Take your business further with a small business loan

Term loans are your basic form of lending – these are traditional loans with a fixed repayment schedule and a predetermined end date. They’re best suited for long term projects where you’re confident in your ability to meet the payments every month.

As you would expect, short term loans are designed for immediate needs. ‘Short term’ in this scenario means they have a term of a year or less and are quick to fund. One important thing to consider is that interest rates for short term business loans will usually be higher, as you’re likely to pay more for the speed and flexibility of the product.

Lines of credit are built around flexibility – they allow businesses to draw funds as needed up to a set limit. Once you reach that limit, the arrangement ends. These can be useful when you’re not sure how much you need and want to stay in control of how much you borrow and when.

As the name suggests, equipment financing is meant for purchasing business equipment. That’s because these loans use the equipment itself as collateral. This can be ideal when you need to use equipment to generate revenue, which helps repay the loan.

Invoice financing allows businesses to borrow against the amounts due from customers, providing immediate cash flow. This can be useful if you have a large number of unpaid invoices, providing short term relief and flexibility.

Similar to invoice financing, but more theoretical, merchant cash advances are based on future sales. Here, the lender provides funds in exchange for a portion of daily credit card sales, repaid on a flexible term until the sum and interest are repaid.

Typically aimed at startups and smaller businesses, microloans offer smaller amounts of funding. At early stages, these can be a route to financing key activities to keep your business moving without the risk of taking on large amounts of debt.

The cost of a small business loan in the UK can vary significantly based on the type of loan, the loan amount, the term length, and the interest rate. For instance, our Flexi-Loan goes from 2% per month.

Unfortunately, your credit score alone is usually insufficient to determine your eligibility for a business loan. Most lenders consider many factors, including creditworthiness and interest rates.

The main thing to know is if your business is healthy. This includes checking if it has defaulted on debt, has any outstanding County Court Judgments (CCJ), and has a solid customer base with steady revenue. For those looking to learn more on the topic, we’ve put together a business health check tool.

Securing a small business loan with bad credit can be challenging but not impossible. Here's how you can improve your chances:

• Understand your credit score: before applying for a loan, understand your credit score and what factors led to it. This insight can help you plan on how to improve it
• Improve your business’s financials: showing that your business is profitable or improvement in its financial health can make you a more attractive loan candidate
• Consider alternative lenders: if traditional banks have turned you down, consider alternative lenders. they often have more flexible requirements and are more willing to work with businesses that have poor credit
• Provide collateral: if you have assets that can be used as collateral, this can increase your chances of securing a loan
• Seek a co-signer: if you can find someone with a strong credit score to co-sign the loan, lenders may be more willing to approve your application. However, this can be risky as the co-signer is equally responsible for repaying the loan.

Remember, obtaining a loan with bad credit can come with higher interest rates. It's essential to weigh your options carefully to avoid further financial strain.

Business loan insurance is not a legal requirement, but some owners consider taking it out to help give them peace of mind. If the business owner dies or becomes seriously ill, any outstanding loans can have a significant impact on the business and its employees.

Some insurance providers offer a lump sum payment when a director dies or falls critically ill. The insurance lump sum will usually be the same amount of money as what’s outstanding on the loan. In return for this, you’ll be expected to pay regular premium payments to the insurance provider.

Whether you do or do not take out small business loan insurance is entirely down to you, although as there’s a regular cost, most owners will discuss the decision with the other business directors before taking out such insurance.

Minimum repayments must be made either weekly or monthly, depending on the repayment schedule you agree to when requesting funds. With a monthly repayment schedule you will repay the first month 30 days after drawing down.

Securing a small business loan from the government can be a beneficial way to boost your business's financial health. To get such a loan, you'll need to follow several steps:

• Find the appropriate government loan: the UK government has different loan programs for businesses. For new businesses, there is the Start Up Loans scheme. For more established businesses, there is the Enterprise Finance Guarantee. Understand the eligibility criteria and terms for each before choosing.
• Government-backed lenders usually need a detailed business plan that explains your business model, financial projections, and how you'll use the loan money.
• Fill out the application: once you've identified the right loan and prepared your business plan, you'll need to fill out the application form. This typically includes details about your business, financial information, and your personal information.
• Wait for approval: after submitting your application, the lender will review it. This process can take several weeks, and if approved, you'll receive the loan agreement to sign. After the loan agreement is signed and returned, the funds are typically deposited into your bank account.

Government-backed loans have lower interest rates and flexible terms, but they must be repaid. Defaulting can have serious consequences. It's crucial to understand the terms and conditions fully before committing to such a loan.

The process will very much vary from one lender to another. If you’re interested in taking a loan with us, have a read through how to get a business loan with iwoca. We tried to make the process as transparent and hassle-free as possible.

That’s a good question and the answer is simple: look for an unsecured business loan.

We're happy to consider a wide range of businesses ranging from new startups to established companies. However you must have a UK-based business and operate as a limited company or a partnership. Startup businesses are limited to a maximum credit limit of £10,000.

Our maximum term is for up to 24 months but you can always repay early if you don't need the funding for that long. We only charge interest for each day you have the funding so making early repayments is a great way to reduce the total amount of interest you will pay.

No. It’s free to get a quote - you only choose whether to go ahead once you have received an offer. Even then if you want to repay early, you can with no extra fee, you'll only pay interest for the time you have the funds.

Of course. We will renew your offer once your loan has ended, assuming your circumstances have not changed. If your business has grown we may even be able to increase your credit limit or reduce your interest rate. Then it’s just a matter of logging in to your account to withdraw the funds.