Debt finance (loans)
How can my business secure a business loan and what if I fail to meet business growth targets and can no longer afford to pay the interest owed?
Loan and debt finance is offered by many lenders, including banks, community finance institutions and a raft of alternative providers, to startups and small businesses. Terms will vary depending on business trading record, intended use, term, security and company balance sheet. Loans are typically used for startup capital or for purchasing equipment, where loans are linked to the useful life of equipment or assets.
Loans have an interest element, which is typically paid monthly, and capital repayment, which can be repaid over the duration of the loan or at its term. Loans can either be secured against company or personal assets, or unsecured for typically smaller amounts. The interest rate charged will vary depending if it’s a fixed rate for the length of the loan or variable rate linked to the bank of England base rate.
Loans are typically inflexible and if you fail to make repayments (the interest rate may have risen if your loan has variable rates, or your income or costs are not in line with forecasts) you could lose your loan security, including personal property or company assets. With debt finance, entrepreneurs retain ownership of your company and profits, although profits are reduced by interest payments. Control is also retained, subject to keeping up interest payments.
Startup loans
Apply for a government-backed startup loan
from the British Business Bank
WHAT? Government backed loans for small businesses less that are less than two years-old. £500-£25,000 loans are available at a fixed interest rate of 6% pa (currently)
WHEN? You have been unable to access mainstream finance
WHY? You need to find a specialist loan provider that can fund your business
OTHER RESOURCES?
>> Alternative loan option from BizBritain
>> Watch a testimonial video on how loans from BizBritain have helped businesses to start up
Loan providers
Search through potential lenders on the GOV.UK website
from GOV.UK
WHAT? A search facility approved by the UK government
WHEN? You want an overview of potential lenders, including high street names
WHY? Enables selection of a targeted shortlist of mainstream and alternative lenders
OTHER RESOURCES?
>> Ethical small business loans from Business Enterprise Fund
>> Review of alternative finance and loan providers from Unbiased
>> Sharia compliant finance from Start Up Loans
Alternative business debt
Find alternative finance agents
from Alternative Business Funding
WHAT? Online search and quote engine for alternative business debt funding
WHEN? Your mainstream bank won’t fund your loan or finance request and you need to refer to one of three approved alternative finance agents
WHY? Finance agents search all mainstream and alternative lenders to find lenders that match your business’s finance needs
OTHER RESOURCES?
>> Two other alternative finance providers:
Startup loans
Explore taking out a Virgin Start Up loan
from Virgin Start Up
WHAT? Start-up loans with inclusive support package and networking (less than 2-year-old businesses only). Borrow between £500 and £25,000
WHEN? You’re looking for finance with support, advice and a network
WHY? Virgin Start Up is an approved provider of government-backed Start Up Loans UK
OTHER RESOURCES?
>> A video case study of a startup loan followed by a crowdfund from British Business Bank
>> Case study of a Virgin Start Up loan from Virgin Start Up
Loans for young entrepreneurs
See if you're eligible for young entrepreneurs support
from The Prince's Trust
WHAT? Lower-interest loans with business support and mentoring for those aged 18-30
WHEN? You’re 18-30 and have tried traditional finance and are now exploring other routes
WHY? All other funding routes have led to funding rejection
