Unsecured business loans – An essential guide for UK businesses

In today’s fast-paced business environment, quick access to funds can be a crucial factor in seizing opportunities and driving growth. Unsecured business loans have emerged as a popular financing option for businesses in the UK, offering the flexibility and speed often required in the modern marketplace.

This article will provide an overview of unsecured business loans, identify leading providers in the UK, and discuss key considerations when seeking this type of loan.

Best unsecured loan providers in the UK

Unsecured loan provider	Loan amount range	Repayment term range	Interest rate type	Unique features
Aldermore Bank	£1,000 – £1,000,000	1 – 20 years	Fixed	–
Atom Bank	£25,000 – £1,000,000	1 – 5 years	Fixed	–
Barclays	£1,000 – £100,000	1 – 10 years	Fixed	Offers repayment holidays
BIZL	£10,000 – £350,000	6 months – 5 years	Unknown	Fast and flexible funding
Boost Capital	£3,000 – £500,000	Unknown	Unknown	High approval rates, flexible repayment plans
Capify	£3,500 – £500,000	6 months – 10 years	Unknown	Flexible repayments, fast approval
Capital On Tap	Up to £100,000	Up to 12 months	Competitive	No early repayment fees
Cashplus	Up to £50,000	1 month – 18 months	Competitive	–
ClearFunder	£10,000 – £100,000	6 months – 3 years	Competitive	Fast approval
CubeFunder	£5,000 – £100,000	3 months – 3 years	Competitive	No early repayment charges
Esme Loans	£10,000 – £250,000	1 – 5 years	Unknown	No early repayment fees
Everest Business Funding	£5,000 – £500,000	4 months – 2 years	Unknown	Fast approval and funding
Fair Finance	Up to £20,000	6 months – 3 years	Unknown	Tailored repayment schedules
Fleximize	£5,000 – £500,000	1 month – 48 months	Unknown	No penalty for early repayment
Funding Circle	£10,000 – £500,000	6 months – 5 years	Fixed	No early repayment fees
Growth Street	£25,000 – £2,000,000	1 month – 15 months	Competitive	Fast approval
HSBC	Up to £25,000	12 months – 10 years	Fixed	Fixed monthly payments
Iwoca	£1,000 – £200,000	1 month – 12 months	Case-by-case	–
Lloyds Bank	£1,000 – £50,000	1 – 10 years	Fixed	Repayment holidays option
MarketFinance	£10,000 – £50,000	3 months – 3 years	Fixed	–
Merchant Money	£5,000 – £150,000	1 – 24 months	Competitive	Flexible repayment plans
Metro Bank	£2,000 – £25,000	1 – 5 years	Fixed	–
Monzo	£1,000 – £3,000	1 – 3 years	Competitive	–
NatWest	£1,000 – £50,000	1 – 10 years	Fixed	–
Newable	£26,000 – £150,000	1 – 3 years	Competitive	–
Novuna (formerly Hitachi Capital)	£10,000 – £500,000	1 – 5 years	Fixed	Flexible repayment plans
Nucleus Commercial Finance	£3,000 – £50,000	3 months – 5 years	Unknown	Fast approval and funding
Paragon Bank	£25,000 – £500,000	1 – 5 years	Fixed	–
Qardus	£25,000 – £200,000	6 months – 5 years	Fixed	–
Revolut	£1,000 – £500,000	1 month – 5 years	Competitive	No early repayment fees
Santander	£2,000 – £25,000	1 – 5 years	Fixed	–
Shawbrook Bank	£250,000 – £25,000,000	3 months – 7 years	Fixed	–
Spotcap	£10,000 – £250,000	1 month – 2 years	Flexible	Fast funding
Starling Bank	Up to £250,000	1 month – 5 years	Competitive	Flexible repayment plans
Tide	£1,000 – £150,000	1 month – 5 years	Competitive	Fast decision times
Together Money	£26,000 – £2,000,000	1 – 30 years	Competitive	Flexible repayment options

What are unsecured business loans?

Unsecured business loans are a type of financing that doesn’t require the borrower to provide collateral as security against the loan. This contrasts with secured loans, where assets such as property or equipment are used as collateral that the lender can claim if the loan isn’t repaid.

The absence of collateral makes unsecured loans more accessible to businesses that don’t have substantial assets, but it also introduces more risk for lenders. Consequently, unsecured loans often carry higher interest rates than their secured counterparts. They also tend to have shorter repayment terms, typically ranging from 1 to 5 years.

How do unsecured business loans work?

The loan process usually begins with an application where the business owner provides information about the business, including its financial history and the purpose of the loan. The lender then evaluates the business’s creditworthiness, which might include reviewing credit scores, cash flow, and financial projections.

Once approved, the lender will provide the loan amount to the business, which will be repaid over a set term. The repayment term, interest rate, and any other fees are typically outlined in a loan agreement.

Considerations when seeking an unsecured business loan

When considering an unsecured business loan, there are several factors to keep in mind:

Interest rates

Unsecured loans typically have higher interest rates due to the increased risk to the lender. It’s essential to calculate the total cost of the loan, including the interest, to ensure it’s affordable for your business.

Repayment terms

Shorter repayment periods can mean larger monthly payments, so make sure your business cash flow can comfortably support the repayment schedule.

Credit score

Lenders often base their decision on your business credit score. A higher score can lead to better loan terms. If your business is new or has a low credit score, you may need to improve it before applying.

Fees

Some lenders charge arrangement fees or early repayment fees. Be sure to understand all the costs associated with the loan.

Lender reputation

Consider the reputation and customer service of the lender. Reading reviews and seeking advice from other business owners can be beneficial.

In conclusion, unsecured business loans can be a valuable financing tool for UK businesses. However, it’s crucial to understand their terms and costs, as well as the reputation and reliability of the lender, before making a decision.

Unsecured business loans FAQ

Remember, it’s always a good idea to seek professional financial advice before taking out a business loan.