Limited company loans: how to finance your business

What is a limited company loan?

A limited company loan is a type of business finance designed specifically for companies registered as limited companies with Companies House. In other words, it’s a funding option tailored to businesses that operate as separate legal entities, also referred to as Ltd, rather than sole traders or partnerships. When your business is a limited company, its finances are legally separate from your personal finances. This means the company can borrow money in its own name, and the debts belong to the business rather than to you as an individual director or owner.

How do limited company loans work?

Limited company loans function much like any other business loan: your company borrows an amount of money and repays it over time with interest, typically in regular installments. The key difference is that the company itself is usually responsible for repaying the loan, not the business owner personally. This structure can protect your personal assets and credit if the business struggles to meet repayments, since the liability stays with the company.

While many limited company loans are designed to separate personal and business liability, many lenders will require a director to sign a personal guarantee, a legal promise that you’ll personally repay the loan, or a specified portion of it, if the company cannot meet its obligation.

Providing a personal guarantee gives lenders extra security, which is particularly common for newer businesses or when borrowing larger sums. Some guarantees cover the entire loan amount, while others are limited to a capped sum or percentage of the loan.

If you do sign a personal guarantee, you become personally liable for the agreed amount in the event of default. Make sure you review the terms carefully, understand whether the guarantee is limited or unlimited, and consider taking independent legal or financial advice before committing. When working with a Capitalise Funding Specialist, they will take the time to run you through the terms of the loans, including discussing the terms of any personal guarantee.

Types of limited company loans

Limited company loans can be broadly categorised into two main loan types:

• Secured limited company loans: a secured loan requires an asset to be offered as security – for example, property, equipment, vehicles, or even your company’s invoices. By backing the loan with collateral, you give the lender reassurance, which often results in lower interest rates and the ability to borrow larger amounts. The trade-off is that if your company cannot repay the loan, the lender has the right to seize the asset used as security to recover the debt. 

• Unsecured limited company loans: an unsecured loan does not require you to pledge any business assets or collateral. This makes the application process faster and simpler since you don’t have to undergo asset valuations. Keep in mind: because there’s no collateral, lenders often ask for a personal guarantee as a condition for an unsecured loan. Unsecured loans are suitable for companies that don’t have significant assets to offer or prefer not to risk them, but they may come with slightly higher interest rates or lower borrowing limits due to the higher risk for the lender.

Within these categories, limited companies can access a wide range of finance options, from traditional term loans and commercial mortgages to business credit lines, invoice financing, and even Start Up Loans for newer businesses. The right option will depend on your company’s needs and circumstances, such as whether you require a large lump sum upfront or flexible access to funds over time. To find the right fit funding, start by exploring the loan types in the Insights section of our website. You can also discuss your funding needs with a specialist by signing up for free on our platform.

Benefits of limited company loans

Opting for a loan as a limited company can offer several advantages for your business:

• Access to larger funding amounts: Established limited companies often can borrow more than a comparable sole trader business. Lenders typically view limited companies as having more structure and transparency (due to filed accounts, directors’ history, etc.), making them comfortable offering higher loan amounts or credit limits. For instance, some lenders may offer anywhere from a few thousand pounds up to £1 million or more, depending on your turnover and credit profile.

• Potentially lower interest rates: because a limited company is a separate legal entity with public records and (usually) more detailed financial information, lenders may consider it less risky and offer better rates. If your company has a solid financial history, you might secure a lower interest rate than an unincorporated business would. Using collateral (secured loan) can further reduce rates by giving lenders added security.

• Limited liability protection: With a limited company loan, the debt is in the company’s name. As long as you haven’t given a personal guarantee or other personal security, your personal assets are shielded if the business cannot repay.. This limited liability is a core benefit of running a business as a company, it can give you more confidence to borrow for growth, knowing your home or savings aren’t automatically on the line (again, provided no personal guarantee is in place).

