Can a Sole Trader Get a Business Loan UK?
Mark Harris
Relationship Manager · Jun 2, 2024 · 6 min read
Yes, sole traders can access UK business loans. The products available are largely the same as for limited companies, though some lenders have a stated preference for limited companies. Here is what lenders look at for sole trader applications and which products work best.
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How sole trader lending differs from limited company lending
For a sole trader, there is no legal distinction between the business and the individual. This means the lender is effectively lending to the person, assessed on their personal credit file, personal income, and business revenue combined. A personal guarantee is implicit in a sole trader loan (because there is no separate corporate entity to separate from). This can simplify the process but also means personal assets are always at risk if the business defaults.
Many mainstream lenders require a minimum of 12 months of self-employment to lend to sole traders. Lenders assess SA302 tax returns and business bank statements to verify income and cash flow. Some lenders accept sole trader applications from six months of trading, using open banking to assess recent performance.
Best products for sole traders
Unsecured business loans are available to sole traders through a wide range of lenders, with amounts typically from £1,000 to £250,000. The personal credit file carries more weight than for limited companies, so clean personal credit is important. Asset finance is available to sole traders on broadly the same terms as limited companies; the asset is the security rather than the business entity.
Invoice finance is available to sole traders with B2B customers and sufficient turnover (typically £50,000 or more annually). Revolving credit facilities and merchant cash advances are also accessible to sole traders through specialist lenders. The Start Up Loans scheme is available to self-employed individuals and sole traders.
"Being a sole trader does not limit your product options significantly. What matters most is your personal credit, your trading record, and your bank statements showing consistent income."
- Mark Harris, Relationship Manager
Frequently Asked Questions
Does a sole trader need a business bank account to get a business loan?
Most lenders require a business bank account from which they can assess revenue and to which they pay funds. Some lenders will accept a personal account used exclusively for business, but a dedicated business account is strongly preferred and makes the application significantly smoother.
The bottom line
Spark Finance works with sole traders across all product categories. Start your eligibility check at apply.sparkfinance.co.uk.
Check your eligibilityAbout the author
Mark Harris
Relationship Manager
Mark is a Relationship Manager at Spark Finance with a strong track record in merchant cash advances and short-term business loans. He specialises in revenue-based finance for hospitality, retail, and leisure businesses, helping operators access flexible funding tied to card sales volumes.
