Unsecured business loans – An essential guide for UK businesses

Last updated on 10 August 2023

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.

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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 providerLoan amount rangeRepayment term rangeInterest rate typeUnique features
Aldermore Bank£1,000 – £1,000,0001 – 20 yearsFixed
Atom Bank£25,000 – £1,000,0001 – 5 yearsFixed
Barclays£1,000 – £100,0001 – 10 yearsFixedOffers repayment holidays
BIZL£10,000 – £350,0006 months – 5 yearsUnknownFast and flexible funding
Boost Capital£3,000 – £500,000UnknownUnknownHigh approval rates, flexible repayment plans
Capify£3,500 – £500,0006 months – 10 yearsUnknownFlexible repayments, fast approval
Capital On TapUp to £100,000Up to 12 monthsCompetitiveNo early repayment fees
CashplusUp to £50,0001 month – 18 monthsCompetitive
ClearFunder£10,000 – £100,0006 months – 3 yearsCompetitiveFast approval
CubeFunder£5,000 – £100,0003 months – 3 yearsCompetitiveNo early repayment charges
Esme Loans£10,000 – £250,0001 – 5 yearsUnknownNo early repayment fees
Everest Business Funding£5,000 – £500,0004 months – 2 yearsUnknownFast approval and funding
Fair FinanceUp to £20,0006 months – 3 yearsUnknownTailored repayment schedules
Fleximize£5,000 – £500,0001 month – 48 monthsUnknownNo penalty for early repayment
Funding Circle£10,000 – £500,0006 months – 5 yearsFixedNo early repayment fees
Growth Street£25,000 – £2,000,0001 month – 15 monthsCompetitiveFast approval
HSBCUp to £25,00012 months – 10 yearsFixedFixed monthly payments
Iwoca£1,000 – £200,0001 month – 12 monthsCase-by-case
Lloyds Bank£1,000 – £50,0001 – 10 yearsFixedRepayment holidays option
MarketFinance£10,000 – £50,0003 months – 3 yearsFixed
Merchant Money£5,000 – £150,0001 – 24 monthsCompetitiveFlexible repayment plans
Metro Bank£2,000 – £25,0001 – 5 yearsFixed
Monzo£1,000 – £3,0001 – 3 yearsCompetitive
NatWest£1,000 – £50,0001 – 10 yearsFixed
Newable£26,000 – £150,0001 – 3 yearsCompetitive
Novuna (formerly Hitachi Capital)£10,000 – £500,0001 – 5 yearsFixedFlexible repayment plans
Nucleus Commercial Finance£3,000 – £50,0003 months – 5 yearsUnknownFast approval and funding
Paragon Bank£25,000 – £500,0001 – 5 yearsFixed
Qardus£25,000 – £200,0006 months – 5 yearsFixed
Revolut£1,000 – £500,0001 month – 5 yearsCompetitiveNo early repayment fees
Santander£2,000 – £25,0001 – 5 yearsFixed
Shawbrook Bank£250,000 – £25,000,0003 months – 7 yearsFixed
Spotcap£10,000 – £250,0001 month – 2 yearsFlexibleFast funding
Starling BankUp to £250,0001 month – 5 yearsCompetitiveFlexible repayment plans
Tide£1,000 – £150,0001 month – 5 yearsCompetitiveFast decision times
Together Money£26,000 – £2,000,0001 – 30 yearsCompetitiveFlexible repayment options
Best unsecured loan providers UK

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.

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Co-Op Business Banking
✓ Business Current Account
✓ Online, App & High Street Banking
✓ Quick & Easy Application Process
Pricing Trial period Contact

HSBC Business Banking
✓ Business Current Account
✓ In-Branch, Online & App Banking
✓ FSCS Protected
Pricing Trial period Contact

Metro Business Banking
✓ Business Current Account
✓ High Street Presence
✓ FSCS Protected
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Mettle Business Banking
✓ Business Bank Account
✓ Online & App
✓ Quick & Easy Application Process
Pricing Trial period Contact

Monzo Business Banking
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Virgin Money
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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

What is an unsecured business loan?

An unsecured business loan is a type of loan that doesn’t require the borrower to provide collateral to the lender. This means the loan is backed solely by the borrower’s creditworthiness, not by any type of collateral.

Who can apply for an unsecured business loan?

Most business entities, including sole traders, partnerships, limited companies, and more, can apply for unsecured business loans. It’s always best to check with the specific lender for their criteria.

What can an unsecured business loan be used for?

Unsecured business loans can be used for a variety of purposes, such as working capital, expansion capital, refinancing existing debts, purchasing equipment, or covering temporary cash flow shortages.

What factors do lenders consider when approving an unsecured business loan?

Lenders typically look at factors like your credit score, business history, revenue, and the overall financial health of your business.

What are the advantages of unsecured business loans?

The main advantage of unsecured business loans is that they do not require any collateral. This makes them more accessible for many businesses, especially smaller ones that may not have substantial assets.

Are there any disadvantages to unsecured business loans?

Because they are riskier for lenders, unsecured business loans may have higher interest rates than secured loans. They also typically require a good credit score and a solid business performance.

How quickly can I get an unsecured business loan?

Many lenders offer quick approval and funding processes, often within a few days of application. The exact time will depend on the lender and your individual circumstances.

What happens if I default on an unsecured business loan?

If you default on an unsecured business loan, the lender can take legal action to recover the debt. This could harm your business’s credit rating and make it more difficult to obtain financing in the future.

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

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