Why choose a business loan?

Business loans supply a predictable lump sum that you repay over an agreed term with interest. They are one of the most common forms of finance for established businesses because they allow you to:

• Invest in new equipment or premises
• Recruit staff or expand operations
• Bridge short-term cash flow gaps
• Refinance expensive existing debt
• Fund a one-off project or seasonal inventory

Loans starting from £10,000 are well suited to small and medium-sized enterprises (SMEs) across the UK — from new cafés buying ovens to manufacturers replacing machinery.

Types of business loans

Business loans generally fall into two broad categories: unsecured and secured. Each has distinct advantages and trade-offs.

Unsecured business loans

Unsecured loans do not require the borrower to provide an asset as collateral. That makes them attractive to companies that don’t own high-value property or equipment to pledge. Key features:

• No collateral required: Your personal or business assets won’t be secured against the loan (in normal circumstances).
• Faster application: Lenders can assess unsecured applications quickly because there’s no valuation or legal charge process.
• Higher interest rates: Because the lender takes more risk, rates tend to be higher than for secured lending.
• Smaller loan sizes: Many unsecured products are capped — though £10,000 upwards is commonly available for qualifying businesses.

Secured business loans

Secured loans are backed by collateral (property, equipment, or other assets). Because the lender can recover losses against the asset, secured loans typically offer:

• Lower interest rates than unsecured loans
• Higher borrowing limits — suitable for larger projects
• Longer terms in many cases
• However, you must be comfortable that default could lead to the lender taking the asset used as security.

Other loan structures and features

Beyond the basic secured/unsecured split, lenders offer a range of structures:

• Term loans: A lump sum repaid over a fixed term with regular monthly or quarterly repayments.
• Revolving credit facilities: A flexible line you draw on and repay; interest is charged only on the amount used.
• Invoice financing: Borrow against unpaid invoices to improve working capital.
• Asset finance: Loans or leases for specific equipment or vehicles.
• Bridging loans: Short-term finance to cover a temporary gap — generally higher cost but fast.
• Merchant cash advances: Repayments taken as a percentage of daily card takings — convenient for retail but often expensive.

How business loan interest works

Lenders set rates in a variety of ways. Understand these common terms when comparing offers:

• Fixed rate: Interest rate stays the same for the term. Easier to budget for.
• Variable rate: Moves with a reference rate (e.g. Bank of England base rate plus a margin).
• Representative APR: A standardised figure that includes interest and some fees — useful for comparison but check the breakdown.
• Arrangement or facility fees: One-off fees charged to set up the loan.
• Early repayment penalties: Some lenders charge if you repay the loan before the agreed term ends.

Always request a total cost of credit example that shows monthly repayments, total interest and all fees for the full term.

What lenders look for

Although individual criteria vary, most lenders assess a few core areas:

1. Credit history: Business and sometimes director personal credit checks.
2. Trading track record: How long you’ve been trading and whether revenue is stable or growing.
3. Profitability and cash flow: Lenders want to see enough free cash flow to service repayments.
4. Security available: For secured loans, the value and quality of collateral matter.
5. Purpose of funds: Clear, credible use of the loan improves the chance of approval.

Smaller unsecured loans from around £10,000 can be available to younger businesses with weaker trading histories, but expect higher rates and stricter conditions.

Eligibility checklist — documents you’ll typically need

Preparing your paperwork speeds up the application and improves your chances. Common requirements:

• Company registration details (CRN) and confirmation of trading address
• Management accounts for the last 6–12 months
• Bank statements (business and sometimes personal) for the last 3–6 months
• Tax returns and corporation tax filings
• Cash flow forecast or business plan for larger loans
• Details of assets you’ll use as security (if any)
• Proof of ID for company directors (passport/driving licence) and proof of address

If you’re a sole trader or newly formed company, expect additional checks and possibly personal guarantees.

How to choose the right loan for your business

When evaluating options, consider the following guidelines:

Match term to purpose

Use short-term finance for temporary cash-flow needs and longer-term loans for capital investments. Repaying a long-term asset with a short loan can strain monthly budgets; conversely, long terms for short-term needs increase total interest paid.

Compare the total cost, not just the headline rate

Ask for an example showing interest, arrangement fees, and any ongoing charges. Two lenders with similar rates can have very different total costs once fees are included.

Check flexibility

Can you make extra repayments without penalty? Is there an option to redraw? Flexible features can save money if your cash flow improves.

Consider speed

Some lenders (especially alternative and online lenders) can provide funds in days; high-street banks may take longer. If time is critical, prioritise lenders with quick turnaround times — but not at the expense of poor terms.

Common use cases and examples

Here are typical reasons UK businesses borrow from £10,000 upwards, with realistic scenarios:

Buying equipment

A joinery business purchases a CNC router for £25,000 using asset finance. The machinery itself is the security, so the interest rate is lower than a comparable unsecured loan.

Refurbishment and premises

A café invests £15,000 in a fit-out. They take a 5-year term loan to spread the cost and match the expense to the expected uplift in turnover.

Working capital

A wholesaler needs £12,000 to buy seasonal stock ahead of peak sales. A short-term business loan or invoice finance helps them buy stock and repay once the seasonal sales are collected.

Growth and hiring

A tech services firm borrows £50,000 to hire additional developers and fund marketing campaigns — a longer-term loan tied to revenue projections.

