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8 of the most popular business loans for 2019 compared

9-minute read

8 of the most popular business loans for 2019 compared
Sam Bromley, Jessie Day

Sam Bromley, Jessie Day

26 April 2019

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If your business needs a cash boost, you may be considering a small business loan. We've taken a deeper look so you can find out how small business loans work and compare some of the options.

From government business loans to entrepreneur loans and backing, you can get help funding your business.

But remember, a business loan may not always be the best option. You should conduct your own thorough research – and weigh up alternative options – before taking one out.

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We’ve only compared a few of the business loans available. Other providers are available and you should do your own research before making a decision.

What is a business loan?

A business loan is a loan for business purposes. The type of business loan you apply for is likely to depend on your business circumstances and why you need the money.

You can apply for a startup loan to help get your business off the ground, a short-term loan to help ease cash flow issues, or a long-term loan to fund the expansion of your business, for example.

When to get a business loan

Whether you can get approved for a business loan depends on the criteria of the lender. There’s some funding available for businesses that are just starting out (see the sections on Start Up Loans and Virgin's early-stage business loan below). But for other loans, you’ll need to have been running your business for a certain amount of time. Contact the lender if you’re not sure.

Understanding business loans

There are several decisions you need to make when you’re looking for a business loan, and several things that you need to understand when you’re comparing loans. These are some of the key points.

Fixed rate vs. variable business loan

If you have a loan with a variable interest rate, the rate can go up and down, whereas a loan with a fixed rate means your repayments tend to be predictable. Most small business loans are fixed rate loans.

Unsecured vs. secured business loan

A secured loan is backed by an asset (property, machinery or a vehicle, for example), which means the lender can claim ownership of the asset if the loan isn’t repaid. Unsecured business loans (UK, in this case) aren’t backed by an asset, but the lender may ask for a ‘director’s guarantee’ instead, which means they may pursue the director for repayment if the loan isn’t paid off.

Whether you’re offered a secured or unsecured loan may depend on how much money you want to borrow. Large loan amounts will usually need to be secured, whereas lower amounts are often unsecured. Unsecured loans may have higher interest rates, as they’re riskier for the lender.

Long term vs. short term business loan

You’ll also need to make a decision about your loan term, which is the length of time that you have the loan for. This is likely to depend on what you need the loan for, and how quickly you think you’ll be able to repay it. Different lenders have different minimum and maximum loan terms, and the term you’re offered may depend on your circumstances.

Business loans compared

Compare business loans and you’ll soon work out the categories and types of funding available, from government-backed Start Up Loans, to loans from peer-to-peer platforms, to options from high street and big-brand banks.

We’ve compared a few of the business loans available in 2019, looking at factors like loan amounts, eligibility criteria, minimum interest rates and application process. It’s important to understand this is only a guide: the loan you’re actually offered will depend on your circumstances and the details of your business.

It can be tricky to get approval for a business loan, and the lender will ask for lots of paperwork as part of the application process, including business plans and accounts.

Bear in mind that, as well as the eligibility criteria mentioned for specific loans below, most business loans require that you’re at least 18 years old, a UK resident, and that you’re not bankrupt or in a debt management scheme.

Whether a business loan is right for you depends on your circumstances. Remember that interest rates can be high and there are penalties for missed payments, so make sure you can afford the loan before you take it out.

What are the best business loans (UK-wise)?

And the best business loan rates? Our quick list is in no particular order, but gives you a starting point for what’s available in 2019.

New in for 2019: Virgin StartUp Loan (new business loans only)

Virgin’s StartUp Loan is aimed at new or early-stage businesses and entrepreneurs, looking to scale or get started. The average loan size is £10,000, although you can apply for as little as £500. Successful applicants also get full access to exclusive business support, as part of The Funded Club.

Loan amount: £500 - £25,000

Interest rate: There’s currently a fixed annual interest rate of 6 per cent.

Loan term: One to five years.

Fees: No arrangement fee or early repayment charges.

Eligibility: Your business must be under two years old, and you’ll need to have an EU passport or valid UK visa.

How to apply: As you’d expect, the online application form is aimed at passionate new business owners. The Virgin website asks for details like your website and Twitter handle, as well as what you’ve done to validate demand for your product or service.

Government-backed Start Up Loan

The Start Up Loans Company provides government-backed unsecured loans to people who are starting or growing a business. Technically, these are personal loans, granted for business purposes. Successful applicants also receive 12 months of business mentoring.

Loan amount: £500 - £25,000

Interest rate: Fixed rate of 6 per cent a year.

Loan term: One to five years.

Fees: No application fee and no early repayment fee.

Eligibility: You need to be planning to start a UK-based business, or have a UK-based business that’s been trading for less than two years.

How to apply: Complete the Start Up Loans registration form online. Later on in the application process, you’ll need to provide documents like a business plan and a cashflow forecast, but you’ll be given help to get these together.

NatWest Small Business Loan

NatWest emphasises the flexibility of its loans, ranging from small, short-term cash injections to bigger, long-term loans. If you have a NatWest Business account, you may be eligible for personalised rates. Security and/or a director’s guarantee may be required.

Loan amount: £1,000 - £50,000

Interest rate: Fixed. The rate depends on your circumstances and loan amount, but using a slider on the website, you can see an example of how much you may need to repay.

Loan term: One to 10 years.

Fees: No arrangement fee or early repayment charges.

