Business Loan Comparison – 2020 Updated

Why you should avoid using banks

Going to a highstreet bank is the traditional way to seek financing for a small business, like it is with business foreign exchange. The issue is though, many companies are not traditional — and most are far from perfect. Banks tend to have very high standards of creditworthiness, meaning they’re quick to rule out companies with a less-than-perfect track record.

If you’re one of the few SMEs that can likely gain approval from a bank  you have another decision to make: how much time do you have? Banks are known for a ruthless application process that takes weeks, and demands very well-written and a comprehensive, professionally created business plan. Gaining the funds is far from immediate, and that’s if you’re lucky enough to get approved.

There are several reasons why you may want to use banks for financing, and reasons why you may want to avoid online lenders. Balancing which one you should do is tricky, but this is covered towards the bottom of the article.

 

How small business lenders are offering a solution

Essentially, a business loan UK is synonymous with alternative financing. It’s alternative because it’s the opposite of traditional bank loans — they’re fast, and they’re easy to get. The biggest reason behind this is that unsecured business loans in the UK aren’t really offered by traditional banks. Instead, alternative online lenders provide them. They provide secured loans too, but generally, if you’re willing or able to put forward collateral, bank loans might be better suited. Just like money transfer companies help optimize your currency transfer.

 

P2P lenders — a second alternative

Peer to peer loans (known as P2PL) are getting increasingly popular in the private sector, especially in the UK. Since the inception of FundingCircle started to catch up in the business sector, more than £5.8 billion being lent so far to over 54,000 UK businesses.

P2P platforms essentially connect investors to borrowers. Anyone can invest, which is why there are so many lenders, all of whom have varying needs. Likewise, businesses can go onto such P2P platforms where they can find the right lender for them. The process is transparent, so lenders know exactly who they’re lending to and can calculate their risk and diversify accordingly.

The 5 leading UK online lenders for SMEs are:

  1. Funding Circle
  2. Think Business Loans
  3. Nucleus
  4. iwoca
  5. fleximize

 

Review: 5 leading business loans UK

Funding Circle

Short, medium and long-term business loans are available

The possible loan terms for borrowers to repay the money is between 6 months and 5 years. However, only needing the money for 4 months may not put you off using this platform — after all, there are no early repayment fees.

Loans range from small to large: £5,000 – £1,000,000. Unsecured loans are usually capped at £350,000.

Secured and unsecured business loans

Funding Circle offers unsecured business loans UK. However, like banks, they also offer secured loans in which you will likely negotiate yourself a smaller interest rate on your borrowings. 

Applying for a loan doesn’t cost anything, and the admin is minimal. In fact, you can check to see if you qualify within 30 seconds. Credit score isn’t the most important aspect regarding your chances of approval. In fact, FundingCircle maintains its own credit model consisting of things such as director backgrounds, management models. Bad credit business loans are possible within this model, if the risk-management team in FundingCircle thinks the risk is manageable. 

Loan rates and fees

APR is not stated on Funding Circle. Instead, you will have to see what you are quoted as every individual/business is different. They state that rates start from 1.9% per year, but this seems unlikely. There are no early repayment fees, so you can pay it all off in one go and you’ll only pay interest on the time you borrowed.

How long to receive an approval?

It takes 30 seconds to check if you qualify for a Funding Circle loan. It then takes around 10 minutes to apply online, where you tell them about your business and yourself. After you send off this form, you will hear about a decision within 24 hours. If approved, it will be a matter of days before you have access to the funds.

Credibility

Funding Circle is a P2P platform, backed by the UK government. It is considered to be one of the most reputable P2P platforms, and it was 9 years ago in 2010. 

Think Business Loans

Unsecured loans are available

Think Business loans, whilst only a credit broker and not a lender, offers the chance to get unsecured business loans for SMEs.

Loan amounts range from £25,000 to £1,000,000.

Generally, the loan term is a range between 1 and 120 months, meaning this is for almost any type of loan length. Big or small, short or long-term.

Loan rates and fees

Think Business Loans suggest there are rates as low as 1.8%, whilst other commentators suggest their representative APR is 8.80%. Business loan rates appear to be lower than many of the other alternative lenders in the market – but how and why?

Firstly, you must have a minimum of £75,000 annual turnover and have been trading for 2 years to even apply. This rules out startups and very small companies.

How long to receive an approval?

Using iFunds technology, Think Business Loans paris you up with a lender within a couple of minutes. It’s even possible to access funds within 24 hours.

Credibility

Again, Think Business Loans are not the lender themselves, they’re merely a broker, unlike the other companies on this list. They are credible, but it’s important to also check out the lender that they may pair you up with.

