Page written by Chris Godfrey. Last reviewed on June 5, 2025. Next review due April 6, 2026.
Small, fast, flexible, and easy to access, micro loans can be a gamechanger for entrepreneurs or small businesses who are struggling to obtain traditional business finance.
A micro loan is a small, short-term business loan designed to help entrepreneurs or small businesses that typically lack access to regular banking services or do not qualify for conventional loans. Provided by government sources, some banks, non-profits, online lenders and charities, and with eligibility and repayment terms that are more flexible that mainstream business lending, these loans are often used to start or expand small businesses or support underserved communities.
Micro loans can be used to start, maintain or grow a business.
Key Features:
Micro loans are commonly used to purchase equipment, inventory, or cover working capital for small businesses. However, they can also be used to launch a new business, covering initial costs such as renting business premises, creating a business website or covering the cost of an operating licence.
Young companies, established businesses, entrepreneurs just starting out – micro loans can help many types of organisation.
Micro loans can provide essential funding for UK start-ups and early-stage businesses that may lack access to traditional finance. These loans can help to cover initial costs like equipment, inventory, or marketing, enabling businesses to launch or grow. With lower borrowing amounts and flexible terms, micro loans can reduce financial strain, support job creation, and foster entrepreneurship, especially in underserved communities. They can also help build credit history, improving future access to larger funding sources.
Micro loans can provide small businesses with quick access to short-term funding for managing cash flow, covering unexpected expenses, or seizing timely opportunities. With lower borrowing limits, fast approval, and flexible repayment terms, these loans can deliver a practical solution without creating unmanageable long-term debt. Ideal for bridging gaps between invoices or seasonal fluctuations, micro loans can help businesses stay operational and competitive while avoiding disruption due to financial shortfalls.
Building a business or driving a project when you don’t have access to traditional finance can be tough. Micro loans help UK entrepreneurs resolve this problem by offering small, manageable funding without requiring extensive credit history or collateral.Â
Like all financial products, micro loans have their advantages and disadvantages.
Pros
Cons
Applying for a micro loan is similar to applying for any business loan. The first step is to identify a suitable lender—this could be a government source, a community development finance institution (CDFI), a bank or an online microfinance provider. Be aware that lenders will often have very specific funding rules, so you’ll need to research their eligibility criteria carefully to make sure your business type, location, and funding needs are covered.
Once you’ve found a suitable lender, prepare key documents such as a simple business plan, cash flow forecasts, and personal identification such a proof of address. You may also need to demonstrate how the loan will support your business goals.
Complete the application online or in person, providing detailed yet concise information about your business, financial position, and how you plan to use the loan. Some lenders may require a brief interview or additional documentation. If your application is approved, micro loans are usually issued quickly. Funds could be deposited into your bank account within 24 hours of approval.
Every micro loan lender will have a unique loan criteria and methodology, which means applying one by one could be a slow and frustrating process. Alternatively, you could fast track your application by using the services of a financial marketplace that gives you access to a wide range of micro loan lenders with just one application. Not only does this tactic save you time, it can give you loan comparisons that let you choose the best deal for your situation.
If a micro loan is not for you, there may be other ways to get the funds your business or project needs.
Business grants are provided by local and national government and some foundations and charities. This is effectively free money, as grants do not need to be repaid like a loan. However, applicants should be aware that there is often stiff competition for grants, the application process can be slow and difficult, and the pool of available money is usually limited, which can restrict the amount of cash you may receive.
Available via various online platforms, crowdfunding can provide the cash you need if your presentation hits the right spot. Although it may be tough to raise large sums in small donations from hundreds of donors, the cash is essentially free as there is no interest to pay, and you don’t need to repay the money if you spend it where you said you would. An eye-catching idea and a powerful pitch are essential to succeed with this funding option.
Peer-to-peer (P2P) lending is a method of borrowing money directly from individual investors through an online platform, bypassing traditional lenders such as banks. Businesses apply for loans, and lenders may choose to fund them, often in small amounts across multiple loans. Although this lending method can be time-consuming for borrowers, it may offer access to funds when businesses are unable to obtain other types of business loan.
Working with business finance experts can make all the difference when applying for a loan. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality micro loans from a choice of lenders. Grow your small business into a big business. Register with Swoop today.
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
Swoop promise
At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.
Find out more about Swoop’s editorial principles by reading our editorial policy.
Related pages
Get your free Micro Loans quote today
Join the 95,000+ businesses just like yours getting the Swoop newsletter.
Free. No spam. Opt out whenever you like.
We work with world class partners to help us support businesses with finance
Suite 42, 4th Floor, Oriel Chambers, 14 Water Street, Liverpool, L2 8TD
View in Google MapsKingfisher Way, Silverlink Business Park, Newcastle upon Tyne, NE28 9NX, UK
View in Google Maps35 Bull Street, Lewis Building, Birmingham B4 6AF, UK
View in Google MapsAberystwyth Innovation and Enterprise Campus
Gogerddan Campus
Aberystwyth University
Ceredigion
SY23 3EE
Dogpatch Labs, The CHQ Building, Custom House Quay, Dublin, Ireland
View in Google MapsSuite 801, Level 8, 84 Pitt Street, Sydney, NSW 2000, Australia
View in Google Maps43 W 23rd St, New York, NY 10010, United States
View in Google Maps21 Dreyer Street, Cape Town, South Africa, 7708
View in Google MapsClever finance tips and the latest news
Delivered to your inbox monthly
Join the 95,000+ businesses just like yours getting the Swoop newsletter. Free. No spam. Opt out whenever you like.
Thanks for requesting a call back
a member of the team will be in touch.