What are the Sorts of Business Financing Options in the UK?



Every business in the world needs money for day-to-day operations which is known as working capital or firms also might need money for its expansion. There are many cases where companies cannot generate sufficient cash flows from their operations and thus had to resort to borrowing money from external sources.

There can be many sources in the market from where you can raise capital for your business needs. This blog will explain some of the trending funding sources for companies in the UK market.

Fortunately, there are many direct lenders as well in the UK offering loans at home to even bad credit borrowing companies that too without taking any collateral.

Companies can apply online with these direct lenders to get quick loans for their business as these lending companies disburse the loan on the same day it is applied for.

Let’s look at some of the famous business funding sources in the UK:

  • Government Loans & Grants

These are loans given by the UK government to select businesses operating in a specific region or meeting any particular purpose. These can be loans or grants by the government usually given to small businesses, and if it is a grant, then there is no need to repay it, else the company has to repay if it’s a loan.

However, even if it’s a loan, the interest rates are the lowest you can get anywhere in the country with easy terms and conditions. Examples of these loans are BCRS Business Loans, Start-up Grant Scheme, etc.

  • Start-up Loans

Start-up and new businesses that have started recently often are not trusted by big commercial banks owing to their limited financial history.

Fortunately, there are some private loan companies and select commercial banks like NatWest Bank, who are offering these start-up loans. They also provide personal loans to entrepreneurs and founders of these start-ups, which shifts the repayment liability to the founder instead of the business.

  • Loans for Established Business

Companies in the UK who have been operating for many years now finds it relatively easy to take loans. This is because they have a strong relationship with these banks of working for many years currently. They have strong financials, consistent cash flows, and a vision for future expansion projects for which they need funding.

Also, these companies usually have a current account with these banks, which acts as collateral in many cases. Commercial banks offering these loans are HSBC, Santander Bank, Lloyds Bank, Barclays Bank, etc.

  • Short-Term Loans

There are many direct lenders present online in the UK who provide loans at home to many start-up companies, small and mid-size businesses. These are unsecured loans, i.e. without any collateral, and also the borrower does not have to produce any guarantor to represent him.

The best part about these loans is that you can apply for them and get them even if your company’s credit rating is sub-standard. This is unlike big commercial banks who will reject your loan application if your company’s credit history of repayment is not good.

These are majorly short-term quick loans that are transferred to the borrower’s bank account on the same day it is applied for after it gets approved. The approval rate of these loans is more than 90%, and just in case your loan application is rejected by these direct lenders then also your credit rating or score will not exacerbate further.

This is because these lenders do not do strict credit checks on the borrower’s loan application by assessing his credit profile taken from credit bureaus. The only thing a borrower should be sure of before taking these loans is the interest rates on these loans, which lies in the 30-70% per annum range. Some of these direct lenders are Funding Circle, Iwoca, Capify, Cashfloat, etc.

  • Bridging Loans

Its name is bridging finance as it bridges the gap between making a purchase and getting the money to finance that purchase. These loans are predominantly in the real estate buying of commercial properties by the companies in the UK.

Whenever any business wants to relocate to a different area or city, or even geography, these loans are taken. These are also loans that are short-term in nature with tenor ranging from 6 months to 1 year depending on the loan amount and interest rate.

These loans may have some additional charges in the form of legal fees and arrangement charges which are charged by the lender. The loan amount in these cases is usually higher when compared to short-term loans given by direct lenders.

Some of the companies in the UK offering bridging loans are WestOne, Oblix Capital, Tuscan Capital, Clifton Private Finance, to name a few.

  • Tax Loans

These are a particular category of loans provided by selected lenders in the UK to companies who have to pay HMRC Bills. HMRC is Her Majesty’s Revenue, and Customs is a tax that some companies have to spend regularly.

Other types of taxes these loans cover are value-added tax (VAT), corporate tax, payroll tax, and other such public bills. So, if a company is short of funds or failed to generate sufficient cash flows in any financial year, then these lenders help you to honor these tax liabilities.

Some of the leading companies offering such tax loans are Rangewell, White Oak UK, RLA Capital, etc. HMRC Bill needs to be paid off and cannot be ignored as some banks will not accept your loan application and lend you if you have outstanding payments towards HMRC in the UK.

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