A Small Business Loan is easy to get if you are doing the important things right

Availing small business loan can be a great option to those who want to expand their business, provide funding for research or analysis, helps businesses grow, improve marketing strategies and many more. But is it that easy to secure a loan for a small business? I don’t think so. Although so many lenders out there would offer this loan, securing it is not that easy.

There are so many things that you need to get right to avail a small business loan UK. In this article, we will discuss all things you need to get a loan and how careful you have to be with everything to get that. Make sure to stick till the end to know a lot of information.

Things to do to avail a small business loan

The points below are the major roadblocks that stop you from getting that business loan you have been eyeing for. Get all of these right, and it becomes a cakewalk to avail the loan.

Improve credit history

Credit history is the first and most important thing that lenders check to issue you a loan. It helps in determining the credibility of a borrower. If you have an impeccable credit history and pay back all of your loans on time without any delay, then you have a great chance to get the loan.

However, there many loan requests are declined based solely because of credit history.

You can check your credit score on Experian, Equifax or TransUnion. All of these can help you in knowing your credit score.

Most credit rating agencies divide credit rating into three categories: fair, good, and excellent.

Fair721 – 880380 – 419566 – 603
Good881 – 960420 – 465604 – 627
Excellent961 – 999466 – 700628 – 710

If you have investors or partners in your business, the lenders can run an individual credit check for all of them to get an insight of where your business stands and are reliable enough to provide a loan with.

Once you build a good credit score for yourself and the business, there are higher chances of availing the loan at a reasonable interest rate. However, if you have a bad credit history and want a loan, you must go for “bad credit loans” and pay a higher interest rate.

A solid business plan

Lenders need to know what you are going to do with the money. They prefer a borrower with a plan in place and wants to execute that. It is common for small businesses to not have any well thought out business plan in place, but that shouldn’t be the reason for you not to get a loan.

Spend some time and write a business plan where you will mention your plans, strategy, financial forecasts and projections for the future. Make a clear note of things where you will be utilising the money.

Here is a small example for you to understand how a business plan can help.

If you need a loan of £100,000 for working capital vs a loan of £100,000 for business growth (£10,000 for inventory, £30,000 for hiring, £60,000 for marketing).

Put yourself in the shoes of a lender and see which one looks less risky and mor secure to you? Here are some of the must include things in your business plan

  • Description of your company
  • Management team
  • Description of your product or service
  • Current and projected finances
  • SWOT Analysis
  • Industry analysis
  • Facilities and operations plan
  • Marketing, promotional strategies

This business plan will improve lenders’ trust, which increases your chances of approval for small business start-up loans.

Meet lender’s requirement

This is another important aspect that you need to focus on. There are different types of lenders in the market, and each of them has its own pre-requisites. Starting from your credit score to your annual income, you will find lenders with different kinds of opinions.

If you opt for government small business loans, the requirements will vary compared with private lenders. So, once you pick from where you want to get the loan, check their requirements.

Cash flow

Cash flow will help lenders know whether you can repay loan instalments on time. If your business doesn’t have a steady cash flow, then the chances of you getting a loan are reduced.

This cash flow is the one thing that will help them in assessing how healthy your business is.

Irrespective of the lender’s opinion, you should measure business cash flow regularly.

If you cannot figure out the business’s current financial situation, then take the help of a your accountant. Sort all the doubts that you have in mind and get tips on what to do to improve cash flow.

Once you do this, you will get a clear idea of what steps you need to take in order to get your business back on track. Once it gets better, the lenders will also start trusting you with repaying their loan back.

Get financial and legal documents in order

Be it banks or any other financial institutions; colossal paperwork needs to be done and submitted. If you have all these documents handy and intact, it will surely help speed up the approval of small business loans.

  • Income tax returns – personal and business
  • Business plan
  • Cashflow projections
  • Management accounts including latest Income statement, Balance sheet
  • Finance projections

These are the most important documents for traditional lenders. However, if you opt for online loans, you won’t be needing all of this documentation. They would be looking at your returns, balance sheet and income statement.


Now, this may not be possible for everyone, but it will surely improve your chances of getting the loan. If you have any real estate assets or machinery, inventory that you can provide as collateral, lenders will trust you.

This collateral will provide them with the guarantee that they can realise the collateral if you fail on payments. Some lenders don’t want collateral but need a personal guarantee. This personal guarantee will put your personal assets and credit score at risk.

Shop around

Finding the right lender to avail loan can be a daunting task. Once you find a lender willing to offer a loan, don’t just jump at it. Still shop around and see the interest rates, etc., before picking a lender.

Again, do not apply for loans to multiple lenders either. This can also take a toll on your credit score.

Types of business loans in the UK

There are different types of small business loans UK available. Check this list and pick the type of loan that will suit you.

  • Invoice financing: The lender will pay you for outstanding invoices (usually upto 85%). This typs of loans are payable when the customers clear your invoice.

  • Unsecured loan: This type of loan doesn’t require any collateral. However, it needs backing from the company’s directors, and if you default the loan, they can pursue the director for payment. These unsecured loans are good for start-ups, but the amount will be less, and interest is more.

  • Short term business loans: These short term business loans are great for companies that want a quick cash boost and can repay in a few weeks to months.

  • Peer to peer loans: These loans are obtained online from investors. These are not related to banks and are easy to procure.

Wrapping up

So, these are some things that businesses have to do right to get a bank loan. It may seem like a tough thing, but once you plan and work on improving your credit score, cash flow and use collateral, you will get a loan without any doubt.

Experlu Editorial Team
The editorial team at Experlu is comprised of seasoned financial professionals dedicated to providing high-quality content on accounting and finance. With a wealth of experience and diverse expertise, the team produces insightful articles that have established the Experlu blog as the UK's leading financial and accounting resource. The team includes accountants, auditors, and business advisors who stay updated with the latest industry developments. Their commitment to excellence ensures that Experlu remains a trusted source of information, helping readers stay informed about audit, business, finance, and tax matters.