Business Loan Calculator UK

UK business loans typically range from £1,000 to £500,000 depending on your business size, credit, and collateral. Banks usually lend up to 3x annual revenue for working capital or 4-5x revenue if secured by property. For a £500,000 annual revenue business, you might qualify for £150,000-£250,000 unsecured. With property backing, much more. Newer businesses or those with losses typically borrow smaller amounts or get rejected. Alternative lenders (peer-to-peer, asset-based) offer smaller loans (£5K-£50K) with less strict requirements but higher costs.

UK business loan rates range from 4% (for highly creditworthy borrowers with strong collateral) to 15%+ (for riskier borrowers or non-bank lenders). The majority of business loans rate between 5% and 10%. Fixed rates are typically 0.5-1% higher than variable. Your specific rate depends on Bank of England base rate, your credit score, business profitability, collateral, and lender. Shop multiple lenders because rates vary significantly. What one bank quotes at 8%, another might quote at 6.5% for the same business.

An arrangement fee (also called admin fee) is charged by the lender to process the loan application. It's typically 1-3% of the loan amount and charged upfront, usually deducted from the loan proceeds. For a £50,000 loan with 2% arrangement fee, the bank deducts £1,000 and you receive £49,000. You then repay the full £50,000. This effectively increases your borrowing cost. The arrangement fee is negotiable. Many banks will reduce it to 1% or waive it for good customers or large loans.

You make fixed monthly payments combining principal and interest. Early payments have more interest, later payments have more principal. With amortization, the payment amount stays constant but the split shifts. You can usually pay off the loan early without penalty, though some loans charge early repayment fees (1-3% of remaining balance). Some lenders allow payment holidays (skip a month), extending the loan term and adding interest. Ask about flexibility in repayment terms before signing.

APR (Annual Percentage Rate) in the UK legally must include all charges associated with borrowing except interest on the interest (which would compound). The APR must include arrangement fees, legal fees, insurance if compulsory, and any other mandatory charges. The interest rate alone doesn't equal APR. A 7.5% rate with 2% arrangement fee, valuation fee, and legal fees has an APR above 9%. Always compare APRs when shopping lenders, not just interest rates. UK lenders are required to disclose APR so you can compare fairly.

A term loan is a lump sum borrowed upfront that you repay over a fixed term (3-10 years) with fixed or variable rate. You receive all the money at once and payments start immediately. A line of credit is flexible: borrow as needed up to a limit, pay interest only on what you use, and repay and redraw. Term loans suit specific uses (equipment, property, expansion). Lines of credit suit working capital and cash flow gaps. Term loans have lower rates because they're longer-term. Lines of credit have higher rates because they're more risky for the lender.

Banks typically require: 2+ years of profitable trading history (startups struggle), business credit score, personal credit score above 680, 20-30% down payment or collateral, business bank statements for 6-12 months, and financial projections if borrowing for expansion. Directors' personal guarantees are standard; the bank can pursue your personal assets if the business can't pay. Accountant-prepared accounts help your application. Some banks lend to startups but charge higher rates and require more collateral.

Traditional bank loans take 4-8 weeks from application to funding. They move slowly because they verify all information. Alternative lenders (peer-to-peer, online) move faster: sometimes 5-10 business days. The trade-off is higher cost. Having all documents ready (accounts, tax returns, business plan) speeds the process. Banks often request additional information or clarification, adding weeks. Plan ahead; borrowing in crisis mode forces you to accept worse terms because you can't shop alternatives.

A secured business loan is backed by collateral, typically commercial property, personal property, or a charge over business assets. If you default, the lender can take ownership of the collateral and sell it to recover the loan. Secured loans typically cost 2-3% less in interest than unsecured. A £50,000 loan secured against commercial property at 5.5% is cheaper than unsecured at 8%. The downside is you could lose your collateral. Use secured loans if you have valuable assets and the rate savings are worth the risk.

A personal guarantee means you personally promise to repay the loan if the business can't. This is standard on UK business loans. If your business goes bankrupt, the lender can pursue you personally for the shortfall. They can take personal assets, garnish wages, and sue. This is why business loans feel risky: if the business fails, you might be personally liable for six figures. Negotiate with the lender whether they'll release your personal guarantee once the business reaches certain profitability. Some will, especially after 2-3 years of on-time payments.

Harder but possible. Banks typically decline credit scores below 600. Non-bank lenders are more flexible, ranging down to 500+, but charge much higher rates (12-18%+). Alternative options: secured loan (back it with valuable collateral), peer-to-peer lending, crowdfunding, or business credit cards (expensive but easier to get). The best approach is to improve your credit before borrowing. Dispute errors on your credit report, pay down existing debts, and ensure all bills are on-time for 6+ months. A 100-point credit improvement can save 3-4% in interest.

A covenant is a condition the lender attaches to the loan. Common covenants require you to: maintain minimum cash balance, not take on additional debt without lender approval, not sell major assets, keep key employees, maintain insurance, and achieve specified revenue/profitability targets. Breaking a covenant can trigger default. Covenants are more common on larger loans (£100K+) and asset-based lending. Negotiate covenant terms to avoid unrealistic targets. Covenants are restrictions on your business, so push back on ones that limit your flexibility.

Lower rates by: improving your credit score before applying, offering collateral or personal guarantee, shopping multiple lenders and negotiating, having a longer relationship with the bank (existing customers get better rates), providing strong financial projections showing the business is sound, and increasing your down payment (lower loan-to-value means lower risk). Most UK banks have some flexibility on rates for good customers. If you're 6 months into a loan, refinancing to a better rate is sometimes possible if your credit has improved or you now have collateral. Ask your existing lender about rate reduction.

If you default, the lender will begin recovery proceedings. If the loan is unsecured, they can sue you and get a judgment, then enforce through wage garnishment or asset seizure. If secured, they'll foreclose on the collateral. They'll pursue your personal guarantee, so your personal assets are at risk. The debt remains on your credit report for 6 years and makes future borrowing difficult. Best strategy: talk to your lender before missing a payment. Many will restructure the loan (extend terms, lower payments) to keep you current rather than force default.

Generally, borrow the full amount upfront. Each loan has arrangement fees and legal costs, so two loans cost more in total fees. Borrowing once also gives you certainty: you know the total cost. A second loan later comes with reapplication risk (you might be declined) and potentially higher rates if your circumstances have changed. The downside of borrowing large upfront is paying interest on money you're not using yet. Balance this: borrow what you'll definitely need in 12-18 months upfront, and add a line of credit for unexpected needs. This avoids extra loan costs while maintaining flexibility.

Loan term is the duration you have to repay the loan, typically 3-25 years depending on loan type. Short terms (3-5 years) mean high monthly payments but low total interest. Long terms (10-25 years) mean low monthly payments but high total interest. A £50,000 loan at 7.5% costs about £12,000 interest over 5 years but £23,000 over 10 years. Choose term based on your cash flow capacity and the asset's useful life. If borrowing for equipment lasting 10 years, a 10-year loan makes sense. If borrowing for working capital, a 3-5 year term is better.