A business loan is one of the most widely used forms of funding available to UK businesses — providing access to a lump sum of capital that can be used for a broad range of business purposes. Whether you are looking to invest in growth, manage cash flow, fund new premises, or cover a specific cost, a business loan UK may be a suitable option depending on your circumstances.

In this guide, Percy Finance explains what a business loan is, the main types available, what lenders typically look for, and how working with an independent broker can help your business access the most appropriate facility for its needs. This article is for information purposes only and does not constitute financial advice.

What is a Business Loan?

A business loan is a form of borrowing whereby a lender advances a fixed sum of money to a business, which then repays the amount — plus interest and any applicable fees — over an agreed term through regular monthly payments. Unlike asset finance, which is tied to a specific physical asset, a business loan provides the business with capital that can generally be used for any legitimate business purpose.

Business loans are available to a wide range of UK businesses including limited companies, partnerships, and PLCs — subject to status, affordability, and individual lender criteria. The amount available, the term, and the cost of borrowing will all vary depending on the lender and the financial profile of the business.

The Main Types of Business Loan

Unsecured Business Loans — an unsecured business loan does not require the business to offer a specific asset as collateral. The lender assesses the application primarily on the creditworthiness and financial profile of the business and, in many cases, its directors. Because there is no security backing the loan, unsecured facilities may carry higher interest rates than secured alternatives, and the amounts available may be more limited. They are often suitable for businesses that need funding relatively quickly and do not wish to secure the loan against an asset.

Secured Business Loans — a secured business loan requires the business to offer an asset as security against the borrowing. This could be a commercial property, business assets, or in some cases a personal guarantee from a director. Because the lender has security to fall back on in the event of default, secured loans can potentially offer access to larger amounts and may be available at different terms to unsecured facilities. The asset offered as security may be at risk if the business fails to maintain repayments.

Secured vs Unsecured

Unsecured Business Loan

  • Security Required: No specific asset required
  • Personal Guarantee: Required
  • Typical Use: Working capital, growth costs
  • Decision Speed: Often faster

  • Key Consideration: Dependent on credit profile

Secured Business Loan

  • Security Required: Asset or property required

  • Personal Guarantee: Required
  • Typical Use: Larger investments, expansion
  • Decision Speed: Typically longer process

  • Key Consideration: Asset at risk if payments not maintained

What Can a Business Loan Be Used for?

One of the key characteristics of a business loan is its flexibility — unlike asset finance, the capital is not restricted to the purchase of a specific asset. Common uses for business loans include funding growth or expansion plans, hiring additional staff, investing in new premises or refurbishment, purchasing stock or raw materials, covering one-off costs such as tax liabilities, managing cash flow during quieter trading periods, and funding marketing or technology investment.

The purpose of borrowing will typically be discussed as part of the application process. Lenders will want to understand how the capital will be used and how the loan will be repaid from the business’s trading cash flow. The British Business Bank provides useful guidance on the range of funding options available to UK businesses and is a helpful starting point for businesses exploring their options.

What Do Lenders Typically Consider?

Every lender has its own criteria, but the factors most commonly assessed as part of a business loan application include the trading history of the business, its financial performance — typically evidenced through filed accounts, management accounts, or bank statements — the credit profile of the business and its directors, the affordability of the proposed repayments relative to the business’s cash flow, and the purpose of the borrowing.

Businesses with a strong trading history, consistent revenue, and a clean credit profile are generally in the strongest position when applying for a business loan. However, specialist lenders exist for businesses with more complex profiles — including those that are younger, have experienced historical credit difficulties, or operate in sectors that mainstream lenders may view as higher risk. Each application is assessed on its individual merits and there is no guarantee that a business loan will be available to any specific business.

Personal Guarantees

It is important to be aware that many business loan lenders — particularly for unsecured facilities — may require a personal guarantee from one or more directors of the business. A personal guarantee means that the director agrees to be personally liable for the repayment of the loan in the event that the business is unable to meet its obligations. This is a significant personal commitment and should always be considered carefully and with independent legal advice before signing

Why Use Percy Finance for a Business Loan?

The UK business loan market includes a wide range of lenders — from high street banks and challenger banks through to specialist alternative lenders — each with different criteria, pricing, and appetite. Approaching lenders directly means your application is assessed against one set of criteria and one pricing structure. As an independent credit broker, Percy Finance can introduce your business loan requirements to a panel of lenders across the market, matching your specific circumstances to lenders whose criteria are most appropriate.

We manage the process from initial conversation through to completion — discussing your requirements, identifying appropriate lenders, and supporting the application from start to finish. Percy Finance is a credit broker, not a lender, and is remunerated by way of a commission paid by the lender if a finance agreement is arranged — this will always be disclosed to you before any agreement is entered into.

Looking for a Business Loan? Talk to Percy Finance

Percy Finance works with a panel of lenders to introduce UK businesses to both secured and unsecured business loan facilities across a wide range of sizes and purposes. Get in touch for a free, no-obligation conversation about what options may be available for your specific circumstances. Finance is subject to status and affordability. Percy Finance is a credit broker, not a lender. Percy Finance may receive a commission from the lender if a finance agreement is arranged — this will always be disclosed to you.

Looking for business finance?
Our team at Percy Finance is here to help you compare your options and secure the right funding for your business.