Written by the Lendus editorial team · Last updated: April 2026
To qualify for a business loan in the UK, you typically need at least 2 years of trading history, a minimum annual turnover of £100,000, a clean or recoverable credit profile, and the ability to demonstrate that the business can afford the repayments. You'll also need to provide financial documents and, for most unsecured loans, a personal guarantee from directors.
Lenders assess business loan applications against five core criteria. Understanding each helps you target the right lenders and strengthen your application.
| Trading History | Lender Options |
|---|---|
| Less than 12 months | Start Up Loans (government-backed), some specialist lenders |
| 12–24 months | Fintech lenders (Iwoca, Capify, Nucleus), some challenger banks |
| 2+ years | Full range including mainstream banks, Funding Circle, Allica |
| 3+ years with filed accounts | Best rates, highest loan amounts, lowest scrutiny |
Start Up Loans (administered by the British Business Bank) offer up to £25,000 per director at a fixed 6% interest rate for businesses under 3 years old. They require a business plan, cash flow forecast, and personal survival budget.
Lenders want to know you generate enough revenue to service the debt:
| Lender Type | Typical Minimum Turnover |
|---|---|
| Government Start Up Loan | No minimum (business plan required) |
| Fintech lenders | £50,000–£100,000 |
| Challenger banks | £100,000–£250,000 |
| Mainstream banks | £100,000–£500,000 |
| Secured commercial lenders | Focus on asset value, less turnover-driven |
As a rough guide, most unsecured lenders will advance up to 20–25% of annual turnover in a single unsecured facility.
Lenders check both your business credit score and personal credit score (for directors with 25%+ ownership):
What helps:
What hurts:
Adverse credit isn’t always a dealbreaker. Satisfied CCJs over 3 years old, one missed payment, or a previous business failure from 5+ years ago may not prevent approval — particularly with specialist lenders. Be honest with your broker about your history.
Lenders calculate whether your business can afford the repayment:
Debt Service Coverage Ratio (DSCR): Annual net profit (or EBITDA for larger loans) ÷ annual loan repayments
Most lenders require a DSCR of at least 1.25–1.5 — meaning you generate £1.25–£1.50 of profit for every £1.00 of annual debt repayment.
Example:
Lenders want to understand:
| Document | What Lenders Want |
|---|---|
| Company accounts | Last 2–3 years, filed at Companies House |
| Bank statements | Last 3–6 months, business account |
| Management accounts | If filed accounts are older than 9 months |
| VAT returns | Last 4 quarters (if VAT-registered) |
| ID and proof of address | All directors/shareholders with 25%+ stake |
| Existing loan statements | Current balance and monthly payments |
| Business plan | For newer businesses, start-ups, or larger loans |
Tip: Have these ready before you approach any lender. Delays in providing documentation are the single most common reason for a slow decision — or for a lender to lose interest.
| Business Type | Typical Unsecured Limit | Typical Secured Limit |
|---|---|---|
| Sole trader | £25,000–£50,000 | £250,000+ (with property) |
| Partnership | £50,000–£150,000 | £500,000+ |
| Limited company (2 years) | £100,000–£500,000 | £2m+ |
| Limited company (5+ years, strong accounts) | £500,000–£1m+ | £5m+ |
File your accounts on time. Overdue accounts signal poor financial management and some automated systems will decline you at the credit check stage before a human reviews your case.
Reduce existing debt before applying. Paying down a business credit card from 80% utilisation to 30% before applying can materially improve your credit score.
Separate personal and business finances. Lenders want to see a clean business bank account. Mixed personal/business transactions suggest poor bookkeeping and can make it harder to assess true turnover.
Build your business credit file. Register with Experian Business and Equifax, and consider taking a small business credit card and repaying it in full monthly — this builds a positive trade payment history.
Prepare a short briefing document. Even for straightforward applications, a one-page overview of the business — what it does, why it needs the loan, and how it will be repaid — can significantly improve the speed and quality of the underwriting decision.
Use a broker rather than applying direct. Brokers soft-search multiple lenders without leaving footprints and can identify the best match for your specific profile. They also negotiate on terms and manage the documentation process, which saves significant time.
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