Find out what business loan rates are available to you

Business loans are a type of finance designed to help companies raise capital to fund various business needs, from day-to-day running costs to major investments and purchases. Whether you’re looking for stability or growth, getting a business loan could be a smart strategic decision for your company. They can be short, medium, or long term, often ranging from 3 months up to 25 years or more.

Business loans come in all sizes, from as little as £1000 to many millions. How much you’ll be able to borrow will depend on the lender, type of loan, your company’s credit score, and potentially your annual turnover. For unsecured business loans, lenders often cap the maximum borrowing amount at between 25% to 40% of your annual turnover. For secured business loans, you may be able to borrow more as the collateral will reduce the lender’s risk.    

Business loans are primarily used either to make strategic investments for growth or to manage cash flow challenges for stability. Let’s have a look at some of the most common uses of business loans below.

• Boosting Working Capital and Cash Flow – Use funds to cover day-to-day running costs, manage short-term funding gaps, and ensure your business can meet its immediate financial obligations, like paying salaries, rent, or bills. Often used when you’re waiting for customer payments.
  
  

• Purchasing Assets and Equipment – Receive a cash injection to invest in new plant, machinery, vehicles, or technology to enhance productivity and increase revenue. Often used to replace old equipment, purchase a new asset or website, or support operations and growth.
  
  

• Business Growth and Expansion – Funds can be used to finance expansion within the UK or overseas, pursue new business opportunities and ventures (including start-ups), or invest in new product lines and research and development (R&D).
  
  

• Buying Stock or Inventory – Retail and manufacturing businesses frequently use loans to purchase sufficient inventory to meet expected customer demand, particularly ahead of peak trading seasons or to take advantage of bulk-purchase discounts.
  
  

• Debt Consolidation – Business loans can be used to pay off multiple smaller, and often higher-interest debts (like credit cards or short-term loans). This simplifies repayments and can lower the overall cost of borrowing.
  
  

• Managing Tax Liabilities – Business loans can be useful for ensuring funds are available for large, periodic tax payments like VAT or Corporation Tax.

Business loan interest rates are calculated as an Annual Percentage Rate (APR), and typically range from 8% to 15%. However, this could be lower or higher depending on your situation. Lenders will look at factors like your business’s credit rating, trading history, and cash flow when determining your interest rate. Secured business loans often come with lower rates than unsecured business loans due to the reduced risk to the lender. Fixed-rate business loans are most common, but some lenders also offer variable-rate deals. Our expert business loan brokers can search a wide range of deals from across the market to find a rate that works for you.

Typically, your monthly repayments will be fixed and will consist of both interest and principal. As you gradually pay off the loan, more of your monthly payment will go towards paying down the principal and less towards interest, but the size of the payment will remain the same. There are also other options, such as variable-rate or interest-only deals, that may be more suitable in certain situations.