Before you spend an afternoon on an application, it pays to know where you stand. Still getting to grips with the basics? Our guide to how business loans work covers those first. Then come back and run the quick checklist below.

Ticked most of them? Good, you’re in decent shape. The rest of this guide unpacks what each one really means, how much you might borrow, and the things that quietly sink applications so you can sidestep them.

What lenders look at when assessing eligibility

Every lender weighs things a little differently, but they’re all chasing the same answer: can this business comfortably repay what it borrows? Here’s what feeds into that.

Trading history

Most lenders want to see at least 12 months of trading, and some look for two to three years. The longer your record, the more stability it signals. Newer businesses aren’t shut out, but they’ll often find a better fit with startup finance or government-backed options.

Annual turnover

Minimums are all over the place. Some lenders set none at all, others start at a few thousand pounds a month, and larger facilities may want turnover of £50,000 to £100,000 a year. Around £100,000 is one of the benchmarks you’ll see most often, but there’s no universal threshold, and the British Business Bank points out that each lender sets its own. The stronger and steadier your turnover, the more you can usually borrow.

Creditworthiness

Lenders check the business and, in many cases, the directors too. A track record of paying on time counts for a lot. Outstanding County Court Judgments (CCJs) can be a sticking point, though some specialist lenders will still consider you if those judgments are older or settled.

Affordability

This is what it really comes down to. Lenders want to see your income covering the repayments with room to spare, often measured as a debt service coverage ratio. Steady, profitable cash flow does more for your case here than almost anything else.

Business structure

Whether you’re a sole trader, a partnership, or a limited company affects which products fit and whether you’ll be asked for a personal guarantee. Many lenders will ask directors for personal guarantees, so it pays to understand what you would be signing first.

Eligibility at a glance: how it varies by lender type

Lender type	Trading history	Turnover
High street banks	2 to 3 years	Higher minimums
Alternative / fintech	6 to 12 months	Lower or flexible
Government-backed	Startups welcome	Often none
Specialist lenders	Case by case	Flexible

Figures are general industry guidance and vary by lender and product. Confirm specifics before applying.

Each lender type comes with trade-offs: high street banks offer competitive rates but stricter criteria; alternative and fintech lenders are more flexible but can cost more; government-backed options suit new businesses within set limits; and specialist lenders will consider poor credit or unusual cases. If you trade as a limited company, our comparison of business loans for limited companies sets out which lenders suit which profiles.

Government-backed options include the British Business Bank’s Growth Guarantee Scheme, which is open to UK businesses with a turnover of up to £45 million that generate more than half their income from trading. We explain it in our Growth Guarantee Scheme guide.

Eligibility by business type

• Sole traders. Plenty of products are open to you, though your personal credit will carry more weight.
• Limited companies. The widest choice of all, especially once you’ve got filed accounts behind you.
• Partnerships. Well catered for. Expect every partner to be assessed.
• Startups. Your trading history is thin by definition, so startup loans and government-backed schemes are usually the best fit.
• Imperfect credit. You’re not ruled out. Specialist lenders look at the whole picture rather than one number, and routes like asset finance or a merchant cash advance can be more realistic.
• Seasonal businesses. Eligible, but lenders will want to see how the repayments hold up in your quieter months.

Why business loan applications get rejected

Most rejections come down to a handful of things:

1. Affordability concerns. The numbers don’t show comfortable repayment.
2. Incomplete or inaccurate information. Small errors create doubt, and doubt creates delay.
3. A weak or missing business plan. Lenders want to see the money put to good use.
4. Sector restrictions. Some lenders simply don’t fund certain industries.
5. Credit issues. Recent missed payments, or CCJs that are still unresolved.

The good news is that most of these are fixable before you apply. If credit is your main worry, our guide on how to improve your chances of approval with bad credit goes deeper. Our comparison of business loans for bad credit shows which UK lenders are more open to adverse credit history.

What you will need to apply

• Proof of identity for the directors or owners
• Business bank statements, usually the last three to six months
• Recent accounts or management accounts
• Details of existing debt or finance agreements
• A short summary of what the loan is for
• For secured borrowing, details of the asset

How Greenwood Capital helps

We’re a UK business finance partner built on fast, flexible funding with real people at the helm. Instead of leaving you to guess at the criteria, we look at your business, tell you where you stand, and match you to finance that actually fits. No jargon, no pressure, and no pushing you towards something that doesn’t suit you.

If you want a straight answer on whether you qualify, have a word with our team and we’ll walk you through it.

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At some point, most businesses need extra funding. It could be to smooth a cash flow gap, invest in new equipment, or take advantage of a growth opportunity. One of the first choices you’ll face is between a secured loan and an unsecured loan.

Both options provide access to finance, but they work in very different ways. The speed, risk, and flexibility can all vary depending on which route you take. Understanding the difference between secured and unsecured loans makes it easier to match the right type of funding to your goals and timeline.

