How to apply for a business loan

Whether you’re taking your first steps into business or you’re looking to build on existing foundations, applying for a business loan can give you the money you need to expand, buy equipment, take on new staff, build credit or get your business through a rough patch. 

Many lenders offer small business loans between £500 to £100,000. With the base interest rate often in the lower range and current Government support for small businesses, you could be looking at competitive terms.

What’s in this article? 

  • Business loans and how to choose one
  • Why you should check your credit score
  • Putting paperwork in order
  • Making sure your loan is approved
  • Alternative options including grants and crowdfunding

Choosing and applying for a small business loan

Once you’ve decided to apply for a small business loan, dedicate time to researching which one works best for you. Many high street lenders offer business loans but there are online lenders and credit brokers available as well. 

If you’ve not been in business long, securing a loan may be more challenging without the required business credit history or trading account. More traditional lenders often require these as evidence that you will make repayments and without a good credit history you could be seen as higher risk. But don’t despair. There are loans that are specifically designed for startups and businesses that have been trading for less than 24 months. The advantage is that they are generally unsecured, so you won’t need to put up business or personal assets as collateral. However, bear in mind that unsecured loans have a higher interest rate, so it’s unlikely that you would benefit from the current low interest rates. 

Some startup loans offer additional support such as discounts with other services or mentoring programmes, so it’s worthwhile putting in the time to find the right scheme for you. The Government’s loan scheme offers an unsecured personal loan of up to £25,000, alongside other forms of business support.

Check your credit score

Before you apply for a loan, check your credit rating with an online agency such as Experian or Check My File. If your credit rating is good, it may help you successfully secure a loan. If not, you may need to set about building it up before you apply – a poor credit rating could lead to high interest rates or your application being refused.


If your rating isn’t as healthy as you would like, there are a few things you can do to increase it. Lenders like to see that you’ve borrowed money and have a track record of paying it back, so having a credit card and paying off the balance regularly can be a good way to do this. Also, make sure you’re on the electoral register – lenders also need this info to confirm your identity.

Gather essential information

Before filling out an application, it will be useful for you to gather all the information you might need about your business. Make sure you know how much you want to borrow and why. You will likely be asked this during the process. It’s also important to have the last few months of your business account statements available. A lender could ask to see your balance sheet as well as details of any profits or losses you’ve made.

If you’re just starting out and looking for capital to get going, you may not have any business statements to show, so you may need to provide personal ones. The lender may request to see your business plan, which should include projected turnover and profits for the next three years.

Pay attention to the detail

Before you hit the submit button, check and double check your application. Make sure all the information you’ve provided is accurate. The last thing you want is for a tiny error to hold up your application.

While it may be tempting to have several applications on the go at the same time, it’s best if you only deal with one at a time. Multiple applications could give lenders the impression that you’re struggling to get approved.

Alternatives to small business loans

If a loan is out of the question, you could apply for a small business grant. There may be a lot of competition and you’ll need to meet certain eligibility criteria, but they can be a great source of business investment.

Another popular option is crowdfunding, which helps you to raise money by asking for contributions from the public. You can set the conditions on how it works. For example, some crowdfunding campaigns give people the chance to invest in return for a small amount of equity, others offer rewards associated with their product, and some may inspire their audience to invest in their business without rewards. There are many online crowdfunding platforms that take help you set up your campaign step by step, such as Go Fund Me, Crowdfunder and Spectroomz.

While you’re searching for the right financial solution for your business, make sure to keep on top of your cash flow. Countingup is the business current account that comes with free built-in accounting software. The app automates time-consuming bookkeeping admin so that you can focus on making your venture a success. Find out more here.

Disclaimer: Please note that Counting Ltd (trading as Countingup) does not offer financial advice and does not make any recommendation or endorsement as to any loan, means to secure a loan and/or any third party referenced in this article. The financial services mentioned above may not be suitable for you. Consult your own regulated financial advisor before making a decision or taking action.