Business Loans for UK Limited Companies: The Complete 2026/27 Guide

If your limited company needs capital, a business loan is often the most direct way to get it: a fixed sum, a known repayment schedule, and no equity given away. The trouble is that "business loan" now covers a dozen different products, priced by different lenders, on wildly different terms, and the right one depends on why you are borrowing, what your company can offer as comfort, and how fast you need the money.

This is the top-of-cluster guide to company debt. It maps the whole market, term versus revolving, secured versus unsecured, bank versus alternative lender, so you can work out which product fits before you apply. It sits alongside our companion guides to invoice finance and asset finance, which cover the two big non-loan routes to raising working capital and buying equipment.

Company borrowers only. The finance introductions on this page are for UK limited companies and limited liability partnerships borrowing for business purposes. We introduce your company to a panel of commercial-finance brokers. We are not a lender and we do not give regulated credit advice. If you are a sole trader, an individual, or borrowing for personal or household purposes, this service is not for you and you should speak to an FCA-authorised consumer-credit firm. Our introductions are for company facilities, typically £25,000 and above.

Everything below is written for a director or finance lead of a trading limited company. We reference the current UK position for the 2026/27 tax year throughout, and we are candid about when a loan is the wrong tool and another product would serve your company better. Let's start with the products.

The Main Types of Business Loan

Most company debt falls into a handful of shapes. Knowing the shape you need narrows the lender list immediately.

• Term loan. A lump sum drawn once and repaid over a fixed period (typically one to six years) in regular instalments of capital and interest. The workhorse of business borrowing. Best for a defined, one-off cost: a fit-out, an acquisition deposit, a marketing push, hiring ahead of revenue.
• Revolving credit facility (RCF). An agreed limit you draw down and repay repeatedly, paying interest only on the balance outstanding. Works like a formal, larger business overdraft. Best for fluctuating or seasonal cash needs where you cannot predict the exact amount or timing. See our revolving credit facility guide.
• Secured loan. A loan backed by a charge over company assets or property, unlocking larger sums at lower rates. Covered in depth on our secured business loans page.
• Unsecured loan. No asset security, approval rests on trading strength plus (almost always) a personal guarantee. See unsecured business loans.
• Asset-backed finance. Hire purchase or leasing to buy plant, vehicles, or equipment, with the asset itself as security. This is a separate product family, covered in our asset finance guide.
• Merchant cash advance. An advance against future card takings, repaid as a percentage of daily settlement, for card-led companies. See merchant cash advance.
• Short-term and tax-bill finance. Facilities to bridge a specific gap, including VAT loans to spread a quarterly bill and broader working-capital finance.

Two of these deserve their own comparison, because most companies choosing a loan are really choosing between a term loan and a revolving line. We come back to that in the worked example below.

Secured Versus Unsecured

This is the first real fork. A secured loan gives the lender a legal charge over something: commercial property, plant and machinery, the company's book debts, or a debenture over all assets. Because the lender can recover from the security if the company fails, it will lend more, for longer, at a lower rate. The trade-off is that the process is slower (valuation and legal work) and the asset is genuinely at risk if you default.

An unsecured loan has no such charge. The lender is betting on your trading performance, so it prices in more risk: higher rates, shorter terms, and lower maximum amounts (typically up to around £250,000, though some lenders go further for strong companies). Unsecured facilities complete fast and keep your assets unencumbered, which matters if you want to preserve borrowing capacity for later.

Feature	Secured	Unsecured
Security required	Charge over property or company assets	None (but personal guarantee usual)
Typical amount	£50,000 to several million	Up to roughly £250,000
Rate	Lower	Higher
Term	Up to 15 to 25 years on property	1 to 6 years
Speed	Weeks (valuation, legals)	Days
Main risk	Losing the secured asset	Higher cost, guarantee called

Note the small print on unsecured: "no security" does not mean "no recourse". Almost every unsecured company loan comes with a director's personal guarantee, which we cover in full further down.

What a Business Loan Actually Costs

The advertised rate is only part of the picture. The real cost of a company loan is driven by several levers, and understanding them lets you influence the price rather than just accept it.

