Banks lend against three things: trading history, security, and (for new businesses) the founder's personal balance sheet. The age of your business is the single biggest input — under 12 months and you're usually re-routed to a Start Up Loan, asset finance, or invoice finance. Over 24 months with profitable accounts and you become genuinely commercial.
Direct answer
High-street lending becomes realistic once you have 12–24 months of clean trading. Before then, expect a personal guarantee that quietly cancels the 'limited' in limited liability. There are smarter forms of debt available earlier. Use the key facts, step list and official source links on this page to confirm the decision before you spend money or register anything.
- Recovery Loan Scheme
- Up to £2m
- Asset finance APR
- 7–14% typical
- Invoice finance fee
- 0.5–3% of invoice
- Bank loan APR
- 8–14% typical
Section 01
Recovery Loan Scheme (Growth Guarantee Scheme from 2024)
The British Business Bank's flagship government-backed lending scheme — successor to CBILS. Available via 70+ accredited lenders, offering term loans, overdrafts, asset finance and invoice finance of up to £2m per business group. The Bank guarantees 70% of the loan to the lender, which makes them dramatically more willing to lend to viable but unproven SMEs.
- Personal guarantees still usually required for loans over £250k.
- Lender sets the rate, not the British Business Bank.
- Available to UK businesses with viable trading propositions.
- Faster than mainstream lending — 4–6 weeks vs 8–10.
Section 02
Unsecured business loans
Traditional term loans from a bank, repaid over 1–7 years. Realistic for businesses with 2+ years of profitable accounts. Rates typically 8–14% APR for SMEs. Most lenders will ask for a personal guarantee from directors, which collapses limited-liability protection on that debt.
Section 03
Asset finance — cheaper because it's secured
A loan or lease secured against the equipment, vehicle or machinery you're buying. Because the lender can repossess if you default, rates are lower (7–14%) and approval is faster — often inside a week. Two main flavours: hire-purchase (you own the asset at the end) and finance lease (the lender owns it; you rent).
- Vans, plant, IT equipment, manufacturing machinery, dental chairs, gym kit — all eligible.
- Useful even for new businesses because the asset is the security.
- Tax-efficient — payments are usually deductible as a business expense.
- Watch for early-termination penalties on leases.
Section 04
Invoice finance — borrowing against unpaid invoices
If your customers take 30–90 days to pay, invoice finance unlocks the cash trapped in your sales ledger. Two flavours: factoring (the lender chases payment, customers know) and discounting (you keep collection, customers don't know). Fees are typically 0.5–3% of the invoice value plus an interest charge on the borrowed amount.
- Selective invoice finance lets you pick which invoices to fund — useful for occasional cash gaps.
- Confidential invoice discounting protects the customer relationship.
- Most useful for B2B businesses with creditworthy customers and 30+ day payment terms.
- Less common for B2C and very small businesses.
Section 05
Overdrafts — useful, expensive, scarce
Traditional business overdrafts have become harder to find since 2010. Most digital banks (Tide, Starling Business, Mettle) don't offer them. Traditional banks (HSBC, Barclays, Lloyds, NatWest) do but typically only for established customers with 12+ months of trading. Rates of 10–18% EAR are typical. Useful as a short-term cushion, expensive as long-term funding.
Section 06
Personal guarantees: read the small print
A personal guarantee makes you personally liable for the company's debt. Even if the company is dissolved, the bank can pursue your personal assets — house, savings, future income — for the unpaid balance. Some PGs are limited (capped to a specific amount); many are unlimited. Where possible, negotiate: a 50% PG is dramatically better than 100%, a capped PG dramatically better than unlimited.
- Consider personal guarantee insurance (~3–5% of the guaranteed amount per year).
- Spousal consent is sometimes required if you're married and the PG affects joint assets.
- PGs survive the company's death. They don't disappear if you dissolve voluntarily.
- Always take independent legal advice before signing.
Section 07
What banks actually want to see
- 12+ months of profitable trading accounts, ideally accountant-prepared.
- Up-to-date management accounts (P&L and balance sheet to last month).
- 12-month cash flow forecast showing the loan can be serviced.
- Clean business and personal credit histories.
- A clear, specific use of funds — not 'working capital' but 'fit out unit 4 at £45k including £12k VAT'.
- Director's CV / track record, especially for first-time founders.
Partner offers
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