Limited company loans

Last updated on 10 August 2023

In an ever-changing and increasingly complex financial landscape, understanding the intricacies of different funding options has become crucial for UK businesses. Particularly for limited companies, one funding solution of interest is the limited company loan.

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As a business leader, being equipped with comprehensive knowledge about these loans, their structures, pros and cons, can be pivotal in your company’s growth strategy and financial health.

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Best limited company loans compared

Loan providerMinimum loanMaximum loanMaximum term

ABC Finance

£500£1,000,0005 years

ArchOver

£100,000£5,000,0003 years

Aspire Business Loans

£5,000£300,0005 years

Atom Bank

£100,000£5,000,0006 years

Bank of Scotland

£1,000£1,000,00025 years

Barclays

£1,000£100,00010 years

Bibby Financial Services

n/an/a2 years

Bluestar Leasing

£5,000n/a5 years

Braemar Finance

n/an/an/a

Capify

£5,000£500,00012 months

CapitalBox

£2,000£50,00018 months

Catalyst Finance

£25,000£1,000,00012 months

ClearFunder

£10,000£100,00012 months

Close Brothers

n/an/an/a

Clydesdale Bank

£25,001£10,000,00015 years

Co-operative Bank

£1,000£250,00015 years

Cubefunder

£5,000£100,000n/a

Fleximize

£5,000£500,0004 years

Folk 2 Folk

£50,000n/a5 years

Funding Circle

£2,000£250,0006 years

Hitachi Capital

£10,000£500,0005 years

Hope Capital

£50,000£5,000,000n/a

HSBC

£1,000£25,00020 years

Huddle Capital

n/an/a12 months

Independent Growth Finance

n/an/an/a

inFund

£5,000£150,00012 months

Intelligent Loans

£10,000£250,0005 years

Iwoca

£50,001£250,0003 years

LendingCrowd

£5,000£500,0005 years

Liberis

£50,001£150,0002 years

Lloyds Bank

£1,000£1,000,00025 years

Market Finance

£5,000£250,0003 years

Merchant Money

£5,000£500,0002 years

Metro Bank

£2,000£25,000,00030 years

NatWest

£1,000£10,000,00025 years

Novuna

£10,000£500,0005 years

Nucleus Commercial Finance

£10,000£250,0006 years

PFC Finance

£5,000£1,000,0005 years

Rangewell

n/an/a5 years

Rebuildingsociety.com

£25,000£250,0005 years

Royal Bank of Scotland

£1,000£10,000,00025 years

Santander

£2,000£25,0005 years

Satellite Finance

£3,000£1,000,00010 years

Spotcap

£50,000£350,00024 months

Starling Bank

£5,000£20,0005 months

Start Up Loans

n/a£25,0005 years

ThinCats

£1,000,000£15,000,000n/a

White Oak

£2,000£500,0005 years
Best limited company loan providers compared

What is a limited company loan?

A limited company loan is a borrowing facility provided to limited companies – businesses where the liability of members or subscribers is limited to what they have invested or guaranteed to the company. In other words, the company is a separate legal entity from the individuals who own and run it.

Limited company loans may be offered by traditional high-street banks, online lenders, credit unions, and private lending institutions. They can provide an essential influx of cash for growth, investment in new equipment, property acquisition, cash flow smoothing, or even the consolidation of existing debts.

Secured and Unsecured Loans

Limited company loans generally fall into two categories: secured and unsecured.

A secured loan is backed by collateral. This might be property, equipment, or other valuable company assets. The risk to the lender is reduced as they have a claim on these assets if the loan isn’t repaid. This usually results in lower interest rates, and potentially larger loan amounts.

In contrast, an unsecured loan doesn’t require collateral. However, the risk to the lender is higher, and this is usually reflected in higher interest rates and stricter eligibility criteria.

Factors to consider

When considering a limited company loan, keep the following factors in mind:

  1. Interest rates: The interest rate will significantly impact the total amount you will pay back. Rates may be fixed or variable, and it’s vital to understand which applies to your loan.
  2. Repayment terms: Understand the duration of the loan, when payments are due, and if there are penalties for early repayment.
  3. Fees: Some lenders charge arrangement or administration fees, late payment fees, and other associated charges. Ensure you’re aware of all possible costs.
  4. Loan purpose: Lenders usually want to understand the purpose of the loan. Ensure you have a clear business plan detailing how the loan will benefit your company.
  5. Financial health: Lenders will assess your company’s financial health. This includes examining your company’s balance sheet, income statement, and cash flow statement.
  6. Personal guarantees: For smaller companies, lenders often require personal guarantees from directors. This means if your company cannot repay the loan, you become personally liable.

