How to Get a Business Loan
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If you want to get a business loan, then it helps to be prepared. You’ll need to share details about your business’s finances and future plans, but there’s more to consider too. Learn how to get a business loan with our guide below.
Getting a business loan: step-by-step
Here are the steps you need to take to give yourself the best chance of getting the business loan you need.
1. Decide on a loan size
Knowing exactly why you need a business loan, and how it will be used, will help determine the amount you need to borrow. Borrow too much and you’ll be paying interest unnecessarily; don’t borrow enough and you may soon need to get another loan.
2. Consider the different loan types
There are various types of business loans, including unsecured business loans, secured loans, and options that are more specific to certain businesses. Which is best for you will depend largely on the position of your business and its needs.
3. Check your credit scores
Looking at both your business and personal credit scores will give you an idea of the types of business loans you may be eligible for. A good credit score usually means more loan options and the chance of better rates. If your credit situation isn’t where it needs to be, try to address any issues before you apply.
4. Prepare your business plan
A strong business plan with detailed forecasts and strategies is often key in being able to secure funding. This is particularly the case if you have a newer business and are looking for a start up business loan.
5. Gather documents
Lenders will want to assess how your business has been performing. Having financial documents readily to hand, including bank statements, profit and loss accounts, tax returns and so on, will make for a smoother application process.
6. Explore and compare lenders
Business loans are available from various providers, including banks, building societies and specialist lenders. There are brokers who can help too. Taking the time to research your options and compare lenders is crucial if you’re to find the right loan for your business.
7. Assess the loan terms and features
Finding a good interest rate is important, but other loan features need to be considered too. Loan terms, repayment options and fees can all vary between loans and need to be taken into account. The types of asset that can be used as security for a loan can differ between lenders too.
8. Consider other loan requirements
Some lenders require that you give a personal guarantee in order to get a business loan. This means you will be personally liable to cover the repayment of the loan if your business can’t, so give this careful consideration.
9. Complete an application form
Many business loans can be applied for online; for others you may need to visit a provider branch or similar. Be prepared to submit the necessary documents and be aware you may be asked how you intend to use the loan.
10. Wait for approval
Depending on the lender, it may take a matter of minutes or hours to assess your loan application, or it could take several days and weeks. You may be asked additional questions or to supply extra documents during this time.
11. Ready to accept?
If you’re approved for a loan, the provider will confirm the terms on which it’s willing to lend, including the interest rate and the amount you can borrow. It’s then up to you whether you accept the offer.
What documents do I need to get a business loan?
Different lenders may have slightly different requirements over the documents you need apply for a business loan, but most will want to see:
- a business plan, including details of how your company plans to repay the loan
- financial forecasts, showing how much money could be coming in and out of the business every month
- details of your business assets and liabilities, including any income from other sources and existing loans
- monthly bank statements
- recent financial accounts, showing profit and loss, balance sheet and cash flow
- recent tax returns, both for your business and your own, if applicable
- company documents, such as Companies House registration, shareholders’ and directors’ details and proof of address and ID
- proof of ownership and details of any assets you may be using as security for the loan
Before submitting your application, make sure you have supplied every document asked for, and all the information requested, to avoid unnecessary delays in the approval process.
How to get a business loan through NerdWallet UK
We’re here to make it as easy as possible for you to get the business loan you need. Just follow the three steps below, and you’ll immediately see the loans from our panel of providers that are right for you and offer the best chance of acceptance. Thiswon’t affect your credit score.
- Answer some short questions about you and your business, so we know what you’re searching for.
- Get matched instantly with the loans from our panel of lenders you’re most likely to be eligible for.
- Compare loans and apply to your chosen lender, with forms pre-filled using the details you’ve provided already.
» COMPARE: Find the right business loan for you today
Can I get a business loan?
Although each lender will have their own borrowing criteria, to be eligible for a business loan you will typically need to:
- be over 18 years old
- have a business based in the UK
- satisfy the lender’s credit checks
Depending on the type of business, the lender may check both your personal and business credit scores. Your personal credit score will likely be more important if you are a start up with a limited trading history.
There is also likely to be qualifying criteria in relation to business turnover and length of trading history, though these can vary widely between lenders.
» MORE: How do business loans work?
What type of business loan can you get?
Broadly, traditional business loans – where you borrow a lump sum of money, and repay it over time, with interest – come in two forms:
- Unsecured business loans: With an unsecured business loan, you don’t need to provide an asset as security against the loan. This can make it quicker and easier to get a business loan, and means assets aren’t directly at risk if the loan isn’t repaid. However, it is more likely you’ll be asked to provide a personal guarantee.
- Secured business loans: With a secured business loan, you will need to provide an asset, such as property or equipment, as a security. This may mean you can access lower interest rates and borrow more. However, if you are unable to keep up with your repayments and you default on the loan, you may lose the asset you have used as collateral.
Under these two umbrellas come a number of business loans aimed at particular businesses or needs, including:
- small business loans
- start up business loans
- short term business loans
- sole trader loans
- limited company business loans
- bad credit business loans
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