Eligibility: NatWest says its loans are for small businesses. You can apply if your turnover is over £2 million, or you’re a commercial customer, but this will be by phone.

How to apply: See the eligibility note above, but most small businesses can make a business loan application on the NatWest website.

HSBC Small Business Loan

HSBC has made efforts in recent times to show that it’s keen to lend to small businesses, launching a £12 billion fund for small businesses in 2018. £1 billion of this is ring-fenced to support international businesses within the UK.

Loan amount: £1,000 - £25,000

Interest rate: Fixed. The interest rate is agreed at the outset. The website gives a representative APR of 7.4 per cent.

Loan term: 12 months to 10 years.

Fees: Fees apply, including an arrangement fee of £100, and HSBC state the right to charge for early repayment.

Eligibility: There’s an eligibility checker on the HSBC website.

How to apply: If you’re an HSBC business banking customer you can apply online via your internet banking portal. Otherwise, you can apply over the phone or in-branch.

Santander Small Business Loan

Santander offers flexible loans starting at competitive rates and there’s no arrangement fee, but you need to have a Santander Business Current Account to apply.

Loan amount: £2,000 - £25,000

Interest rate: Fixed. Rates currently start at 4.9 per cent APR.

Loan term: One to five years.

Fees: There’s no arrangement fee. Other fees may apply, including early repayment charges.

Eligibility: You must be a Santander Business Current Account holder to apply for a Santander Small Business Loan.

How to apply: Currently, Santander are asking customers to call or apply in-branch, due to ‘short-term Brexit-related issues’. Find out more on the Santander website.

Yorkshire Bank Online Business Loan

Yorkshire Bank has a four-step application process for its Online Business Loan. It’s designed for limited companies, and they say it can be completed in just 10 minutes, with a final decision within 48 hours.

Loan amount: £10,000 - £150,000

Interest rate: Fixed. The website shows 6.96 per cent APR representative on loans of up to £25,000.

Loan term: 12 to 60 months.

Fees: Yorkshire Bank will deduct a fee from the loan amount, but won’t charge for lump sum repayments or early repayments in full.

Eligibility: Your business needs to be a private limited company registered in the UK (excluding Northern Ireland, the Channel Islands and the Isle of Man). You need to have been trading for at least 12 months, and your annual turnover can’t be more than £2 million.

How to apply: You can apply on the Yorkshire Bank website. You’ll need to have some information to hand, including company information, director details, financial information, and access to your mobile phone and email inbox.

New in for 2019: Lloyds Bank Business Loan

Lloyds Bank present businesses with three core options - Base Rate Business Loan, Fixed Rate Business Loan and Commercial Fixed Rate Business Loan - and claim to approve nine out of 10 applications. Existing Lloyds Bank customers can get an instant online decision for loans up to £10,000, but you can also apply for up to £500,000 (the process is just a little longer).

Loan amount: £1,000 - £500,000

Interest rate: This will depend on the loan option you go for - base rate-variable or fixed rate. The website currently shows 9.3 per cent APR representative on loans of £8,000.

Loan term: One to 25 years on the base rate loan.

Fees: Depending on your loan type, there are no arrangement or early repayment fees on loans up to £25,000.

Eligibility: You can check the criteria for all three loan types on Lloyds Bank’s business loans hub page.

How to apply: On the Lloyds Bank website, or through online banking if you’re an existing customer.

New in for 2019: Boost Capital Small Business Loan

Boost Capital aims to offer a more flexible alternative to traditional bank loans – its small business loans are there when you need a bit of extra cash for things like stock, refurbishment, marketing, staff, expansion, equipment, or just to keep the cash flowing.

Loan amount: £3,000 - £125,000

Interest rate: The interest rate is fixed, but varies depending on the amount you borrow, the loan term and the overall health of your business. Boost Capital says its interest rates can range between 1.5 to 4 per cent monthly APR.

Loan term: Four to 18 months

Fees: There’s an arrangement fee of 2 per cent. Boost Capital offers a 6 per cent discount for early repayment once you’ve paid a certain amount back.

Eligibility: Businesses trading for three years or more with an annual turnover of £70,000 or more are eligible. If you’ve been trading for fewer than three years but more than nine months, you may be eligible for a merchant cash advance (a short-term cash advance that you pay back as a percentage of your daily card sales).

How to apply: You can make a business loan application on the Boost Capital website.

Funding Circle business loans

Funding Circle is a peer-to-peer platform, so you borrow money from people and organisations. Funding Circle focus on an efficient, easy-to-apply process, claiming you can ‘get a decision in as little as five hours’. Secured and unsecured loans are available.

Last year we reported that the government had invested £100 million through Funding Circle for small businesses.

Loan amount: £10,000 - £500,000 unsecured (secured up to £1 million)

Interest rate: The rate you’ll be offered depends on lots of factors, but Funding Circle says that business loan rates start at 1.9 per cent a year.

Loan term: Six months to five years.

Fees: There’s a completion fee when you accept the loan, which is between 0.9 and 6 per cent of the loan value. There’s no early repayment fee, but there is a 1 per cent annual servicing fee. Check Funding Circle’s FAQs for full up-to-date details on fees.

Eligibility: You need to have at least two years of Companies House reports if you’re a limited company, or formally prepared accounts if you’re a sole trader. Check your eligibility by using the checker tool on the Funding Circle website.

How to apply: You can apply on the Funding Circle website and get a decision typically within 24 hours.

What’s your experience of small business borrowing? Tell us in the comments.

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