least one director living in the UK

See what business loans you're eligible for. 

Types of business loan available

Unsecured business loans don't require any collateral, so they offer flexibility and a quicker approval time. An unsecured business loan can be used for various purposes, such as working capital or expansion.


Secured business loans require collateral from the business in the form of assets, or property. As the business loan has security, there is less risk for the lender so it allows for higher loan amounts and lower interest rates. They are suitable for larger investments and can be accessible even with lower business credit scores.

Is a business loan a good fit for me?

Pros of a business loan

  • A business loan provides immediate access to capital, allowing you to fund your business initiatives, such as purchasing inventory, or investing in new equipment. It helps bridge the gap between your current financial resources and the capital needed for growth.
  • With access to more funds, you can expand your business, open new locations, hire more employees, or launch new products or services. This can lead to increased revenue, positioning your business for long-term success.
  • On time repayments of a business loan can help you build a good business credit score. By establishing a strong credit score, you will be able to secure future business loans at better terms and interest rates. 
  • Unlike seeking investors who may require equity in your business, a loan allows you to maintain full ownership and control. You can use the funds as you see fit. 

Cons of a business loan

  • Borrowing money means taking on debt, and you'll be obligated to repay the loan amount with interest. Defaulting on a loan will have severe implications, so consider whether you can meet the repayments. If you are concerned about defaulting on a loan, you can consult with a nonprofit credit counselling service. 
  • Lenders typically have specific requirements for business loan approval, such as a good business credit score and a minimum trading history, If your business doesn't meet these criteria, it can be difficult to secure a loan, or you may end up with unfavourable terms.
  • When applying for a business loan, you might get approved, but the lender could offer you a lesser amount than you have in mind if they think it is too much and unlikely to be repaid in full. 


How much will a business loan cost?

There are different factors that will affect the rates of a business loan and how much it will cost your business. 

When you apply for a business loan, lenders will usually assess the creditworthiness of the business by looking at your business credit score, the business’ financial history, profitability and any assets owned. This evaluation helps the lender to determine the risk associated with lending to the business and will determine what rates they offer.  

Some business loans will also include an initial arrangement fee, or early repayment fees. 

female business owner

Frequently asked questions about business loans

Many lenders require evidence of turnover and trading history, so as a startup it can be difficult to get a business loan. However there are some specialist lenders that could help. Find out more about startup business loans.

Yes, to take out a business loan you’ll need to be a director of the business. 

To qualify for a business loan from a UK lender, your business must be based in the UK. 

The loan amount you can borrow depends on factors such as your business's financial health, revenue, creditworthiness, and the lender's policies. Use the Business Loan Calculator to see how much your business can borrow.

It is possible to get a business loan with bad business credit, however you may find it difficult to get an unsecured business loan, or a business loan from a traditional bank. There are options available for businesses with bad credit, as some lenders will look at other factors, such as your assets or debtor book. At Capitalise, we work with over 100 lenders to help you find an option for your business. Find out more about bad credit business loans.

No, Capitalise is a brokerage, not a lender. This means we can give you choice over the market and find a business loan that is the best fit for you.

To apply for a business loan, lenders will need to see the following documents: 

  • 6 months business bank statements
  • Most recent set of annual filed accounts 
  • Personal ID 

The specific documents may vary depending on the lender and loan type.

If you miss a business loan repayment, you must contact the lender as soon as possible to resolve the issue. If you default on your business loan, this will severely affect your credit score and the lender could enforce action against you.

Capitalise gives you access to 100+ UK lenders so you can compare the best rates. With support from our team of funding specialists, you can get the best business loan rates available to your business. 

Compare business loans.