Term loan
From 6.9% APRA fixed lump sum repaid in equal monthly instalments over one to five years.
Facts checked JUL 2026
Business loans: the types, the rates, and which one fits
A business loan is not one product but six, and picking the wrong shape costs more than picking the wrong lender. A term loan hands you a fixed lump sum to repay monthly, a credit line lets you draw and repay as cash flow moves, a business credit card covers everyday spend, revenue-based finance takes a share of your sales, the government Start Up Loan funds brand-new businesses at a fixed rate, and asset or invoice finance borrows against what you own or are owed. This page explains each route, what it actually costs on 2026 rates, and which situation it suits, then hands you to the calculator to size the repayment.
| Route | What it is | How it is priced | Best for |
|---|---|---|---|
| Term loan | A fixed lump sum repaid in equal monthly instalments over one to five years. | APR, typically 10% to 15% unsecured, from about 6.9% for the strongest applicants. | A known, one-off cost such as equipment, a fit-out or a specific project. |
| Revolving credit line | A pre-approved limit you draw from and repay as you need it, paying only for what you use. | Interest per period on the drawn balance, or a flat fee per draw. | Uneven cash flow and topping up working capital between invoices. |
| Business credit card | A revolving card limit for everyday spend, interest-free if you clear it each month. | Representative APR in the mid-30s if you carry a balance, nothing if you clear it. | Day-to-day spend, cashback and a short interest-free float. |
| Revenue-based finance | An advance repaid automatically as a fixed share of your daily card takings. | A factor rate, not APR: a fixed multiplier set at signing that does not fall if you repay early. | Card-heavy businesses that want repayments to rise and fall with sales. |
| Government Start Up Loan | An unsecured personal loan for new businesses, with up to 12 months of free mentoring. | 7.5% fixed, £500 to £25,000 over one to five years. | A business under five years old that a commercial lender would still decline. |
| Asset and invoice finance | Borrowing secured against equipment you buy, or against invoices you are owed but not yet paid. | Lower rates than unsecured lending because the borrowing is backed by an asset. | Funding kit, or unlocking cash tied up in unpaid customer invoices. |
The six ways to fund a business
Revolving credit line
Pay per useA pre-approved limit you draw from and repay as you need it, paying only for what you use.
Business credit card
Free if clearedA revolving card limit for everyday spend, interest-free if you clear it each month.
Check your Capital on Tap limitCompare business credit cards
Revenue-based finance
Factor rateAn advance repaid automatically as a fixed share of your daily card takings.
Government Start Up Loan
7.5% fixedAn unsecured personal loan for new businesses, with up to 12 months of free mentoring.
Asset and invoice finance
SecuredBorrowing secured against equipment you buy, or against invoices you are owed but not yet paid.
Typical business loan rates in 2026
Unsecured business term loans ran at roughly 10% to 15% APR in mid-2026, with the strongest applicants offered rates from about 6.9% and newer or higher-risk borrowers paying 25% or more. Secured loans backed by an asset run cheaper. The catch is the pricing model, not just the number: a flat rate works out at roughly double the equivalent APR, and revenue-based finance is quoted as a factor rate that cannot be compared to an APR at all. The four lenders behind most UK business-loan searches publish these headline figures.
| Lender | Product | Amount | Headline rate |
|---|---|---|---|
| Funding Circle | Unsecured or secured term loan, plus FlexiPay credit line | £10,000 to £750,000 | From 6.9% a year |
| iwoca | Flexi-Loan, a revolving business credit line | £1,000 to £1,000,000 | Representative 49% APR |
| Capital on Tap | Business credit card, not a term loan | Limits up to £250,000 | Representative 34.9% APR variable |
| YouLend | Revenue-based finance, repaid as a share of sales | Up to £2,000,000 | Priced by fixed fee, no APR |
A headline rate is a starting point, not an offer, and only the lender's decision tells you the rate you will actually pay. Put your amount, term and quoted rate through thebusiness loan calculator to see the monthly repayment and the total interest before you commit.
The government Start Up Loan
A brand-new business that a commercial lender would decline can still borrow through the government Start Up Loan. It lends £500 to £25,000 per founder at 7.5% fixed over 1 to 5 years, as an unsecured personal loan rather than business lending, and includes up to 12 months of free mentoring. Up to four partners in the same business can each apply, taking the total to £100,000. The fixed rate rose from 6% to 7.5% on 6 April 2026, so treat any guide still quoting 6% as out of date. Because it is a personal loan, you are personally liable for it whatever happens to the business, which is the trade for lending that does not need trading accounts.
Apply for a Start Up Loan on gov.uk
Which finance fits your situation
- A one-off, known cost. A term loan is the clean fit: fixed sum, fixed monthly repayment, done when it is paid off. Funding Circle for an established business, the Start Up Loan for a new one.
- Cash flow that comes and goes. A revolving credit line such as iwoca's Flexi-Loan lets you draw only when you need it and stop paying interest when you repay, which suits seasonal or lumpy income.
- Everyday spend you clear monthly. A business credit card is cheaper than a loan for short-term spend, and free if you clear the balance in full.
- Strong card takings, thin accounts. Revenue-based finance flexes repayments with your sales, which helps if income is uneven, as long as you understand the factor-rate cost is fixed up front.
- A larger sum against an asset. Asset or invoice finance is cheaper for bigger borrowing, because securing it against equipment or unpaid invoices lowers the lender's risk.
Before you borrow
Borrow against a repayment you can already afford, not the growth you hope the money brings. Check three things before you sign: whether the quote is an APR, a flat rate or a factor rate, because they are not comparable; whether you are giving a personal guarantee, which puts your own assets on the line even for an unsecured loan; and what an early settlement costs, since some products fix the total at signing and charge you the full amount however fast you repay. Run the real numbers through thecalculator first, and keep any borrowed cash you are not using yet in a business savings account so it earns while it waits.
Questions people actually ask
What types of business loan are available in the UK?
There are six main routes: term loans, revolving credit lines, business credit cards, revenue-based finance, the government Start Up Loan, and asset or invoice finance. A term loan gives a fixed lump sum repaid monthly, a credit line lets you draw and repay as needed, and revenue-based finance repays as a share of your sales. Which one fits depends on whether your need is a one-off cost or ongoing cash flow.
Can I get a government business loan?
Yes. The government-backed Start Up Loan lends £500 to £25,000 to businesses under five years old at 7.5% fixed, as an unsecured personal loan with up to 12 months of free mentoring. It is the main government scheme for new businesses. Established businesses borrow commercially instead, from lenders such as Funding Circle or iwoca.
What interest rate will I pay on a business loan?
Unsecured business term loans sit around 10% to 15% APR in 2026, from about 6.9% for the strongest applicants and 25% or more for newer or higher-risk borrowers. Secured loans are cheaper. Watch the pricing model, because a flat rate is roughly double the equivalent APR, and revenue-based finance uses a factor rate rather than an interest rate.
How much can a new business borrow?
A new business can borrow up to £25,000 through the government Start Up Loan, and more from commercial lenders once it has trading history. iwoca lends from £1,000 and Funding Circle from £10,000. A lender sizes the offer to your revenue, time trading and credit profile, so a brand-new business with no accounts is usually steered to the Start Up Loan first.
Do I have to secure a business loan against assets?
Not always. Many small-business loans are unsecured, meaning no asset is pledged, though the director usually signs a personal guarantee. Secured loans, backed by property or equipment, carry lower rates because the lender's risk is lower. Unsecured is faster and simpler, secured is cheaper for larger sums.
Figures checked 4 July 2026; confirm details with the provider before applying. We may earn a commission through links on this page.