Small Business Loans London

Business loans for SMEs in London come in all shapes and sizes. Borrow from just a few £thousand all the way up to £5million, repay in weeks, months or years.

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Small business loans can support your cashflow with working capital, buy major assets such as vans and machinery, provide the funds to start a new venture, or give you the financial muscle to grow your business faster.

Read on to learn more about small business loans in London:

  • London small business loans
  • London business grants
  • Alternative business financing 
  • Your credit score 
  • Successfully applying for a business loan

What small business loans are available in London?

Expand production, launch a business, pay your VAT, support cashflow, or buy vehicles, plant and machinery:

Starting a new business

Entrepreneurs seeking to launch their own small business in London may get a financial boost with a startup loan – seed money to get a new business off the ground. Government funds may also be available for this type of loan. Security may be required.

Expansion loans

Expand operations with development and bridging loans. Use the funds to refurbish or extend your current premises. Borrow up to 90% of the project cost and repay over 1 – 30 years. The property acts as security and in most cases, no extra collateral is required.

Working capital loans

Working capital loans can be used to pay wages, utility bills, inventory and more. Depending on the type of loan you choose, added security may be required. 

Type of loanDetails
Small business loanWorks like a traditional bank loan. Borrow from £1,000 to £500,000.
Invoice financeRelease the cash tied up in your outstanding invoices.
Revolving line of creditWorks like a bank overdraft. Dip into the available funds as and when you need them. Pay back from incoming revenues.
Merchant cash advanceFor businesses that accept credit and debit card payments. Borrow against your card sales, the higher they are, the more you can borrow.
Business credit cardsWork like personal credit cards but are held by the business instead of an individual. Usually come with a higher credit limit than personal credit cards. Can be more costly than other forms of small business loan.

Buy major assets

Asset finance helps small businesses buy expensive equipment, such as vehicles, plant, and machinery. Borrow up to £5million. Make money with the equipment as you pay for it. The asset acts as security for the loan. In many cases, there is no need to provide added collateral.

Franchise finance

Franchises offer entrepreneurs an opportunity to join a well-known brand, benefit from centralised marketing support, and have easy access to products and equipment. However, becoming part of a major franchises can be expensive, and few franchisors offer funding to cover the startup costs. A franchise loan can solve this problem. Borrow from £1,000 to £5million. Repay over months or years. Additional security may be required.

VAT loans

Slow paying customers can leave London business owners battling to pay their VAT bill, making them vulnerable to penalties and interest. VAT loans can be used to pay the taxman on time, avoiding penalties and allowing businesses to hold on to their available cash much longer. The lender pays HMRC direct. Repay the loan over 3, 6, 9, or 12 months.

Commercial mortgages

A commercial mortgage in London is a type of loan that enables businesses to purchase commercial property or land within the city. Unlike unsecured business loans, which have a maximum limit of £250,000, commercial mortgages are better suited for businesses requiring financing between £50,000 and £25,000,000.

Similar to a residential mortgage, the borrowed amount is typically obtained from a bank or specialised lender and repaid through monthly instalments over a fixed term with added interest. However, the value of the property or land is typically higher with a commercial mortgage compared to a residential one.

If you’re considering obtaining a commercial mortgage in London, our expert team is available to discuss your requirements. Contact us today to learn more.

How do I find a business grant in London?

Business grants may take longer to secure than a loan and may come with restrictions on their use. However, unlike business loans, business grants do not need to be repaid or require security. 

Business grants in London may be found here: 

What alternative business financing options are there?

Alternative business financing options include venture capital, angel investment, microloans and crowdfunding. Structure, costs, and lender participation will vary with each option, so it is important to conduct your own research before you start an application.

Type of loanDetails
Venture capitalPrivate equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have high growth potential, or which have already demonstrated high growth.
Angel investmentCapital for businesses, including startups, usually provided in exchange for convertible debt (a loan that can be converted to shares), or shares in the business.
MicroloansVery small loans to borrowers who typically lack collateral, steady employment, or a verifiable credit history. Designed to support entrepreneurship. Also includes Peer to Peer loans, where private individuals provide funds directly to small businesses or other individuals. Interest rates on microloans can be more expensive than other types of borrowing.
CrowdfundingFund a project or venture by raising money with many small donations from a large number of people, typically via the internet. Funds raised are not a loan and do not need to be repaid as long as you use them for the purposes described in your presentation.

How to apply for a business loan in London

Application for most small business loans is usually straightforward. Lenders will typically require the following information:

  • Most recent three-years bank and tax records. (Business account for established businesses,  personal account for entrepreneurs launching a new small business).
  • Cashflow forecast.
  • Profit and Loss Statement and recent Balance Sheet. (Established businesses).
  • Details of any existing debt.
  • List of major customers and suppliers.
  • List of any assets, such as property or inventory.
  • Business plan – as detailed as possible.

Top Tip: Some lenders may ask for a personal guarantee by the business owners or directors to secure the loan. If they do, they will check their personal credit scores. Don’t get caught out by an error on your credit report, always check your business and personal credit scores before you apply. 

What credit score do I need?

As well as your business credit score, some lenders will review your personal credit report. The credit score you need to qualify for a business loan in London will vary depending on the lender and type of loan you are applying for. A score of 600 or more is usually required for swift approval, but even if you have bad credit, or you’ve been turned down elsewhere, it may still be possible to secure the loan you need.

What are the typical interest rates for a business loan in London?

Interest rates vary according to the type of loan you choose. Typical interest rates on business loans in London range from 4% to 15% APR.

How long does it take to get funds?

No business owner wants to wait for the funds they are borrowing, but the length of time from application to receipt of funds varies from lender to lender and the type of business loan you choose. Some loans will fund within a few days, others will take much longer. In most cases, you should allow one to three weeks to receive your money.

How to find the best small business loan in London

There are many types of small business loan, with differing rules of application. London SMEs seeking funds may find themselves forever searching and making applications to lender after lender. The delays this can create could cause you to lose revenues and leave your business vulnerable to the competition. Instead, working with a broker, who can access small business loans from a wide range of lenders is a better way to go. No more cold calls and endless demands for information, simply tell us what you need and leave the rest to us. 

Get started with Swoop

Give your business the funds it needs to thrive. Register with Swoop to find the best rates, the best terms and the best small business loans in London.

Written by

Chris Godfrey

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.

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