• Flexible use of funds: Lenders generally allow you to use the money where your company needs it most, as long as it’s for legitimate business purposes. This flexibility means that a well-chosen loan can act as a springboard to take your business to the next level. Most lenders do, however, exclude certain sectors or activities, such as weapons manufacturing, illegal activities, or anything that breaches regulatory or ethical guidelines, from eligibility. Outside of these restricted areas, funds from a limited company loan can usually be applied to a wide range of business needs, from fueling an expansion project and purchasing new equipment to boosting cash flow during a slow season or covering unexpected expenses.

• Build business credit: successfully repaying a loan can boost your company’s credit score, strengthening its overall credit profile. A solid credit history doesn’t just help with future borrowing, it can also improve your ability to negotiate better payment terms with suppliers, secure larger credit lines, and build trust with other business partners. Consistently making repayments on time shows your company is reliable, which can have a direct impact on cash flow and day-to-day operations. 

Tip: keeping an eye on your business credit score regularly can help, with a free Capitalise account, you can check your business credit rating at no cost and spot issues early.

Tax-deductible interest: In the UK, interest payments on a business loan are often tax deductible expenses for the company. This means the interest you pay on your limited company loan could be deducted from your profits when calculating corporation tax, reducing the overall cost of borrowing. You will want to consult a financial advisor or an accountant for specific advice.

Before you borrow: key risks to consider

Being clear on the risks and responsibilities that come with a limited company loan will help you make a confident, informed decision:

• Cost of borrowing: like any loan, a limited company loan comes with costs, including primarily interest, and sometimes additional fees. Even if your business qualifies for a lower interest rate, the repayments will still affect your monthly cash flow. Always consider the total cost of credit. Tools like a business loan calculator can help you estimate monthly payments and total interest over the term. If you’re working with a funding specialist, make sure they walk you through all the costs, and don’t hesitate to ask if they haven’t.

• Personal guarantees and asset risk: If your loan requires a personal guarantee or is secured against an asset, those commitments override the protection of limited liability. For example, defaulting on a secured loan could lead to losing the asset you pledged (whether a company asset or personal property). Similarly, if you sign a personal guarantee, the lender can pursue you personally for the debt. Ensure you’re comfortable with these risks and explore insurance or other safeguards if you decide to take on a personal guarantee.

• Impact on credit score: limited company loans are typically reported on the company’s credit profile, not the director’s personal credit file. However, if you’ve provided a personal guarantee and the business cannot repay, you’ll be personally responsible for the guaranteed amount. Failing to meet those personal repayments could affect your own credit profile. Paying on time, whether as a business or under a personal guarantee, helps protect both your company’s and your personal credit standing.

• Eligibility hurdles: Each lender has its own criteria, and some can be stricter than others. Newer companies or those with past credit issues may face fewer options, smaller loan amounts, or higher interest rates. We’ll cover eligibility in the next section — and the better informed you are, the better prepared you’ll be to submit a strong application.

Eligibility criteria for limited company loans

Basic requirements: 

1. UK-registered limited company, typically registered with Companies House

2. Directors/owners must be 18+, lenders require legal capacity to enter into a credit agreement

3. Company details verified, lenders usually check your company number and official records during the application process. Before applying, review your business details (you can view them in your Capitalise account) and update them with Companies House if needed.

Trading history and turnover: 

Most lenders look at how long your business has been trading and its revenue levels before approving a loan.

1. Trading history: Many lenders prefer that a company has been actively trading for at least 6–12 months (sometimes longer). A longer and stronger track record generally improves your chances.

2. Turnover requirements: Loan amounts are often tied to revenue. For example, some lenders won’t lend more than 10% of annual turnover. This ensures repayments don’t place unnecessary pressure on your operations.

3. Startups: Very new limited companies can still get funding (sometimes via specialist products or government-backed schemes), but options may be fewer and terms stricter.

Credit scores: 

Lenders will evaluate both your business credit score and often your personal credit score as a director. A good credit history signals that you manage debts responsibly. Before applying, check your business’s credit report and address any issues. If your company’s credit file is thin or has negatives (or if your personal credit score is low), expect that loan offers might come with higher interest or extra conditions (like providing a personal guarantee or security). Some alternative finance providers do cater to businesses with poor credit, but typically at reduced loan amounts or higher rates.