Nucleus

Unsecured loans are available

Nucleus specialises in unsecured loans with term lengths between 3 and 60 months. This is quite a broad range, meaning it is suitable for a wide variety of business’ needs.

Loan amounts range from £25,000 to £150,000. Cash flow financing can however be up to £200,000.

Loan rates and fees

Because of the wide variety of loan lengths as well as it being unsecured business loans (meaning Nucleus is exposed to a lot of different risk), putting a rate on this would be redundant. Nucleus, for the same reasons, do not state a representative APR.

How long to receive an approval?

Funding can be received within 24 hours. 

Credibility

Nucleus have lent over £1.3 billion, and are highly innovative with their technology. They lend up to £20 million for property finance, so they’re seen as a reliable lender.

iwoca

Short term loans are available

Iwoca specialise in short term loans between 1 and 12 months. These are both secured and unsecured loans, although limited companies must provide a personal guarantee.

In order to be eligible, you must have been trading for at least 6 months with a minimum turnover of £50,000.

Loan amounts range from £1,000 to £200,000.

Loan rates and fees

No fees are applied to the short term loan (Flexi loan). The longer term business loan (3 to 5 years), there is a 6% funding fee.

Interest rates vary but the representative APR is 49%.

How long to receive an approval?

To apply, the process is only a few minutes long. The account manager will then put an offer in place within a matter of hours. Once approved, you can withdraw anytime.

Credibility

Iwoca are very established within this industry. Operating since 2011, iwoca have 

fleximize

Short and medium loans are available

fleximize focuses mainly on short term and medium term loans, with the loan terms ranging from 1 month to 4 years. These loans are only available to limited companies with a minimum monthly turnover of more than £5,000 and 6 months trading history.

Loan amounts range from £5,000 to £500,000.

Loan rates and fees

fleximize claim there are no hidden fees when you borrow, and no application fees.

fleximize vary their rates but the representative APR is 42.2%.

How long to receive an approval?

Funding can sometimes be retrieved in as little as 24 hours. This is due to the fast online application, liberal requirements (other than the above set-in-stone ones) and a focus on digitalisation.

Credibility

fleximize have been featured in Inc., Business Insider, City AM, Independent and many more reputable publications. The company has grown rapidly since it was founded in 2014. Of course though, being such a young company still poses questions, as they’re yet to endure a significant economic crisis for example. Being fully regulated and widely used however, fleximize is generally a trusted platform.

When to use an online lender, and when to wait for the bank

If you don’t have personal assets, or if you’re unwilling to use them as collateral, then you can forget most banks. There are a couple that currently offer unsecured loans, such as Natwest, but it’s not easy to gain approval.

Likewise, if you have a less-than-perfect credit score, you’ll likely not gain approval and applying will be a long waste of time. If you’re unsure, then you want to ask the bank if the application process could lead to damaging your credit score (i.e. a rejection).

If you’re confident that you can gain approval though, it finally comes down to a matter of time. If you’re in a rush for quick funding to tie you over for a couple of months, then alternative online loans are going to do that for you. However, if you have the spare time to undergo a long application process, perhaps because you’re not desperate for the money (i.e. it’s for a long term project), a bank loan application would be worthwhile as it would certainly be cheaper.

 

Matt Di Vincere

Matt Di Vincere is a digital content specialist. His main expertise is in the comparison of products, and simplification of complex concept into digestible journalistic pieces. He serves as the main editor of MoneyTransferComparison.com for the past 3 years, and writes some of the content and the reviews, as well as provides guidance to other writers. He is a world affair and history fanatic, especially modern history.

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Unsecured Business Loan Comparison & Review...

[…] We review the top alternative funding solutions for businesses. We focus on quick approval, reasonable APR, and credibility. P2P Business Loans Included.  […]

Arnold

Well unsecured financing for businesses is a highly important topic, and you made a good choice focusing on it. There aren’t many specalised guides about this topic in the UK. Some people refer to these fast loan companies as the new PayDay but I don’t think that’s true… some of these companies seem extremely solid, especially Funding Circle. Their min APR is better that what you would probably get from the bank.

Guy P

It is not true the provider recommended is regulated by the FCA, quite the opposite: http://fca.org.uk/news/warnings/fund-bird

* Edit * The FCA has removed its warning on FundBird

thanasis arvanitis

I am from GREECE, and i try to find a business loan 10.000.000,00 euro from a bank or private to start to make a new company bakery-pastry foods.if your company deals with those loans,please sent me a answer.
P.S.Also i can sent you the business plan.
thank you.
thanasis Arvanit