Business Finance FAQ: 55 Questions UK Business Owners Ask Most
Finn Murphy
Relationship Manager · Mar 4, 2025 · 20 min read
This page answers the 55 most common questions UK business owners ask about business finance. Whether you are applying for the first time or comparing products, these answers cover eligibility, costs, timescales, personal guarantees, credit checks, and what happens when things go wrong. If you have a question not covered here, contact the Spark Finance team directly.
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Eligibility and credit
Most questions about business finance come back to eligibility. Can my business borrow? How much? Will a bad credit history disqualify us? The answers depend heavily on the product type and the specific lender, which is why working with a broker who knows the market makes such a practical difference.
For unsecured business loans, mainstream lenders typically require 12 to 24 months of trading history, consistent monthly revenue, and a reasonably clean credit history for both the business and its directors. Specialist lenders will consider businesses from six months old, and some will look at applications with adverse credit where current trading is strong.
Asset finance is more flexible because the loan is secured against the asset. Businesses with as little as one month of trading can access asset finance if the asset provides strong security and the director has a clean personal credit record. Invoice finance is available to B2B businesses with commercial debtors, typically from around six months of trading.
Costs, rates, and fees
Business loan rates vary significantly by product, lender, and borrower profile. Unsecured business loan APRs range from 6% for the strongest applicants to over 30% for higher-risk profiles or very short-term facilities. Secured lending rates range from 4% to 12%. Invoice finance service charges run from 0.5% to 3% of the ledger per month.
Beyond the interest rate, be aware of arrangement fees (typically 1% to 3% of the facility), documentation fees (£150 to £500), and early repayment charges. For merchant cash advances, the total repayable is expressed as a factor rate (1.2 to 1.5 times the amount advanced) rather than an APR. Always ask for the total amount repayable over the full term.
Broker fees are disclosed upfront. Spark Finance charges no fees to the borrower: we receive a commission from the lender on completion, which is disclosed in your loan documents. This means there is no cost to you unless and until you accept funding.
"The most common mistake is not applying because you assume you will be declined. Many businesses we speak to have stronger applications than they realise. The second most common mistake is applying to one lender and accepting whatever comes back."
- Finn Murphy, Relationship Manager
Timescales and the application process
How quickly you can access funds depends on the product and lender. Fintech unsecured loans can fund within 24 hours of a completed application. Traditional bank term loans take two to eight weeks. Secured lending against property typically takes four to twelve weeks because of the legal charge process. Invoice finance facilities are usually set up within one to two weeks.
The documents most lenders require are: six months of business bank statements, your most recent filed accounts or management accounts, company registration details, and director information. For secured lending you will also need property valuations and solicitor involvement.
Applying through Spark Finance typically speeds up the process because we package applications professionally, approach multiple lenders simultaneously, and manage the process through to completion. Most unsecured applications submitted with complete documents fund within two to five working days.
Personal guarantees and director liability
A personal guarantee (PG) means a director of a limited company agrees to be personally liable for the loan if the business defaults. Many unsecured lenders require a PG, particularly for younger businesses or facilities over £50,000. Some lenders limit the guarantee to a percentage of the facility rather than the full amount.
A PG does not mean the lender can immediately pursue you personally if the business misses one payment. Most agreements require the lender to exhaust recovery from the business first. However, a PG is a serious commitment and should be reviewed carefully before signing. Take independent legal advice if you are unsure about the implications.
Secured business loans against business assets typically do not require a personal guarantee because the asset provides sufficient security. If you want to avoid a PG entirely, secured lending or asset finance are usually the better routes.
Frequently Asked Questions
Can a startup get a business loan?
Yes, but your options are more limited than an established business. Specialist lenders will consider businesses from six months old. Asset finance and invoice finance are often more accessible for early-stage businesses than unsecured term loans. Government-backed Start Up Loans are available to businesses under three years old.
Does applying for a business loan affect my credit score?
An eligibility check uses a soft search that does not affect your credit score. A full application involves a hard search, which does leave a mark. Working through a broker allows you to get indicative terms from multiple lenders on a soft-search basis before committing to a full application.
Can I get a business loan with a CCJ?
Yes. Many specialist lenders will consider applications with CCJs, particularly if the CCJ is satisfied, more than two years old, or relates to a small amount. The lender will look at your current trading performance. A broker can identify which lenders are most likely to approve your application given your specific credit history.
What is the difference between a business loan and a business overdraft?
A business loan gives you a lump sum repaid over a fixed term with a defined repayment schedule. A business overdraft is a revolving facility you draw and repay as needed, paying interest only on what you use. Loans suit planned investments; overdrafts suit managing day-to-day cash flow.
How much can a limited company borrow?
There is no fixed upper limit. Unsecured facilities typically range from £5,000 to £500,000. Secured lending against property can extend to several million. The amount available depends on turnover, profitability, assets, and credit profile.
Is interest on a business loan tax-deductible?
Yes. Interest paid on a business loan is typically deductible as a business expense, reducing your corporation tax liability. Capital repayments are not tax-deductible. Consult your accountant to confirm the treatment for your specific product and structure.
Can I repay a business loan early?
Most lenders allow early repayment. Some charge an early repayment fee (typically one to two months of interest). Fintech lenders increasingly offer no early repayment charge products. Always check the terms before signing.
What happens if I miss a payment?
Missing a payment triggers a late payment fee in most agreements. Persistent missed payments will affect your credit score and may trigger a default notice. Lenders will usually try to agree a repayment plan before enforcing a personal guarantee or taking legal action. Contact your lender or broker immediately if you anticipate difficulty making a payment.
Do I need a business bank account to get a business loan?
Yes. All lenders require a business bank account because they need to assess your business cash flow via statements, and most pay funds directly to the business account.
Can a sole trader get a business loan?
Yes. Sole traders can access most of the same products as limited companies, including unsecured term loans, asset finance, and invoice finance. Some lenders have a preference for limited companies, but many specialist lenders actively lend to sole traders.
The bottom line
Business finance is complex, but the right advice makes it straightforward. Spark Finance's team handles hundreds of business loan applications every month across every product category. If your question is not answered here, call us or start an application at apply.sparkfinance.co.uk.
Check your eligibilityAbout the author
Finn Murphy
Relationship Manager
Finn is a Relationship Manager at Spark Finance focused on asset finance and equipment funding for UK businesses. He has placed hire purchase, finance lease, and operating lease facilities across construction, healthcare, and manufacturing sectors.
