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A business loan means you can borrow a specific sum of money and pay it back, with interest, over a defined period of time.

The loan must be used for business purposes, which include:

• Starting/expanding your company

• Paying for stock

• Hiring employees

• Investing in equipment

You can also use the funds to help manage your business cash flow.

The government-backed Start Up Loan scheme aims to help small businesses in the early stages of their journey with a loan of between £500 and £25,000.

To apply, you'll need to live in the UK, be over 18, and either have a UK-based business or plan to start one. The loan term is 1-5 years at a fixed interest rate of 7.5%, and your company must have been trading for less than 60 months.

As part of the scheme, the government offers 12 months of free mentoring to help your business too. There are also no application fees or early repayment costs.

You can find out if your business is eligible for the Start Up Loan before you apply.

To get a business loan approved, you'll have to provide information to show you meet the eligibility criteria.

You will typically need:

• To be over 18 years old

• To have a UK bank account

• Up-to-date accounts and bank statements

• To show your credit profile

• A business plan with the loan's purpose and how you plan to repay it

The credit score required to secure a business loan varies depending on your lender and the type of loan you're applying for.

Before getting a business loan, it's important to understand how much it will the total cost will be, including the interest you'll pay.

The amount your business can borrow will depend on a range of factors, including:

• Your business credit history

• Business turnover

• Length of loan

For smaller businesses, lenders will typically offer loans worth up to £500,000.

Larger businesses with higher turnover are generally more likely to be accepted for loans over £1 million, but this varies depending on the lender and the business’s eligibility.

Potential repayments:

Below are three examples² of how much business loans could cost with different terms and rates:

Use our loan calculator to find out how much a business loan could cost you each month.

At the start of 2026, many forecasts predicted the Monetary Policy Committee (MPC) would lower the Bank of England base rate, which has stood at 3.75% since December 2025.

After another decision to hold in April, financial markets are pricing in the possibility of rate rises in the second half of the year. This is due to renewed concerns about inflation, particularly linked to energy costs.

Higher base rates typically lead to higher borrowing costs for businesses. That said, lenders set their own criteria and pricing, so any changes will depend on how financial providers respond to future rate decisions.

The next base interest rate decision is due on Thursday 18 June, and you can track updates on the Bank of England's explainer page.

To give your company the best chance of securing funding, it’s important to keep your finances well-organised.

Lenders want to be confident that your business can repay any money it borrows, so you need to demonstrate that your company is in a strong financial position.

This means you need to have:

• Up-to-date accounts

• A healthy bank account history

• A clear plan for how your business will use the funds

You also need to show that your company generates enough income to cover the loan repayments. Typically, lenders look for a Debt Service Coverage Ratio (DSCR) of at least 1.25, meaning your income is at least 25% higher than your company’s debt obligations.

For more information, read our expert guide on how to get loan-ready.