Financial documents: 

Be prepared to provide documentation to demonstrate your company’s financial health. Common requirements includ:

1. Recent bank statements

2. Filed accounts or management accounts

3. A business plan or forecasts sometimes, but not in all cases. You can use our cash flow forecast template, available for free and in Google Sheets format.

4. Directors’ details, including contact information and, in some cases, ID for verification and credit checks

Lenders use these to assess your revenue, profit margins, cash flow, and overall ability to repay the loan. Having up-to-date financial statements and a clear explanation of how you’ll use the funds can strengthen your application. It shows the lender that you have a plan for the money and a strategy for repayment, which can improve your approval chances.

Lenders want to be confident that your business can repay the loan comfortably. Meeting the basic criteria (UK limited company, minimum trading time, acceptable credit) gets you in the door. From there, the stronger your business’s financials and credit profile, the more options and better terms you’ll likely qualify for. If you’re unsure about your eligibility, you can speak with a funding specalist or use a platform (like Capitalise) to check what loans your company might be pre-qualified for without affecting your credit score.

How to apply for a limited company loan

Securing a loan for your limited company can be straightforward if you prepare properly. Here are the general steps to follow when applying:

1. Check your company’s financial health and business credit score: Before approaching lenders, do an internal review and ensure all your financial information is correct. Make sure your balance sheet, income statement, and cash flow records are up to date and accurate, lenders will often cross-check these with Companies House filings. Check your business credit score in advance, verify that the data on your credit report is correct, and resolve any errors or outstanding CCJs (County Court Judgments). A clean, accurate credit profile and solid financials will make your application stronger and speed up approval.

1. Determine your funding needs and affordability: start by assessing how much you need to borrow and ensure your business can comfortably manage the repayments. Lenders are primarily concerned with your ability to repay, so have up-to-date financial information and cash flow forecasts ready. The amount you request should be realistic and aligned with what your company can support. You can use our business loan calculator to have an idea of what your repayments could look like

1. Compare lenders to secure the best offer available to your business: Limited company loans are available from high-street banks, challenger banks, online lenders, and specialised finance providers, each with its own criteria, rates, and terms. Comparing multiple offers helps you find the best fit for your business and avoid overpaying.

You can research lenders independently or use a broker/platform. For example, with Capitalise you gain access to a marketplace of 130+ business lenders. Your dedicated funding specialist will help you understand your business needs,  prepare a strong application, and match you with the most suitable lenders. They’ll also walk you through the terms and costs of every offer, so you can make a fully informed decision.

1. Prepare your application documents: Once you’ve shortlisted lenders (or chosen one), gather the documents they’ll need. Typically, you’ll complete an application form with your company and director details, and provide:

   1. Recent bank statements: usually the last 3–6 months

   2. Filed accounts or management accounts: showing profitability and financial position

   3. Tax returns (if available)

   4. Forecasts or business plan: sometimes requested, especially for larger loans or younger businesses

Some lenders may also ask for a short explanation of how you’ll use the funds to grow the business or improve revenue. Preparing a complete, organised application upfront demonstrates professionalism and can speed up approval, a little extra time here can save you delays later.

1. Submit the application and follow up: Many lenders allow online applications where you upload documents electronically. After submission, the lender’s underwriting team will review everything. Be responsive to any follow-up questions or requests for additional info. Sometimes they might ask for clarification on a specific transaction in your statements or an updated document. If approved, you’ll receive a formal offer outlining the loan amount, interest rate, repayment term, fees, and any conditions (such as security or personal guarantees). Review these details carefully, compare them against your expectations, and don’t hesitate to ask questions if anything is unclear. Once you’re satisfied, you can accept the offer and proceed to funding. The funds are then released to your business account – in some cases, within a day or two of approval.

Final Tip: If this process sounds daunting, remember that you don’t have to go it alone. Platforms like Capitalise are designed to make business finance simple, you provide your details once, and you can get matched with loan options that suit your needs, without affecting your credit score. This can be a great way to quickly gauge your chances and compare offers. Moreover, an expert Funding Specialist from Capitalise can guide you through the application, helping you understand the requirements and even assisting with paperwork. Leveraging such resources can significantly streamline your quest for the right limited company loan.