• Risk-based interest. Lenders price to your company's perceived risk. A three-year-old company with rising, profitable turnover and clean bank conduct pays less than a one-year-old company with thin margins. Rates move with the wider cost of borrowing, so the Bank of England base rate and lending conditions feed through.
• Arrangement and facility fees. Often 1% to 5% of the amount, sometimes added to the loan. A low rate with a high fee can cost more than a higher rate with no fee, so compare the total repayable, not the headline percentage.
• Term length. A longer term lowers the monthly payment but raises total interest paid. Match the term to the useful life of what you are funding.
• Security and guarantees. Offering security or a solid personal guarantee typically buys a lower rate, because it reduces the lender's exposure.
• Early-repayment terms. Some facilities charge to settle early, others let you repay interest only on the time used. This matters if you might refinance or clear the loan ahead of schedule.

One more lever sits underneath all of these: fixed versus variable pricing. A fixed rate locks the cost for the whole term, so your repayment never moves and budgeting is simple, but you pay a small premium for that certainty and you gain nothing if base rates fall. A variable rate (usually quoted as a margin over the Bank of England base rate) is cheaper at outset and falls if base rates drop, but it rises if they climb, so your monthly cost is not guaranteed. For a short unsecured loan the difference is modest. For a large, long secured facility it can move the total cost materially, so decide deliberately rather than accepting whatever the lender defaults to.

Because interest on borrowing taken wholly for the trade is generally deductible for corporation tax, the after-tax cost is lower than the headline rate suggests. That interaction sits with the tax rules rather than the finance product, so we treat it in one paragraph near the end and link out rather than re-explaining corporation tax here.

Worked Example: Term Loan Versus Revolving Facility

Suppose your company needs to fund a £75,000 project. Two structures are on the table.

Option A, a £75,000 unsecured term loan over 5 years. At a representative rate of, say, 12% per year on an amortising basis, the monthly repayment is around £1,668. Over 60 months that is roughly £100,100 repaid, so about £25,100 of interest, on top of any arrangement fee. You draw the full £75,000 on day one and pay interest on the whole balance for the whole term, whether or not you are using all of it at any given moment. That is efficient if you genuinely need the full sum spent up front (a single fit-out or an acquisition).

Option B, a £75,000 revolving credit facility. Here you draw and repay as the project spends, paying interest only on what is drawn. If your actual average balance across the year is £40,000 rather than the full limit, you pay interest on £40,000, not £75,000, plus a non-utilisation fee (often around 1% to 2%) on the undrawn portion. For a project that spends in stages, or where revenue comes in and lets you park the balance back down, the RCF can cost materially less in interest, and you keep headroom for the next need without reapplying.

The rule of thumb: a term loan wins when the cost is known, one-off, and spent immediately. A revolving facility wins when the need is lumpy, staged, or seasonal, because you only pay for money while it is in your hands. You can model both with our business loan calculator before you speak to anyone.

Eligibility: What Lenders Look For

Approval turns on whether the lender believes the loan is serviceable from trading cash flow. The evidence they weigh is broadly consistent across the market:

• Trading history. Mainstream unsecured lenders usually want one to two years of filed accounts. Asset and secured lending is more forgiving because the asset carries the risk.
• Turnover and profitability. A minimum turnover (often around £100,000 a year for unsecured) plus a trend that is flat or rising, not falling.
• Existing debt and commitments. Lenders total up your current borrowing to judge affordability. A stacked balance sheet limits new lending.
• Bank-statement conduct. Returned direct debits, persistent overdraft breaches, and County Court Judgments all count against you.
• Director creditworthiness. Because a guarantee is usual, directors' personal credit files are checked.
• Sector and purpose. Some sectors are viewed as higher risk. A clear statement of what the money is for and how it will be repaid always helps.

Weakness in one area can often be offset by strength in another. A young company with thin history but strong security, or a solid director guarantee, can still raise finance. The panel's job is to find the lender whose appetite matches your particular profile.

Bank Versus Alternative Lender Versus Broker Panel

Where you apply changes both the price and the odds of a yes.

