Business Finance Options in the UK: Which Is Right for Your Business?

The right funding can help you grow, manage cash flow, or invest in new opportunities. There are many business finance options in the UK. It is not always easy to know which one suits your circumstances.

Unsecured loans, secured loans, asset finance, and invoice finance all work differently. Each has its own costs, requirements, and benefits.

This guide explains the main types of UK business finance. It also covers how they work and what to consider before you apply.

What Is Business Finance?

Business finance means the different ways a business can get money for day-to-day costs, investment and growth.

Depending on the type of finance, a business might use funding to:

• Purchase equipment or machinery
• Improve short-term cash flow
• Buy stock or inventory
• Hire additional employees
• Open a new location
• Invest in marketing
• Cover unexpected expenses
• Fund expansion plans

The right option depends on how much you need and how soon you need it. Lenders may also consider your trading history, whether repayments are affordable, and whether you can offer an asset as security.

What Business Finance Options Are Available in the UK?

UK businesses can choose from several types of finance. Here are some common options.

1. Unsecured Business Loans

An unsecured business loan lets a business borrow without offering a specific asset, such as property or equipment, as security.

The lender will usually review your business's finances, trading history, credit record, and ability to repay. You can also review gross and profit margins to see how costs affect your profits.

Because the loan is not secured against a specific asset, lenders may set stricter requirements or charge higher rates than some secured loans. They may also ask for a personal guarantee.

Unsecured finance may suit businesses that want flexible funding but do not want to use a specific asset as security.

How Does an Unsecured Business Loan Work?

With an unsecured loan, you receive an agreed amount and repay it over a set period. You also pay interest and any fees.

Repayment terms vary by lender. Check the total cost of borrowing, not just the advertised interest rate.

How Much Can I Borrow with an Unsecured Business Loan?

The amount available will depend on the lender and your individual business circumstances.

Factors that can influence borrowing capacity include:

• Annual turnover

• Profitability and cash flow

• Existing debts

• Trading history

• Business and personal credit profiles

• The purpose of the funding

• Affordability of repayments

Consider what you can comfortably repay, not just the maximum amount available.

2. Secured Business Loans

A secured business loan is backed by an asset. The lender may accept commercial property, equipment, or another suitable asset.

Offering security may allow a business to borrow more or get different rates than with an unsecured loan.

If the business cannot keep up with repayments, it could lose the assets used as security.

Secured finance may suit established businesses with suitable assets and longer-term funding needs.

3. Asset Finance

Asset finance can help a business get vehicles, machinery, technology or other equipment without paying the full price upfront.

Instead, the cost is spread across an agreed period.

It may suit businesses that rely on equipment, such as those in construction, manufacturing, transport, or professional services.

Asset finance can affect ownership, tax, and accounting. Consider getting professional advice before choosing a product.

4. Invoice Finance

Invoice finance can help businesses that invoice other companies access money tied up in unpaid bills.

The business can access an agreed part of an invoice before the customer pays.

It may suit a growing business with healthy sales that faces cash flow pressure because customers pay late.

5. Business Overdrafts

A business overdraft provides access to additional funds through a business bank account, up to an agreed limit.

It can be useful for managing temporary cash-flow gaps or unexpected short-term costs.

Overdrafts are usually for short-term cash needs, not major long-term investments. For larger costs, another type of finance may be more suitable.

6. Business Credit Cards

Business credit cards offer a flexible way to pay smaller costs and manage short-term cash flow.

They can help with everyday purchases, subscriptions, travel, or unexpected costs. But interest can make an unpaid balance expensive.

Businesses should consider repayment terms, fees and spending limits before relying on credit cards as a regular source of finance.

Unsecured vs Secured Business Finance

When comparing finance, decide whether a secured or unsecured loan suits your business.

An unsecured loan does not require a specific asset as security. It may suit businesses without suitable assets or those that do not want to use them as security.

Secured finance may offer larger loans or different terms because the lender has an asset as security.

Neither option is automatically better. The right choice depends on your financial position, available assets, funding purpose, and appetite for risk.

