Scotland business loans: finance options for Scottish businesses

Scotland's entrepreneurial landscape is dynamic and growing, as highlighted in the latest Global Entrepreneurship Monitor (GEM) report for 2023-24. Scotland's Total Early-stage Entrepreneurial Activity (TEA) rate rose from 8.8% in 2022 to 9.1% in 2023. Minority ethnic and female entrepreneurship rates have also shown significant progress. However, when it comes to encouraging growth and development, access to finance and small business loans remains essential.

Recent research from the British Business Bank found that 62% of Scottish SMEs reported using finance more so than those in Wales and Northern Ireland. However, 38% of business owners in Scotland report facing barriers to finance (against 21% and 20% in Northern Ireland and Wales).

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Scottish business loans

1. Iwoca small business loans

iwoca provides a range of business loans tailored to the needs of SMEs across Scotland. Our Flexi-Loan is designed to offer rapid access to funds without lengthy application processes or the need for collateral. Key features include:

• Loan amounts: Businesses can borrow between £1,000 and £1,000,000, making these loans suitable for everything from short-term cash flow needs to larger investments in growth.
• Flexible repayment terms: Repayment periods range from 1 day to 24 months, with no fees for early repayment.
• Fast funding: With decisions often made within hours, funds can be deposited into your account as quickly as the same day, providing the speed you need to keep up with your business.
• Transparent pricing: iwoca offers clear, upfront pricing with no hidden fees, so businesses know their costs from the outset.
• Interest on outstanding balance: Interest is only charged on the outstanding loan balance, not the entire loan amount, which helps to reduce overall borrowing costs​.

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2.  Scottish Loan Scheme

The Scottish Loan Scheme offers loans ranging from £250,000 to £2 million, targeting growth-focused companies with viable business plans. 

• This funding can be used for working capital, capital expenditure, international expansion, and marketing investments. 
• To qualify, businesses must be based in Scotland, demonstrate a clear ability to repay the loan, and promote fair work practices. 
• Notably, no personal guarantees are required, and the loans typically offer repayment terms of 1 to 7 years​.

3. Social Investment Scotland 

For social enterprises and community-focused businesses, Social Investment Scotland provides loans between £10,000 and £1.6 million. This funding is designed to create positive social impact and is particularly suited to businesses prioritising community development and sustainability​.

Specialist loans and grants

1. Small Business Grants

For new businesses, start-up grants can provide a valuable source of funding. In addition to financial support, some grants offer additional resources specifically designed to help new enterprises succeed.

• Start It: This grant provides up to £5,000 for individuals looking to start a social enterprise. Funds can be used for costs such as legal fees, rent, marketing, equipment, or insurance. Eligibility requires that the business is independent, has a positive social impact, and is in the early stages of development.
• Techscaler Minimum Viable Product (MVP) Small R&D Grant: This grant, ranging from £5,000 to £50,000, is available for tech start-ups that have participated in the Techscaler Executive Education Programme. some text
  • It supports research and development activities aimed at creating new products or services. 
  • Eligibility criteria include having fewer than 250 employees, demonstrating strong customer research and insights, and showing evidence of early commercial interest.

2. Local Business Start-Up Grants

Various local authorities across Scotland offer start-up grants, including:

• Renfrewshire New Business Start-Up Grant: £300 to £1,000
• Orkney Islands Council New Business Start-Up Grant: £500 to £1,500
• West Dunbartonshire Council Business Start-Up Grant: up to £500
• North Lanarkshire Business Start-Up Fund: £1,000 to £2,500
• Shetland Start-Up Grants: up to £4,000
• Midlothian Business Start-Up Grant: up to £2,000

For a full list of available start-up grants, including those not listed above, visit Scotland’s Find Business Support website where you can find over 180 different funding options.

Key considerations when choosing a business loan

1. Eligibility criteria: Most government and private loans require a viable business plan, evidence of profitability or projected profitability, and a clear economic impact. Specific eligibility requirements can vary, so it’s crucial to review them in detail before applying.
2. Interest rates and repayment terms: Understanding the interest rates, whether fixed or variable, and the repayment terms is essential. Government-backed loans often offer more favourable rates, but businesses should carefully compare all options to identify the best deal.
3. Application process: The application process typically involves submitting a detailed business plan, financial projections, and proof of the business’s trading history. Many lenders also require an assessment of the business’s impact, particularly for government schemes designed to foster economic growth and job creation.

Choosing the Right Small Business Loan in Scotland

Whether you’re exploring grants for start-ups, securing a loan for expansion, or needing quick access to funds for cash flow management, finding the right fit is essential. 

iwoca has supported over 90,000 SMEs across the UK to achieve their growth plans. To see how we can help your business in Scotland, try out our small business loan calculator to see how much you could borrow.