Small Business Loans UK

How do small business loans work and is it the right loan solution for your business?

Small business loans are a way SMEs can get an easy, low cost cash injection into their business. Cash flow loans for small businesses can be used for any business purpose, from hiring new staff and boosting cash flow to purchasing machinery or covering surprise costs. Small business loans are available as both secured and unsecured.


How do Small Business Loans in the UK work?

Like most types of finance, small business loans work by a lender giving a business money upfront which is then repaid month by month at an agreed rate over a fixed period of time. Cash flow loans for small businesses cover a variety of funding options for SMEs, including secured and unsecured business loans, fast business loans and invoice financing.


What are the main advantages and disadvantages of cash flow loans for small businesses in the UK?

Advantages of small business loans:

  • Quick and affordable way to get a cash injection into your business
  • No need to secure the loan against your assets in most cases
  • Don’t always require in depth credit checks

Disadvantages of small business loans:

  • If you have a low credit score, you may have to pay more to borrow the money as you are a bigger risk to the lender.
  • Try to keep the repayment terms as short as you can to avoid paying lots of interest over a longer term.

Is my business eligible for a small business loan in the UK?

A small business is defined as one whose turnover is less than £6.5 million and a balance sheet total of more than £3.26 million and doesn’t employ more than 50 people. So if your business fits these criteria and you need a short term loan to help with financing your daily operational costs to enable you to grow you can try applying for a small business loan.

Eligibility criteria for a small business loan can vary a lot and different lenders will have differing criteria. However it helps your application if you have kept up to date documents and statements from your business accounts as it allows the lender to see how much money is coming into and out of the business. It is also helpful for a lender to see your trading history, if it’s been profitable and if it looks like there is future potential to the business. Sometimes they need evidence of at least 2 years of trading but others will accept less. It will help if you have a good credit rating so any late payments of credit cards, mortgages and even household bills could count against you.

Eligibility will also depend on ability to repay the loan as small business loans tend to be taken out for a short period of time to help in the short term so monthly repayments could be higher than a normal loan.


What are the best ways to use a UK small business loan?

A small business loan in the UK can be used to invest in anything that will improve its future profitability and security.

There are many ways of doing this including using the loan to provide your business with working capital which can help with the day to day running costs that keep your business afloat. You could have a great business but sometimes short term issues will mean cash flow is affected, if cash flow is low you may no longer be able to pay wages, office rents and suppliers, a short term injection of cash via a small business loan could help you stay afloat and grow for the future.

It can help to buy essential business equipment that will help build up the profitability of the company in the future. A small business may not have the cash flow available in the short term for a large purchase so a small business loan could be useful in this case.

To invest in staff training and development and make sure they are keeping up to date with emerging technologies to improve the company’s ability to compete in a changing market.

To pay for advertising and marketing, this is essential for a small business that is looking for new clients and a small business loan invested in this way could be key for making sure you attract new business.


What are the differences between a UK small business loan and a start up loan?

Start Up Loan is a government backed unsecured personal loan available for businesses that have been trading from between 0 to 24 months. It is available to companies in the UK that need help to start or grow and provides them with financial but also practical support in the form of 12 months free mentoring.

A Start Up Loan works by allowing each owner or partner in the business, aged 18 or over to apply individually for a loan up to £25,000 and to a maximum total of £100,000 per business.

The interest rate is currently fixed at 6% and repayments are between 1 to 5 years.

By contrast a Small business loan in the UK is available to any small business in the UK at any time of its life as long as it meets the eligibility criteria of a small business.

The interest rates will vary depending on who you take the loan out with and the repayment period will vary depending on what works best for you and the lender.

A small business loan can be unsecured but is more likely to be secured on a business or personal asset so the risk you take on is greater.


Have you thought about Invoice Finance as a cash flow solution for your business?

Invoice finance allows you to release cash quickly from your unpaid invoices.

As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.


Get in touch

Contact our friendly UK advisors on our freephone

0808 250 0859

8:45 - 17:15 - Monday to Thursday &
8:45 - 16:45 - Friday


The benefits of invoice finance companies such as Novuna Business cash flow

  • Boost your cash flow without having to wait up to 120 days for your customers to pay you

  • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled

  • Access funds within 24 hours from initial appointment with our revolutionary digital onboarding process

  • Benefit from our in-house credit control processes, allowing you to focus on running your business, instead of chasing clients for payment

  • 6 month trial period followed by a rolling contract


Want to understand more Cash Flow Finance terms?

Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.

We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.



Let's talk

Please complete this form and one of our friendly advisors will call you back.

If your customers are consumers, please contact our consumer finance division.

Back to top