How to Choose the Best Business Finance for Your Business

No single finance product is right for every UK business.

Before choosing a lender or finance option, consider:

How much do you need?

Work out how much you need for the planned use. Avoid borrowing the maximum just because it is available.

What will the funding be used for?

A loan expansion may need different terms from finance for machinery or a short-term cash gap.

How quickly do you need the money?

Application and funding times vary by lender and product.

How much can you afford to repay?

Make sure repayments fit alongside your other costs and debts.

Do you have assets available?

If you have suitable assets and are comfortable using them as security, compare secured and unsecured finance.

What is the total cost?

Look beyond the headline rate. Interest, arrangement of fees, and other charges affect the total cost.

What Are Business Finance Interest Rates in the UK?

Business finance rates in the UK vary by product, lender and applicant.

Lenders may consider factors including:

• Credit history

• Business turnover

• Profitability

• Time in business

• Loan amount

• Repayment period

• Existing financial commitments

• Whether security is provided

Rates can differ from one business to another.

Compare the total amount you will repay, including fees. Do not judge an offer by its headline rate alone.

Can Startups Get Business Finance with No Trading History?

It can be harder for a startup to get finance without a trading history. Lenders have less financial information to assess.

However, this doesn't necessarily mean funding is unavailable.

Depending on the product, lenders may review your business plan, forecasts, directors' experience and personal credit history. They may also ask for other evidence that the business can afford repayments and is likely to succeed.

Compare options carefully. Each lender may have different requirements.

Can You Get Business Finance with Bad Credit?

Poor credit can limit your options, but it does not always prevent you from getting financed.

Lenders may also consider your turnover, cash flow, trading history, and reason for borrowing.

Borrowing may cost more if the lender sees the business at a higher risk.

Do not take expensive finances just because it is available. Make sure you can afford the repayments.

What Are Low-Doc Business Loans?

Low-doc business loans require less paperwork than some traditional business loans.

Requirements vary by lender. You may still need to provide bank statements, turnover details, identification, or other business records.

“Low doc” does not mean there are no checks or paperwork.

How to Apply for Business Finance in the UK

The application process varies by lender and product. You will usually need to provide:

• The business and its directors

• How long the business has been trading

• Annual or monthly turnover

• The amount of finance required

• The purpose of the funding

• Existing borrowing

• Bank statements or financial accounts

The lender will review your application and decide whether you meet its requirements.

Before accepting an offer, check the repayment schedule, interest, fees, security, and any personal guarantee.

Choosing Between Business Finance Lenders

UK businesses can borrow from high street banks, specialist lenders and alternative lenders.

Do not choose a lender based only on how quickly it can provide funds. Compare the full offer.

Consider the:

• Total amount repayable

• Interest rate and fees

• Repayment frequency

• Loan term

• Eligibility requirements

• Security requirements

• Personal guarantee requirements

• Early repayment conditions

Compare several suitable options before you commit. This helps you understand what is available.

SimplyFunded may suit established businesses seeking an unsecured business loan. Applicants need at least six months of trading history and monthly business income of £5,000 or more.

Frequently Asked Questions

How do I get an unsecured business loan?

To apply, provide details about your business, funding needs, and finances. The lender will review your turnover, trading history, credit record, and ability to repay before deciding.

Are unsecured business loans available in the UK?

Yes. Banks and alternative lenders offer unsecured business loans in the UK. Requirements, loan limits, rates, and repayment terms vary by lender.

How can I use an unsecured business loan?

You may be able to use an unsecured loan to buy stock, market your business, hire staff, improve premises, manage cash flow, or expand. Check out the lender terms.

How much can I borrow with an unsecured business loan?

There is no set limit for every business. The amount offered depends on the lender and your turnover, ability to repay, trading history, and credit record.

What is the best unsecured business loan in the UK?

The best unsecured loan depends on your business. Compare the requirements, total cost, repayment terms, fees, and any personal guarantee. Do not choose based on one feature alone.

Related guides

• Explore unsecured finance and SME lending options.
• Compare business loans, alternative finance and working capital loans.
• Read our guides to business loan affordability and business loans with bad credit.