Loans and finance can help a business pay for essential improvements, invest in itself, and achieve big goals. With so many types of business finance and funding available with different costs and terms attached, it’s important to make the right choice for your small business. These 27 business finance and funding options can suit a variety of businesses with different funding needs.
Keep reading to find out which finance options could work for you and your business.
1. Government & Other Grants
- Available to businesses that need extra support or have been rejected for a loan.
- Usually awarded to businesses in a specific region or fulfilling a specific purpose.
- Access can be limited. Schemes will change as governments change.
- Include loans and grants.
Small business success is vital to the British economy, so the government often provides grants and loans for brand new enterprises and business owners that need it. A loan will have to be repaid but could have favourably low interest rates or accessible terms. A grant doesn’t have to be repaid at all.
Accessing government grants and loans can be difficult because they’re designed to help the most in need. Your business will be assessed and means tested and there could be restrictions based on your location, size, and sector. Schemes will often be limited and may not be available on an ongoing basis.
To find current government grant and loan schemes, search the finance and support database.
- Business Growth Grant – Grants from £2,000 to £25,000 for capital projects based in specific regions of the UK.
- Business Start-up Grant Scheme – Grants for new businesses based in specific regions.
- BCRS Business Loans – Loans of £10,000 to £150,000 for small and medium businesses that have been rejected by their bank.
2. Startup & New Businesses Loans
- For brand new businesses.
- Government-backed finance available.
- Fewer options available from banks.
New businesses often need a helping hand. Startup and new business loans are designed for brand new enterprises with a limited financial history. Startup loans are available from private loan companies and some mainstream traditional banks, including NatWest. Some entrepreneurs choose to take out a personal loan to support their new business idea, which means repayment is your personal responsibility instead of the business’.
The government-backed Start Up Loans scheme is funded by the Department for Business, Energy and Industrial Strategy (BEIS), giving businesses trading for less than two years the opportunity to borrow up to £25,000 and repay at a fixed interest rate of 6%. Free mentoring and support is also available. Since its launch in 2012, the scheme had lent over £600m to over 68,500 entrepreneurs outside of London.
- Start Up Loans – A government-backed scheme with fixed interest rates for brand new businesses.
- Virgin Start Up loans – A personal loan of £500 to £25,000.
- NatWest – £1,000 to £50,000 available at a fixed rate of interest.
3. Loans for Existing Businesses
- Wide range of options for businesses with a few years’ history.
- Specialist loan companies and banks have products for small businesses with some trading history.
- Interest rates and terms can vary widely.
Existing businesses with a few years behind them can often take their pick of loans, providing their financial history and projected future is fairly healthy. Mainstream banks like Barclays, NatWest, Santander, Co-operative, HSBC, and more, offer small business loans, as well as private loan companies specialising in business finance.
The range of options is quite wide, so it’s important to compare interest rates, repayment terms, and any other fine print before you commit. Before your business is approved for a loan, there will also be a credit check.
- HSBC – Loans from between £1,000 and £25,000 available with fixed monthly repayments.
- Barclays – Loans available up to £100,000.
- NatWest – Borrow from £1,000 to £50,000 and choose your repayment period.
4. Unsecured vs Secured Loans
- Unsecured finance isn’t secured on your business’ property or equipment.
- A secured loan will ask for your property as ‘security’ in case you can’t repay the full loan.
Business finance products can be secured or unsecured. Unsecured loans are separate from your business’ property, while secured loans use your business’ property as security. Many business loans are unsecured, but it might be necessary to use security if the loan is a high amount, or there’s greater risk attached to it.
Security is usually valuable equipment, buildings, vehicles, and anything else high value. If your business couldn’t repay the finance, the security would be taken to cover the cost of the loan.
- Unsecured loans – Many banks and loan companies offer unsecured loans, including Funding Circle, Barclays, NatWest, and more.
- Secured loans – Loans are available from many of the same funding providers, usually starting at £25,000+.
