Unsecured business loans for UK businesses

An unsecured business loan gives your company a lump sum that is repaid in fixed instalments, with the lender relying on the company's cash flow and the directors' guarantees rather than a charge over business assets. The process is short, but each stage matters for the price and the terms you end up with.

1. Affordability check. The lender reads your business bank statements to see average monthly credits, regular outgoings, existing loan repayments and how often the account dips close to its limit.
2. Credit assessment. Once you choose to apply, the lender searches the company's credit file and usually the directors' personal files too. Late filings at Companies House, county court judgments and missed payments are all noted.
3. Offer. If the lender is comfortable, it sets an amount, a term and a price. The offer shows the monthly instalment and the total repayable.
4. Guarantee and signing. Directors normally sign a personal guarantee alongside the loan agreement.
5. Drawdown and repayment. Funds are paid to the company account, and repayments are usually collected by direct debit on a fixed date each month.

Because there is no valuation or legal charge to register, unsecured business loans are generally quicker to arrange than secured borrowing. The trade-off is that the lender carries more risk, which is reflected in the price and in the guarantee it asks for.

Beyond the standard fixed-term loan, lenders offer several unsecured structures that suit different patterns of spending. Choosing the right one can matter as much as the price.

• Flexible or drawdown loans: an approved limit that the company draws in tranches, paying interest only on what has been drawn. Useful for a project with staged costs.
• Seasonal repayment profiles: some lenders allow lower repayments in quiet months and higher ones in busy months, which can suit hospitality or retail businesses.
• Interest-only periods: occasionally available at the start of a loan while new equipment or staff begin generating income, followed by capital and interest.
• Top-up loans: a further advance from an existing lender once part of the original loan has been repaid.

Not every lender on our panel offers each of these, so it is worth telling your relationship manager how and when the money will be spent.

The cost is the total of interest plus any fees, and the clearest way to compare offers is the total amount repayable over the full term. A low monthly instalment over a long term can cost more overall than a higher one over a short term.

Charges you may see include:

• Interest: quoted by some lenders as an annual rate on the reducing balance and by others as a flat rate or a fixed factor. A flat rate is charged on the original amount for the whole term, so it is not directly comparable with a reducing-balance rate.
• Arrangement or origination fee: often deducted from the loan before it is paid out, which means the company receives less than the headline amount.
• Early settlement charges: an amount payable if you clear the loan early, sometimes expressed as a number of months' interest.
• Late payment and default charges: fees and extra interest if a repayment is missed.

Lenders price unsecured business loans by risk. The things that usually move the price are the strength and consistency of turnover, profitability in the latest accounts, how long the company has traded, the credit records of the company and its directors, the sector, existing debt and the length of the term.

Illustrative example only: actual costs depend on the lender and your circumstances.

A hypothetical engineering company borrows £50,000 over 36 months to buy software and recruit two staff. The lender's offer sets a monthly repayment of £1,700 and an arrangement fee of £1,000 deducted at drawdown.

• Total repayments: £1,700 x 36 = £61,200
• Interest element: £61,200 minus £50,000 = £11,200
• Arrangement fee: £1,000, so £49,000 actually reaches the bank account
• Total cost of credit: £11,200 + £1,000 = £12,200

Comparing the £12,200 figure, not just the monthly payment, makes offers easier to weigh up. You can model your own figures with our business loan calculator.

Most lenders size an unsecured loan from monthly turnover and spare cash flow, not from the purpose of the loan. A common starting point is a proportion of annual turnover, which is then tested against what the bank statements show the company can afford each month.

In practice, a lender will usually look at:

• Average monthly credits over the last three to six months, ignoring one-off transfers and loans
• Repayments already committed to other lenders, including merchant cash advances and asset finance
• Net profit and any director drawings in the latest accounts
• How the requested monthly instalment compares with the company's free cash after costs

If the amount you want is higher than one unsecured lender will offer, options include a longer term, a smaller loan alongside another facility, or a secured structure. Our article on what UK lenders look at for unsecured business loans goes into more detail.

The biggest risk in an unsecured business loan is usually the personal guarantee, because it moves the risk from the company to the directors who sign it. Read the guarantee as carefully as the loan agreement itself.