High-street banks offer the lowest headline rates but the slowest, strictest process. They tend to favour existing customers, want a longer track record, and decline more freely. If you have a strong, banked relationship and time to wait, they are worth approaching.

Alternative and fintech lenders price higher but decide in days, weigh recent trading over long history, and lend into situations banks avoid. They have widened access to company credit considerably, and for many growing companies they are the practical route.

A broker panel is not a lender at all. It puts a single application in front of banks, challenger banks, and specialist lenders at once, so you see the genuine market rather than one lender's view. This is the route we introduce companies to: you fill in one form, and a panel of commercial-finance brokers competes to place your company with the right lender. It costs you nothing to see the options, and it avoids the credit-file damage of applying to five lenders one after another. The British Business Bank publishes useful independent context on the small-business lending market in its Small Business Finance Markets reporting, and the Bank of England tracks lending conditions if you want to gauge the wider climate before you borrow.

How Much Can a Company Borrow?

There is no single formula, but there are reliable anchors.

For unsecured lending, many lenders cap the offer at roughly one to two months of annual turnover. A company turning over £600,000 might therefore access £50,000 to £100,000 unsecured, subject to profitability and existing debt. Stronger, more profitable companies stretch further.

For secured lending, the number is driven by the value of the security rather than turnover. A charge over commercial property worth £500,000 might support borrowing of £300,000 or more, depending on the loan-to-value the lender will accept. This is how companies raise into the millions.

For asset finance, the ceiling is the value of the asset being financed, because the asset is the security. A £120,000 machine can usually be financed close to its full cost.

Affordability is the real ceiling, not the headline maximum. A lender models whether the monthly repayment is comfortably serviceable from your existing trading cash flow, usually looking for the debt service to sit well within your net profit rather than consuming it. Borrowing the theoretical maximum a lender will offer is rarely wise: it leaves no buffer for a bad month, and it uses up capacity you may want for a better opportunity later. A useful discipline is to size the loan to the return it funds, so the new activity generates enough to service the debt with room to spare.

Layering matters too. A company can run a term loan, an invoice-finance facility, and asset finance simultaneously, because each is secured against a different thing. This is how a growing company assembles a full funding stack rather than relying on one large loan. Our small business loans page covers the SME-sized end of this in practical detail.

Government-Backed Options

The state supports company lending in two main ways, and it is important to understand what each actually is.

The Growth Guarantee Scheme (successor to the Recovery Loan Scheme) is run through the British Business Bank. The government gives the lender a 70% guarantee on the facility. This encourages lenders to say yes to viable companies they might otherwise decline. Critically, the guarantee protects the lender, not you: your company still repays the loan in full, and a personal guarantee may still be required. It covers term loans, overdrafts, and asset and invoice finance through accredited lenders. Our Growth Guarantee Scheme guide sets out eligibility and the common misconception in full.

The government Start Up Loan, also delivered through the British Business Bank, is a different animal entirely. It is a personal loan to the individual, unsecured, up to £25,000, with personal liability and a fixed rate. It is not lent to the company, and it is a regulated personal-borrowing product. Because it is personal rather than company finance, it is not something we introduce. If you run a new limited company and want company borrowing, the routes are unsecured company loans, asset finance secured on what you buy, or a guarantee-backed facility, all of which are covered on our startup business loans page. You can read the scheme terms directly on the gov.uk Start Up Loans page.

Business Loan Versus Invoice Finance, Asset Finance, and Overdraft

A term loan is not always the right tool. The honest answer is that the best product depends on why the money is short.

• Cash tied up in unpaid invoices? A loan borrows against nothing in particular. Invoice finance advances cash against your debtor book, so the facility grows with your sales and you are not adding a fixed monthly repayment on top of a cash-flow gap.
• Buying equipment, vehicles, or plant? Asset finance spreads the cost against the asset itself, usually at a better rate than an unsecured loan, and interacts with capital allowances (more below).
• Small, unpredictable day-to-day swings? A business overdraft or a revolving credit facility flexes with the balance, so you are not servicing a fixed loan for money you are not using.
• A one-off, known cost with a clear payback? This is where a term loan is genuinely the cleanest answer.