5. Short-Term Loans
- Often repaid in a few weeks or months, instead of years.
- A short term solution for businesses that need quick cash.
- Usually unsecured.
If you need to make something happen fast, a short-term loan could be the right solution for your business. Short-term loans are usually repaid over months instead of years, and can be helpful for boosting cash flow, paying for essentials, covering one-off costs, and fast growth.
If you’re taking out a short-term loan, it’s important to make sure the repayments stay affordable for the full term of the loan, whether it’s 1 month or 12.
- Iwoca – Borrow £1,000 to £200,000 and repay over 1-12 months.
6. Bridging Loans
- Bridges the gap between making a purchase and receiving the funds.
- Usually for property or an expensive purchase.
- A type of short-term loan.
Bridging finance is commonly used to buy property or move commercial premises, often when there’s a shortfall in funds. This type of finance makes it possible for a business to move, refinance, finish, or sell an asset. Lenders can usually provide funds quite quickly once the applying business has gone through the necessary checks.
This type of finance isn’t too dissimilar to a mortgage, so there can be legal fees and arrangement fees to pay. The term of the loan is usually 12 months or less.
- WestOne – Loans from £75k for terms from 1 month.
- Clifton Private Finance – Bridging loan service from £100,000 to £100m.
7. VAT & Tax Loans
- Designed to pay owed VAT and tax quickly.
VAT and tax loans are for businesses with HMRC bills to pay. The lender will help you cover quarterly VAT payments, payroll, corporation tax, and other bills if you don’t have enough cash flow at the time to pay them yourself. This can happen when businesses lose revenue, make incorrect calculations, or have unexpected expenses.
These bills are important and shouldn’t be ignored. Some lenders won’t lend to businesses that have outstanding payments to HMRC, but lenders specialising in VAT and tax loans will. A VAT and tax loan can help make payments more manageable.
- Rangewell – Tax bills can become easier monthly payments.
- Cubefunder – Borrow from £5,000-£100,000 over 3 to 12 months.
8. Bad Credit Loans
- Designed for businesses with lower credit scores.
- An alternative for businesses that struggle to access finance from their bank.
- Interest rates and approval processes can vary.
Not every business has a perfect credit rating, but that doesn’t have to stop them from getting the finance they need. Some loans are designed for businesses that struggle to get approval for finance. These loans can sometimes be secured on your business’ assets, including property, vehicles, and equipment.
If you’ve already tried to get finance from a bank or mainstream lender, a loan for businesses with poor credit could give you access to the cash you need.
- Boost Capital – Loans available for small businesses with a trading history of at least 3 years.
- Capify – Offers business loans and merchant cash advance options based on your card payments.
9. Business Expansion Loans
- Covers the cost of moving to a new premises or extending current premises.
- Makes it easier to afford growth and expansion.
Business expansion loans are exactly what they say on the tin – finance to help pay for expanding your business. This type of finance can be used to buy a new premises or a franchise, set up a new site, hire new staff, buy equipment and resources, or invest in a new vehicle.
Most loans are designed with expansion in mind. Many mainstream banks offer business loans to help small businesses afford whatever they need to grow. Private loan companies also offer many different loan products for business expansion.
- Santander – Borrow £2,000 to £25,000 over 1-5 years and repay in fixed monthly payments.
- Barclays – Borrow from £1,000 to over £100,000.
- 365 Business Finance – Merchant Cash Advance for £5,000 to £200,000.
10. Working Capital Loans
- Short-term loans to boost day-to-day cashflow.
- Helpful for paying for everyday essentials.
A working capital loan is designed to improve your business’ immediate cash flow, covering everyday expenses. If you’re struggling to pay for staff wages or essential stock, a working capital loan will pay for the important stuff until more cash comes into your business.
Working capital loan providers include traditional banks, private loan companies, and alternative online lenders.