Impact on limited companies

It’s important to remember that taking out a business loan impacts more than just your company’s finances. It also has implications for control over your company, your personal liability, and potentially the company’s ability to secure further financing in the future.

Financing alternatives to limited company loans

While limited company loans are a common form of financing, they are not the only option available to businesses. Here are some alternative forms of financing that you might consider:

  1. Business overdrafts: This is a facility provided by banks that allows companies to borrow money as and when they need it, up to a predetermined limit. It provides flexibility and can be a good option for managing cash flow effectively.
  2. Asset finance: In this form of borrowing, the loan is secured against a specific asset, like equipment or machinery. The amount you can borrow generally depends on the value of the asset. It can be a useful option if your business has valuable assets but may not have strong cash flow.
  3. Invoice financing: This involves selling your unpaid invoices to a third party at a discount in return for immediate cash. This can be beneficial for businesses that have long payment terms but need quick access to cash.
  4. Crowdfunding or Peer-to-Peer lending: These options involve raising funds from multiple people or organisations, typically through an online platform. They can be a good fit for innovative projects or businesses that can attract interest from a large number of investors.
  5. Equity financing: This involves selling a stake in your business in return for funding. This might come from venture capitalists, angel investors, or even through issuing shares via an Initial Public Offering (IPO). While it avoids adding debt to your balance sheet, it does dilute your ownership and control.
  6. Government grants and schemes: The UK government offers a variety of grants and schemes for businesses, especially for startups, innovative projects, or businesses in certain sectors or regions. While the application process can be competitive and time-consuming, it could provide part or even all the funding you need.
  7. Trade credit: This involves negotiating longer payment terms with suppliers or getting goods on credit. This can help to improve your business’s cash flow and delay the outflow of cash.

The right choice will depend on your business’s specific circumstances, needs, and long-term strategy. It’s recommended to explore all options and seek professional advice before making a decision. Each option has its pros and cons, and it’s important to understand these fully before making a commitment.

The bottom line

Limited company loans can be a powerful tool to finance your company’s growth and investment. However, they are not without risks, and it’s essential to carefully consider the implications before proceeding.

Always seek advice from a financial advisor or solicitor before signing any loan agreements. Their knowledge and expertise will be invaluable in helping you to understand all the implications and to ensure you secure the best deal for your limited company.

Limited company loan FAQ

What is the difference between a business loan and a limited company loan?

A limited company loan is a type of business loan. While a business loan can be extended to sole traders, partnerships, or limited companies, a limited company loan specifically applies to limited companies.

Can I get a limited company loan with bad credit?

Yes, it’s possible, but it may be more challenging. Lenders will assess the risk associated with lending to your company, and a poor credit score might make them less likely to approve your loan application. However, there are lenders that specialise in lending to businesses with poor credit, albeit typically at higher interest rates.

What happens if I default on a limited company loan?

If your company defaults on a loan, the lender has the right to take steps to recover the money. If the loan is secured, they can claim the assets used as collateral. If it’s unsecured, they might take legal action against your company. If you have given a personal guarantee, you could be personally liable.

Can I get a limited company loan if my business is new?

Yes, but it might be more difficult as lenders prefer businesses with a track record of profitability. Some lenders offer start-up loans designed for new businesses. You could also explore government-backed schemes designed to support new businesses.

Do I need a business plan to get a limited company loan?

Most lenders require a business plan when you apply for a large business loan. The plan should detail what you intend to do with the money and demonstrate how you will generate sufficient profits to repay the loan.

How long does it take to get a limited company loan?

The time can vary depending on the lender, the complexity of your application, and whether you have all necessary documentation ready. Some online lenders might approve your loan within days, while traditional banks may take several weeks.

Can I have more than one limited company loan?

Yes, it is possible to have more than one limited company loan. However, taking on multiple loans increases your debt burden and could affect your ability to secure future financing. Lenders will consider your current debt levels when assessing your loan application.

Remember, these answers are general in nature and the exact details may vary between different lenders and under different circumstances. Always seek advice from a finance professional before making decisions related to your company’s finances.

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Reviewed by , Managing Director

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