Our working-capital finance guide is a router page that maps the cause of a cash gap to the right product if you are not sure which of these you need.

Personal Guarantees Explained

A personal guarantee (PG) is a director's written promise to repay the loan personally if the company cannot. It is the single most misunderstood part of company borrowing, so it is worth being precise.

A PG does not turn the loan into personal or consumer credit. The company is still the borrower, the loan is still a company facility, and the borrowing remains outside the consumer-credit regime. The guarantee simply gives the lender a fallback. It is standard on unsecured loans, common on secured facilities, and frequently required even under government guarantee schemes.

What you can do about it:

• Negotiate the amount. A guarantee can sometimes be capped at a percentage of the loan rather than the full sum.
• Share it. With multiple directors, exposure may be split, though "joint and several" wording can still leave one director liable for the lot, so read it carefully.
• Insure it. Personal-guarantee insurance covers a portion of the exposure for an annual premium.
• Take advice before signing. A PG is a real, enforceable personal liability. Understand the wording, the cap, and the trigger before you commit.

How to Apply and Improve Your Odds

Preparation is the difference between a fast yes and a slow no. Before you approach any lender or panel, have the following ready:

• Your latest filed accounts, plus up-to-date management figures if the accounts are more than a few months old.
• Three to six months of business bank statements.
• A short, clear statement of the loan purpose and how it will be repaid from trading cash flow.
• Details of existing borrowing and commitments.
• Director details for the guarantee credit check.
• A simple, forward-looking cash-flow forecast if you are borrowing to grow rather than to cover a known cost, so the lender can see how the loan pays for itself.

To improve the odds and the price: tidy up bank conduct in the months before applying (no returned direct debits), clear or reduce any CCJs, keep filings up to date at Companies House, and be realistic about the amount, over-asking relative to turnover is a common decline reason. Apply through a panel rather than lender by lender, so multiple credit searches do not stack up on your file. The gov.uk business finance support tool is a useful neutral starting point for understanding the options before you commit.

The Tax and Regulatory Fine Print

Is the Interest Tax-Deductible?

Interest on a loan taken wholly and exclusively for your company's trade is generally an allowable deduction for corporation tax, treated under the loan-relationships rules, and arrangement fees are usually deductible too. The capital you repay is not deductible, only the interest and finance costs. Because the deduction reduces taxable profit, its value depends on your company's marginal corporation-tax rate, which can reach an effective 26.5% in the band between £50,000 and £250,000 of profit for 2026/27. We do not re-explain the tax mechanics here, our corporation-tax marginal relief guide covers the rate bands, and the underlying rules sit in HMRC's Business Income Manual (see BIM45301 on interest and finance costs).

One planning point worth flagging: if the borrowing is to buy equipment, the way you fund it interacts with capital allowances. Buying outright or on hire purchase can attract the £1,000,000 Annual Investment Allowance or 100% full expensing on new and unused main-rate plant, giving a large first-year deduction, whereas leasing gives you deductible rentals spread over the term instead. That decision belongs with the asset, so it lives in our asset finance guide rather than here. Get the finance structure and the tax treatment lined up together before you sign, because reversing it later is expensive.

Why This Guide Is for Companies Only

It is worth understanding why this whole guide is written for companies only. Under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, a credit agreement made wholly or predominantly for the purposes of a borrower's business is an exempt agreement, and effecting an introduction of a body corporate to a lender is not regulated credit broking under Article 36A. That is why introducing a limited company to a lending panel does not require FCA consumer-credit authorisation. The primary text sits on legislation.gov.uk, and the FCA's own perimeter guidance is in its PERG manual.

Sole traders, individuals, small partnerships borrowing below the relevant thresholds, and anyone borrowing for personal or household purposes fall the other side of that line, into regulated consumer credit. That borrowing needs an FCA-authorised firm, and it is not what we do. If that is you, this service is not for you. For every UK limited company borrowing for business purposes, though, the routes above are open, and one application to the panel is the fastest way to see them all.