- Funding Circle – Working capital loans up to £500,000.
- Capify – Raise from £5,000 with a working capital loan.
- PayPal – Working capital for businesses processing cash through PayPal.
11. Cashflow Loans
- Loans designed to improve cashflow in your business.
- Can bridge the gap between essential expenses and invoices or bills being paid.
Cash flow is essential for running a healthy business. If your business is waiting for several invoices or bills to be paid, a cash flow loan can help improve liquidity in the meantime. Cash flow loans are usually unsecured and funds can be accessed quickly once approved.
Everyday expenses can include staff wages, stock and inventory, costs associated with premises, paying bills, covering emergencies, and anything else that needs to be covered now and paid for later.
- Liberis – Funding from £2,500 to £300,000, repaid through customer card payments.
- Just Cashflow – Borrow from £10,000 to cover expenses.
12. Credit Cards
- An accessible way to pay for business expenses.
- Available with most business bank accounts.
A business credit card can be a simple and fast way to cover large and small business expenses online and in person. Most banks offer the option of a credit card with their business current account, but your business will need a credit check before it’s approved. Your card will have a monthly spending limit.
Credit cards can sometimes have a higher interest rate than loans and overdrafts, so it’s important to compare before you commit. If your business will be able to repay the balance in full each month, you won’t pay any interest at all.
- Barclaycard – Two business credit cards are available from Barclays.
- Santander – Credit card includes 1% cashback on purchases.
- American Express – Offers a range of six business credit cards.
- An optional part of your business current account.
- Interest is charged based on how much of your overdraft you use.
Most business current accounts include the option of an overdraft, which gives you the freedom to spend more than your balance when you need to. There’ll be a set overdraft limit with an agreed interest rate, and your business will usually only be charged for how much it uses.
Overdrafts are usually fairly simple to secure, and there will often be a credit check beforehand. For certain amounts, there will often be an arrangement fee and the limit will be reviewed every 12 months. Overdrafts can be secured or unsecured.
- Lloyds Bank – Overdrafts up to £25,000 available.
- Co-operative Bank – Overdrafts up to £250,000 available.
- HSBC – Flexible overdrafts available.
14. Business Line of Credit & Revolving Credit Facility
- Borrow up to a certain limit and only pay interest on the outstanding balance.
- Can be an alternative to a credit card or business loan.
A business line of credit gives you access to a credit limit to help pay for whatever your business needs. Just like a credit card or overdraft, you’ll only repay what you’ve used.
A revolving credit facility is particularly useful for businesses that regularly need access to credit and want to keep paying it off. It’s helpful for emergency purchases, everyday costs, and quick business expansion expenses.
- Boost Capital – A line of credit from £3,000 available.
- Liberis – £2,500 to £300,000 available in flexible funding.
15. Commercial Mortgages
- Just like any other mortgage, but specifically for commercial property.
- Offered by some banks and private lenders.
Commercial mortgages are just like a personal mortgage for a private residence, except they’re specific to commercial properties and businesses. Some traditional banks, like Barclays and NatWest, offer commercial mortgages to businesses, as well as private lenders specialising in business finance products.
The benefits of owning a commercial property are similar to owning a home – less reliance on renting, more equity, and more flexibility in terms of renovation. You may need a deposit and monthly payments and interest rates will often be pre-agreed and stretched over a period of years. It’s also possible to remortgage existing property to free up cash to spend on the business.
- NatWest – Commercial mortgages from £25,001.
- Barclays – Commercial mortgages available from £25,000, interest rates fixed for 1-10 years.
- Aldermore – £50,000 to £25 million available for mortgages and remortgages.
16. Property Development Finance
- For property developers and property related businesses.
- Used to build, renovate, and develop property before a sale.
- One of the more complex types of finance.
Property developers can access finance to develop and renovate properties in their portfolio. The aim is to cover the immediate costs of developing a property and preparing it for sale to make a profit later. Property development finance can be available to individual property developers as well as property businesses.
