Business Loans and Finance for UK Start-ups 2026

Start Up Loans — The Best Starting Point

For most new UK businesses, the Start Up Loans scheme (part of the British Business Bank, government-backed) should be the first port of call. Loans of £500 to £25,000 per applicant are available at a fixed 6% per annum, with no application fees and no early repayment charges. Crucially, you also receive 12 months of free mentoring after receiving your loan. See our dedicated Start Up Loans guide for the full details.

Traditional Bank Loans

High-street banks (HSBC, Barclays, NatWest, Lloyds) offer business loans typically from £1,000 upwards, but they usually want to see at least 12–24 months of trading history, audited accounts, and sometimes security. For a brand-new business, a traditional bank loan is often difficult to obtain — which is why government-backed schemes and alternative lenders exist.

Once your business has been trading for a year or two and has a proven track record, traditional bank loans become more accessible and are often the cheapest source of finance for larger amounts.

Alternative Lenders

A range of FCA-regulated alternative lenders now serve UK small businesses with faster decisions and more flexible criteria than high-street banks:

Funding Circle

Lending from £10,000 to £500,000 for established businesses. Funding Circle uses a peer-to-peer model (investor-funded) and typically gives decisions within 24 hours. Best suited to businesses with at least 2 years of trading history and a solid credit record.

iwoca

iwoca offers Flexi-Loans from £1,000 to £1,000,000, with decisions often in minutes. You only pay interest on what you use, making it suitable for businesses with variable cash flow. Open to businesses trading for as little as 3 months in some cases. Rates vary based on risk profile.

Capify / Liberis

Merchant Cash Advances — repayments are taken as a percentage of your card terminal sales. Useful for retail and hospitality businesses with strong card turnover. More expensive than conventional loans but repayments flex with revenue.

Invoice Finance

If your business issues invoices with 30–90 day payment terms, a significant amount of cash can be tied up waiting to be paid. Invoice finance releases up to 90% of invoice value immediately:

  • Invoice factoring: The lender collects payment from your customers on your behalf. Your customers will know you are using a factor.
  • Invoice discounting: You collect payment yourself — the arrangement remains confidential. Usually requires a minimum turnover.

Providers include Bibby Financial Services, Aldermore, and MarketFinance. Costs typically 1–3% of invoice value.

Asset Finance

Rather than buying equipment, vehicles, or machinery outright, asset finance lets you spread the cost over a fixed term:

  • Hire purchase: You own the asset at the end of the agreement
  • Finance lease: You use the asset but don't own it — good for IT equipment with short lifespans
  • Operating lease: Similar to renting — you return the asset at the end

Asset finance is often easier to obtain than unsecured loans because the asset itself serves as security.

Crowdfunding

Two main types are relevant to UK start-ups:

  • Equity crowdfunding (Crowdcube, Seedrs/Seedfast): You give away a share of your business in exchange for investment from a crowd of small investors. Suited to high-growth businesses.
  • Rewards crowdfunding (Kickstarter, Indiegogo): Backers pre-purchase a product or receive a reward. Good for product launches and creative projects.

Small Business Grants

Unlike loans, grants do not need to be repaid. Key sources include:

  • Innovate UK — grants for innovative or technology-driven businesses
  • Local Enterprise Partnerships (LEPs) — region-specific grants
  • Levelling Up Fund — for businesses in designated areas
  • R&D Tax Credits — HMRC relief for businesses investing in innovation (up to 33% of qualifying costs for SMEs)

How Lenders Assess Your Application

Regardless of the lender, most will consider: your personal and business credit score, how long you have been trading, your revenue and profitability, the purpose of the loan, and what security (if any) you can provide. A solid business plan significantly improves your chances — see our Business Plans guide.

Frequently Asked Questions

Wonga collapsed in August 2018. The government-backed Start Up Loans scheme (£500–£25,000 at 7.5% fixed, with free mentoring) is the best alternative for new businesses. Established businesses can access alternative lenders such as Funding Circle, iwoca, and the Growth Guarantee Scheme via accredited banks.

Start Up Loans from the British Business Bank are specifically designed for businesses that cannot access mainstream finance — no security required, adverse credit accepted, and free business plan support provided. iwoca also offers quick decisions (sometimes within hours) for businesses that have been trading for a short time.

Invoice finance lets you release cash tied up in unpaid invoices — you receive up to 90% of invoice value immediately, rather than waiting 30–90 days for customers to pay. With invoice factoring, the lender collects payment from your customers. With invoice discounting, you collect payment yourself and the arrangement stays confidential.

Launched July 2024 (replacing the Recovery Loan Scheme), the Growth Guarantee Scheme provides a 70% government guarantee to accredited lenders on business loans up to £2 million. This enables lenders to approve businesses they might otherwise decline. Apply through accredited lenders including Barclays, HSBC, and Funding Circle.

Yes — the Start Up Loans scheme specifically accepts applicants with adverse credit history. Community ENABLE Funding (via CDFIs) also serves businesses declined by mainstream lenders. Alternative lenders like iwoca assess affordability more broadly than traditional credit scoring.