If you need a quick cash injection, one solution is to ask a bank. A bank won’t just give you the money though; they’ll offer it under certain conditions – like a down payment. In that case, you may be wondering how much down payment you need for a business loan. 

Unfortunately, there is no clear answer. Down payments vary depending on the size of your business, how much you’re asking for, and your credit score. Each of these factors helps to determine the bank’s risk. The higher the risk, the more down payment you’ll need. 

Continue reading this article to learn:

  • What is a down payment?
  • What can you use a business loan for?
  • What alternatives are there?
  • Managing your business loans with Countingup

What is a down payment?

It can seem counterintuitive to need a down payment for a business loan. You’re asking for money because you need it, so why should you have to pay to get it?

Think of it this way; if you were buying a house, the bank would ask you to pay a deposit first, and then loan you the rest. A business loan works in the same way. The down payment makes it safer for the bank to lend you the money.

The size of the down payment typically depends on how large the loan is. Smaller loans require smaller down payments. Since loans can be costly in the long term, it’s important to know when to get a small business loan

What can you use a business loan for?

When applying for your loan, the bank may ask what you intend to spend the money on. That’s why it is a good idea to draw up an expense plan before you apply. The plan will help you show where you intend to spend the money. If you’re unsure, some common uses are:

  • Managing cash flow
  • Renting or buying new premises
  • Purchasing new equipment (like a company car)

As long as the money is helping the business to grow, and you can demonstrate how you’ll pay it back there shouldn’t be an issue with how you spend it. 

What alternatives are there?

If you don’t have a large amount of liquid cash available, getting a loan with a down payment may not be a valid option. In that case, there are a couple of different methods for you to boost your short-term cash flow. 

Secured loan

Depending on the provider, you may be able to secure your bank loan against your current assets — this could be a vehicle, property, or a piece of valuable equipment. By securing your loan like this, the bank will feel more comfortable lending you the money and may allow for a larger loan. 

You should only take out a secured loan if you are certain you’ll be able to meet every monthly repayment. If you miss a repayment, your loan provider may consider this a default on your loan, and claim your secured asset. 

Unsecured loan

If you don’t want to risk losing your asset, another choice could be to take out an unsecured loan. Typically, unsecured loans offer less capital than secured loans. In order to reduce their risk, the loan provider usually requires you to sign a contract accepting liability for the loan. If you cannot pay it, then a guarantor is needed instead. Guarantors are a third party (usually a relative) who can pay back the loan if you cannot. 

Since unsecured loans are generally smaller than secured loans, the monthly payments should also be smaller and easier to meet. 

Government start-up loan

The government offers a different type of unsecured loan. If your business is less than two years old, you may be eligible for a start-up loan. This loan can range from £500 to £25,000. Successful applicants can also get up to 12 months of free mentoring to help with their business. 

While some bank loans may have flexible interest rates, the start-up loan is frozen at 6%. This makes it much easier to repay, as you can calculate exactly how much you need to pay each month. 

It may also be comforting to know that there are no application or early repayment fees with the start-up loan. 


A method that is gaining popularity, crowdfunding (or crowdsourcing) is a way to raise money from a wide range of people. Imagine asking 1,000 people for £5 each. If they all say yes, you’ve just raised £5,000. Crowdfunding works by making that offer available online.

Companies like Kickstarter let you post your offer on their website, and visitors can decide to invest. In return, customers are promised certain items depending on how much they invest. For example, a board game company may promise to ship each customer a copy of their game. 

Some small businesses prefer this method of raising cash, because they don’t need to repay the money. Instead, the company has a specific amount of orders to fill and ship. 

If crowdfunding doesn’t suit your business model, then you may decide a loan is best for your business. If so, it’s essential to know how to apply for a business loan, especially if you haven’t applied for one before. 

Managing your business loans with Countingup

Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Start your three-month free trial today. Find out more here.