Many finance providers offer finance for renovations as well as ‘ground-up’ developments where the buyer wants to purchase land to build on or demolish an old property and rebuild.
- Shawbrook Bank – Property development loans from £2.5 million.
- Barclays Corporate Finance – Specialist property development finance for corporate businesses.
Other types of business finance and funding
17. Merchant Cash Advance
- For businesses taking payments from customers through a card terminal.
- Raise finance like a normal loan.
- Repay through a percentage of customer card payments.
The Merchant Cash Advance is a type of finance designed for businesses taking card payments from their customers, including retailers, restaurants, and other customer service businesses. It can be a manageable and predictable way to raise and repay business finance. Payments aren’t fixed and will change depending on how much income your business processes.
Your business will usually be able to raise several thousand pounds after a credit check. Some Merchant Cash Advance lenders will give businesses the ability to raise a percentage of their average monthly turnover, so repayments are structured around what they can afford.
- Capify – Raise £5,000 to over £500,000.
- 365 Business Finance – Raise from under £5,000 to more than £200,000.
- Merchant Cash Express – Raise £5,000 to £500,000.
18. Asset Finance
- Finance for equipment, vehicles, and materials essential to business growth.
- Includes hire purchase and equipment leases.
- A flexible source of finance for businesses in need of specific assets.
Many businesses need equipment, materials, and machinery to operate successfully, but these items are expensive to buy up front. Asset finance provides the cash your business needs to pay for essential equipment. Repayments will usually be spread out over the lifetime of the asset, so you’re not paying for something that’s out of date or non-functional.
Leasing is another type of asset finance, giving businesses the opportunity to rent equipment and return it when they’re ready to upgrade, or buy it outright if they want to keep it.
- Close Brothers – Asset finance, refinancing, and leasing available.
- Asset Finance UK – Asset finance covering commercial vehicles, plant machinery, and other business assets.
19. Invoice Finance, Factoring & Discounting
- A third party buys your unpaid invoices and collects the payment for a fee.
- Factoring and discounting also available.
Unpaid invoices can be a big problem for many businesses, and chasing them takes time. Invoice finance, factoring and discounting can take the burden of chasing invoices away from the business owner, but they’re all quite different. Invoice factoring means the finance company chases invoices for you for a percentage of the total amount. Your invoice gets paid and the invoice finance company takes its cut.
Finance and discounting are slightly different. The business can borrow the value of an invoice that’s yet to be paid, giving them instant cash flow instead of waiting for the customer to pay. When the customer does pay, they’ll be able to repay the finance. The business is still responsible for chasing the invoice, however.
- Close Brothers – Invoice discounting and factoring available.
- Bibby Financial Services – Invoice discounting available.
20. Equipment & Machinery Finance
- Finance for equipment, vehicles, and materials essential to business growth.
- Can include hire purchase and equipment leases.
Many businesses need equipment and machinery to manufacture and operate successfully, but it’s not always possible for them to buy up front. Equipment and machinery finance provides the cash your business needs to pay for essential machinery. Repayments will usually be spread out over the lifetime of the equipment, so you’re not paying for something long after it’s been useful.
Leasing is another type of equipment finance, allowing businesses to rent equipment and return it when they’re ready to upgrade, or buy it to keep.
21. Trade, Import & Export Finance
- Finance designed to help businesses trade internationally.
- Government-backed funding available.
Trading internationally is a major goal for many businesses, but difficult to achieve. Trade, import, and export finance can cover the upfront costs, helping businesses succeed with import and export. This type of finance can include working capital, credit insurance, and bond support.
The government provides UK Export Finance to help businesses win international contracts, fulfil upfront orders, and insure them in case a buyer falls through.
- UK Export Finance – Finance to help businesses export their goods successfully.
- Touch Financial – Finance to helps businesses succeed internationally.