• Scope of the guarantee: is it limited to a fixed sum or unlimited, and does it cover interest, fees and the lender's collection costs? Our guide on what a personal guarantee is explains the common forms.
• Joint and several liability: where several directors guarantee, the lender may be able to pursue any one of them for the full amount.
• Events of default: many agreements let the lender demand full repayment not only for missed payments but for things like a change of ownership, new borrowing without consent or a fall in turnover.
• Early settlement: check how the settlement figure is calculated and whether a minimum interest period applies.
• Continuous payment authorities and direct debits: know what the lender can collect and when.
• Cross-default clauses: a default on another facility may trigger a default on this one.

If anything is unclear, ask for it in writing and consider independent legal advice before signing, particularly on the guarantee.

An unsecured loan suits a defined, one-off cost that pays back over a known period. Other products can be a better fit when the need is ongoing or tied to assets or sales.

• Secured business loans: usually better when the company needs a larger sum or a longer term and has business assets to offer, accepting that valuation and legal work take longer.
• Revolving credit facility: usually better for recurring or unpredictable cash needs, because you draw and repay as needed instead of taking a lump sum.
• Invoice finance: often better for companies that sell to other businesses on credit terms, as funding grows with the sales ledger.
• Merchant cash advance: can suit businesses with high card takings, where repayments flex with sales rather than being fixed.

Sometimes, but it depends entirely on the lender and on the reason behind the issue. Some lenders on our panel will look at the full picture, while others apply strict cut-offs.

A single historic missed payment that has since been settled is often viewed differently from recent or unsatisfied county court judgments. A company with a short trading record may still be considered by lenders whose minimum trading period is a few months, although the amount offered is likely to be smaller. Low or loss-making profits can sometimes be explained by depreciation, director remuneration or one-off costs, and management accounts that show the current position can help.

Being open from the start is the best approach. Your relationship manager can tell you whether an application is realistic before any lender runs a credit search.

Unsecured business loans to limited companies, LLPs and partnerships of four or more partners are generally unregulated. That means the protections of the Consumer Credit Act generally do not apply to them.

Welcome Finance is not authorised or regulated by the FCA and arranges unregulated business finance only. In practice this means the loan agreement and the personal guarantee are the main source of your rights, so read every clause, ask questions and take independent legal or financial advice where you need it.

You get one named relationship manager, a real person you can reach by phone, email and chat, from your first enquiry until the lender pays out. We do not charge your company a fee.

1. Check eligibility in about 60 seconds, with no effect on your credit score.
2. Your relationship manager discusses the purpose, amount and term, and what documents to gather.
3. We identify suitable lenders on our panel and explain the differences between them.
4. With your agreement, the application goes to the chosen lender, which runs its own credit checks.
5. We go through any offer with you, including the total repayable, fees, early settlement terms and the guarantee.
6. You sign, and your relationship manager stays in touch until the funds arrive.

We are paid a commission by the lender when the finance completes. You can ask how much we will receive, and commission can differ between lenders. Read more on how we are paid.

Does unsecured mean nothing is at risk?

No. The company's assets are not charged, but the directors who sign personal guarantees can be pursued personally if the company does not repay.

Can a company have more than one unsecured loan at a time?

Yes, if lenders are satisfied it can afford all the repayments. Each new lender will see existing loans on the credit file and in bank statements, and may lend less as a result.

Will the lender want to know what the money is for?

Usually yes. Most lenders ask for the purpose and some will not fund certain uses, such as paying dividends or clearing personal debts.

Do lenders need filed accounts?

Many do, especially for larger amounts. Some lenders decide mainly on bank statements and credit data for smaller loans, but they will still check Companies House filings are up to date.

Can an unsecured loan refinance an expensive existing facility?

Sometimes. It can make sense if the total cost falls and the term is sensible, but check early settlement charges on the existing facility first.

What happens if repayments become difficult?

Speak to the lender as early as possible. Some lenders may agree a temporary payment plan, while missed payments without contact can lead to default charges and a demand on the guarantee.

Are repayments always monthly?

Usually, but some lenders collect weekly, particularly on shorter terms. Check the collection pattern fits your cash flow.

Can an LLP or partnership borrow unsecured?

Yes, LLPs and partnerships of four or more partners can apply. Lenders usually ask members or partners to give guarantees in the same way directors do.