Pros and cons — an honest view

Alternatives to traditional business loans

Depending on your needs, other finance routes might be better:

• Overdraft: Good for short-term flexibility but can be expensive long term.
• Invoice financing: Borrow against invoices; useful if your customers pay slowly.
• Leasing: Use equipment without the upfront cost — effectively paying for use rather than ownership.
• Equity investment: Selling a stake in the business avoids repayments, but dilutes control.
• Government schemes: From time to time, the UK government and local authorities offer grants or loan schemes for certain industries or regions — check availability.

How Gable helps UK businesses borrow wisely

At Gable we specialise in matching UK businesses with the right lenders and loan products. Our service is designed to:

• Save you time by comparing multiple lenders
• Clarify total costs and commercial terms
• Help prepare the strongest application with the right documentation
• Explain whether a secured or unsecured option is most suitable

We work with a panel of high-street and specialist lenders to find competitive rates and terms that reflect your business profile.

Application process — step by step

1. Assess need: Decide how much you need and why. Prepare a simple one-page summary of purpose and expected benefit.
2. Gather documents: Business accounts, bank statements, ID and forecast (if required).
3. Compare offers: Look beyond headline rates to overall cost, fees and contract terms.
4. Submit application: Many lenders allow online submission with electronic documents.
5. Due diligence: The lender reviews finances, credit and, if secured, carries out a valuation.
6. Offer & acceptance: You receive a formal offer. Check terms and sign to accept.
7. Drawdown: Funds are transferred. For secured deals, legal charges may need to be registered first.

Typical timescales vary: alternative lenders can fund in a few days; high-street banks may take several weeks for larger or secured loans.

Top tips for getting approved

• Keep personal and business finances tidy: Lenders scrutinise bank statements and credit files.
• Prepare a realistic cash flow forecast: Show how you’ll service repayments.
• Be transparent: Explain dips in turnover and how you plan to address them.
• Shop around: Use a broker like Gable to compare multiple lenders quickly.
• Consider security carefully: Don’t offer property as security without exploring unsecured options — but also don’t rule out secured deals that could be far cheaper long-term.

Common fees and charges to watch

When comparing loans, look out for:

• Arrangement fees: Upfront cost for setting up the loan.
• Monthly/annual facility fees: Charged to keep the facility open, even if unused.
• Early repayment charges: Fees for settling the loan early.
• Valuation and legal fees: For secured loans where property or assets need to be valued and legal work completed.
• Default and late payment fees: Penalties for missed payments.

Ask for a full breakdown and get the lender to confirm any potential additional costs in writing.

Case study — a quick real-world example

Business: Independent bakery in Manchester

Need: £20,000 to refurbish premises and buy new ovens

Approach: Brokered a 5-year secured term loan tied to the ovens and a small personal guarantee from the owner.

Outcome: Lower interest than unsecured options, monthly repayments matched the forecast uplift in turnover thanks to improved capacity. The bakery repaid ahead of schedule when sales exceeded targets.

Responsible borrowing

Borrowing is a tool — not an end. Always weigh the benefits against the costs and risk. If you’re unsure whether a loan is appropriate for your situation, seek independent financial advice or speak to an accountant. Gable can provide impartial comparisons and point to specialist advisers if your needs are complex.

Frequently Asked Questions (FAQ)

Q: What minimum loan amount can I apply for?

A: Many lenders will consider business loans from £10,000 upwards. This threshold suits a wide range of SME needs — from equipment purchases to working capital. Some lenders offer smaller facilities (overdrafts or microloans) under £10,000, while certain secured commercial mortgages start at much higher sums.

Q: How long does it take to get a business loan?

A: Timing varies. Online and alternative lenders can approve and disburse funds in as little as 24–72 hours for straightforward unsecured loans. Bank and secured loans typically take longer — often 2–6 weeks — to allow for valuation, legal work and underwriting.

Q: Will I need to provide a personal guarantee?

A: Some lenders require personal guarantees, especially for smaller businesses or where directors’ credit histories are relevant. Personal guarantees increase the lender’s security and can improve chances of approval or produce better rates, but they also increase personal risk.

Q: Can start-ups get loans from £10,000?

A: Start-ups can access loans, but lenders will assess founder experience, business plan, and cash flow forecasts closely. Unsecured loans may be limited or carry higher rates for very new businesses. Alternative finance and start-up-focused lenders are common routes for early-stage companies.

Q: What happens if I miss a repayment?

A: Missing repayments can trigger default fees, late interest and potential enforcement actions. For secured loans, the lender may take possession of pledged assets after established procedures are followed. Contact the lender early if you expect payment issues — many will agree a temporary arrangement if you communicate promptly.

Q: Are there government-backed loans available?

A: From time to time, government-backed schemes (e.g. recovery or regional schemes) are available. Availability changes, so check current government and local authority offers or ask Gable to help identify any suitable schemes for your sector or region.

Q: How much will my repayments be?

A: Monthly repayments depend on loan amount, interest rate, fees and term. Always request an amortisation schedule (or repayment example) that shows monthly amounts and total cost for the full term. Use that figure to stress-test your cash flow if revenues dip.

Q: Can I repay early?

A: Many loans allow early repayment, but check for early repayment charges. Some lenders permit penalty-free overpayments up to a certain percentage annually. If early repayment is important to you, negotiate this flexibility before accepting the offer.

Contact Gable today to get tailored options and take the next step with confidence.

Contact Gable or call our team on 020 8371 5973 for a free consultation.