22. Peer to Peer Finance
- Your business borrows money from a range of investors who receive a return when you repay.
- Uses a peer to peer platform as a ‘middleman’.
Peer to peer finance has become more and more popular over the last 10 years. Businesses can borrow funds provided by investors through an online peer to peer platform. When they repay their finance, the investors will receive a return on their investment. For investors, peer to peer can be a way to achieve a higher rate of interest on their cash.
If approved, you’ll receive your funds quickly. You’ll usually have to provide some upfront information, including what you want to use the cash for, how long you’ve been in business, and the business’ average turnover. Loan size and terms can vary between platforms.
- Funding Circle – Unsecured loans of £10,000 – £500,000.
- LendingCrowd – Borrow from £5,000 – £500,000.
23. Angel Investments
- Individual entrepreneurs investing in businesses.
- Angel investors expect a return on their money and a stake in the business.
Angel investors entrepreneurs who have already made their money, and want to use it to invest in other businesses. In return, they’ll often receive a stake in your business as well as a return on their money.
Connecting with angel investors can be difficult, especially as there’s a lot of competition. Some business owners use their existing connections to build relationships, and there are online platforms to help businesses and investors connect too. Terms and finance amounts will vary dramatically depending on the investor and the business.
- Angel Investment Network – Connects investors and businesses interested in fundraising.
24. Venture & Equity Finance
- Investment for a new, promising business idea.
- Investor will receive equity in your business in return.
Venture capital is investment given to businesses with a big idea they want to develop. Venture capital is often given in exchange for equity in the business, so your investor will benefit if it succeeds. There is risk attached for the investor, because they might not receive anything if the business idea doesn’t pay off.
This can be a popular source of finance for new businesses without much history or existing equity. Investment can be provided by individual entrepreneurs or venture capital firms, which also offer expertise and international connections.
- Index Ventures – Private venture capital firm based in London, San Francisco, and Geneva.
- Octopus Ventures – One of Europe’s largest venture capital funds.
25. Private Equity
- Investment from high net worth individuals and investment companies.
- Investor will buy either a share in your company, or the whole business.
Private Equity is investment in a business that isn’t publicly listed. Investment is given to a business to help it develop its product or service, and the investor will receive a share in the company in return, or buy the business outright.
Generally speaking this type of finance is only available to businesses with a longer trading history. It’s also a common way to take money off the table off the table. Most private equity firms in the UK are based in London.
- The British Private Equity & Venture Capital Association – Official body for venture capital in the UK, providing reliable information for businesses.
- Montagu Private Equity – London-based private equity firm.
- Addition Capital – London-based private equity firm.
- Lots of individuals invest small amounts in your business idea.
- Your business gives the product or service to investors in return when it’s ready.
Crowdfunding has become a popular way for businesses and individuals to get their projects and ideas off the ground. If your business is relatively new or wants to launch a new product or service, crowdfunding is a great way to raise the cash you need in small amounts.
Investors can invest at different levels for different returns and benefits. Crowdfunding can be done using popular online platforms, which can have different rules. Some platforms will demand you reach your funding target before you can withdraw the cash, while others will allow you to take a percentage of the target.
- Kickstarter – Popular crowdfunding platform for creative ideas.
- Indiegogo – Popular crowdfunding platform for innovations.
27. Business Finance & Loans for Women
- Loans ring-fenced for female entrepreneurs to help boost their businesses.
- Can be awarded by professional bodies and government-backed schemes.
There’s a serious funding gap between male and female entrepreneurs, so some business loans and grants are available exclusively for women in business with big ideas.
Loans and grants are available for women who meet specific criteria or are developing businesses in specific sectors. Competition can be tough but the benefits are significant. Being awarded with funding can sometimes lead to lots of publicity and professional development, as well as the cash itself.
- Female founder funding – A list of finance options for women in business.
Financing Options For Specific Types of Business
We’ve also created funding and financing guides for specific types of business: