Article – How to Find the Best Lenders for UK Business Loans: A Comprehensive Guide

Published on
October 22, 2024

Running a business requires continuous financial support, whether for expansion, new equipment, or increased staffing. Securing a business loan can provide the necessary funds, but with so many lenders in the UK, how do you choose the right one? In this guide, we’ll break down the top criteria lenders use when deciding on business loans, helping you make an informed decision and improving your chances of approval.

At Best Business Loans, we are an established and experienced team of business loan brokers, who will help you find the loan rates from a wide range of UK Business lenders. All the lenders on our panel have a proven track record of supporting businesses of all sizes and industries, providing flexible loan terms, competitive interest rates, and outstanding customer service.

We understand that finding the perfect lender can be a daunting task. That’s why at Best Business Loans, we do all the hard work and loan applications for you. Whether you’ve been trading for a few years or an established company in need of a large loan, this article will help you understand the process we go through, so together we can make an informed decision about which loan will be the best choice for you.

Key Criteria Lenders Consider for UK Business Loans

Credit History
Lenders typically check both personal and business credit scores. A strong credit history can demonstrate your reliability in repaying debts. If your business is new, your personal credit may be scrutinized more closely.

Business Financials
Lenders like to see evidence of stable cash flow and profitability. This includes:

  • Up to six months bank statements in PDF Format
  • Most recent annual accounts
  • Management Information, such as an up-to-date profit and loss statement

Time in Business
Established businesses are often seen as lower risk, which is why many lenders require a business to be operational for at least 1-2 years. Start-Ups may have fewer options, though some government-backed loans and Start-Up Loans cater to newer companies.

Debt-to-Income Ratio
Lenders assess your debt-to-income ratio to ensure you have the capacity to repay the loan alongside other existing obligations.

Purpose of the Loan
Lenders want to understand how the funds will be used—whether for expanding the business, purchasing equipment, managing cash flow or refinancing existing borrowing A clear and convincing explanation can really strengthen your application, so it’s helpful if you can give your broker as much detail as possible to include when we write up all the applications we’ll submit on your behalf.

Collateral
For an Unsecured Business Loan, you don’t have to be a UK Homeowner, but it can provide the lender with more confidence and open up more options for you. If you are not a homeowner but you are profitable, with a good personal and business credit score, there will be a good selection of lenders to choose from. Secured loans require you to offer assets (e.g property, machinery) as collateral. Lenders may evaluate the value of this collateral when determining your eligibility and loan terms.

Industry
Certain industries may be seen as riskier than others. Lenders often consider the industry in which your business operates, looking at sector-specific risks and trends.

How to Improve Your Chances of Business Loan Approval in the UK

There are ways to improve your chances of business loan approval, allowing us to speak to as many competitive lenders as possible. It’s worth considering these points if you plan to apply a business loan soon.

  • Improve Your Credit Score: Ensure that both your personal and business credit reports are in good standing as possible. It may be worth checking if you have any unsettled CCJ’s and if possible, clear them before you apply. Although having CCJ’s won’t rule out the possibility of a loan, it may reduce the number of lenders we can approach. If a CCJ is unsettled, the lenders will want to know what it’s for and why it has remained unsettled.
  • Details of the loan use: Lenders are more likely to approve applications backed by a clear, detailed plan for how the loan will be used. Including any upcoming contracts that show your business is growing and revenue will be increasing.
  • Increase Cash Flow: Having strong and steady cash flow can make lenders feel more confident in your ability to repay. If every penny that comes into your account goes back out by the end of the month, it will raise concerns about affordability. Try and keep a positive closing balance in your business bank account where possible.
  • Offer Collateral: If possible, offering assets as collateral can make it easier to get approved for a loan. If you have investment properties it’s always worth mentioning that to your broker, it really gives the lenders confidence that the business owner is a successful businessperson, with assets in the background, showing you are highly likely to repay the loan.

4. Conclusion:

Securing the right business loan can be essential for your company’s growth. At Best Business Loans, we work with many trusted UK lenders to help you quickly recieve the best terms and rates available. By understanding lender criteria and preparing your application, you can increase your chances of success.

Contact us today to discuss how we can support your business funding needs. Call 02921 900000 or email info@thebestgroup.co.uk

Useful Links – Here is a clip from our recent Podcast where we discuss how we helped an Engineering Company secure a £140,000 Unsecured Loan