In this guide, we’ll cover:

• What a secured loan is, with practical examples;
• What an unsecured loan is, and how it compares;
• The key differences between the two;
• How to decide which option fits your business best.

	Secured loan	Unsecured loan
Collateral required	Yes (property, equipment, assets)	No
Typical amounts	£25,000 to £5m+	£5,000 to £500,000
Typical rates	From 5–8% per annum	From 7–25% per annum
Decision timeline	4 to 12 weeks	24 to 72 hours
Personal guarantee	Not always required	Usually required
Loan term	Up to 25 years	3 months to 10 years
Credit criteria	Asset value weighted	Credit profile weighted

 

What is a Secured Loan?

A secured loan is funding that’s backed by something your business owns. This security, often called collateral, could be property, vehicles, or equipment.

By tying the loan to an asset, the lender takes on less risk. That usually means you can borrow larger amounts and access lower interest rates.

For many SMEs, secured loans make bigger projects possible. This might include expanding premises, buying new machinery, or spreading the cost of long-term investments.

The trade-off is that the process can take longer, as the asset has to be valued, and you’re putting something on the line if repayments are missed.

• You can read more about how these loans work on our secured business loans page.

 

First charge and second charge lending

When a lender registers a charge against your property, they are establishing their position in the repayment queue. A first charge lender ranks ahead of all others and is repaid first from any sale proceeds. A second charge sits behind an existing mortgage and is only repaid once the first charge is cleared.

Second charge lending is available but from a narrower lender panel and at a higher rate, to reflect the additional risk of sitting further back in the queue. If you already have a mortgage on your commercial property or your home and want to raise further finance against it, a second charge is the route. It does not require you to remortgage or break an existing deal.

For most business secured lending, lenders advance up to 70% of the property value on a first charge basis. Second charge lenders may advance less, depending on the equity available after the first charge is accounted for.

 

What is an Unsecured Loan?

An unsecured loan gives your business funding without needing to put assets on the line. Instead, the lender looks at your financial profile – things like turnover, trading history, and credit score – to decide how much to offer and on what terms.

The biggest advantage is speed. With no collateral to assess, unsecured loans are often approved faster than secured loans. They’re flexible too, which makes them a good fit for managing cash flow, covering short-term costs, or funding new projects on a tight timeline. Our guide to secured vs unsecured business loans explains which suits which kind of business, and why.

The trade-off is that lenders carry more risk, so the amounts available are usually smaller and the interest rates can be higher.

• Get the full picture on our unsecured business loans page.

 

Personal guarantees on unsecured loans

Most unsecured business lenders require a personal guarantee from one or more directors before they will lend. This is a legal commitment that if the business fails to repay, the director becomes personally liable for the debt.

A personal guarantee is not the same as providing security. No charge is registered against a specific asset and it does not appear on a property search. But it is a personal obligation that follows you, and the consequences of default can include county court judgments against the director personally. It should be read carefully and understood before signing.

Some lenders offer limited personal guarantees, capped at a percentage of the outstanding balance. Others require a full guarantee. Whether a personal guarantee is required, and on what terms, is one of the things a broker will clarify before presenting options.

 

Secured vs Unsecured Business Loans: Key Differences

The main difference between secured and unsecured loans is how the funding is backed.

A secured loan is tied to an asset, such as property or equipment, which lowers the lender’s risk. This lets you borrow larger amounts at better rates, though the process takes longer because the asset needs to be valued. For a side-by-side view of who lends what, see our comparison of secured business loans from UK lenders.

An unsecured loan doesn’t require collateral. Instead, approval depends on your business’s financial profile – turnover, credit history, and trading record. These loans are usually quicker to arrange and more flexible, but you’ll often be limited to smaller amounts with higher interest rates.

A secured loan is the stronger option for businesses planning bigger, long-term investments and comfortable using assets as security. An unsecured loan can be the smarter choice when speed matters most, such as covering everyday costs or bridging a short-term gap.

 

What does the rate difference actually cost?

The rate gap between secured and unsecured lending looks modest in percentage terms, but adds up significantly over a full term. On a £100,000 loan over five years:

	Secured loan	Unsecured loan
Loan amount	£100,000	£100,000
Term	60 months	60 months
Indicative rate	~8% per annum	~18% per annum
Monthly repayment	~£2,030	~£2,540
Total repayable	~£121,800	~£152,400
Additional interest cost	n/a	~£30,600 more

Figures are indicative. Actual rates depend on your credit profile, trading history, lender, and whether security is available.

That £30,600 difference is the cost of not having security behind the application. For some businesses the trade-off is straightforward: if you need funds in 48 hours and the amount is under £100,000, unsecured is the practical choice regardless of rate. If you have property available and can wait for the valuation process, the secured route saves a significant amount over the term.

 

Which Loan is Right for Me?

Both secured and unsecured loans play an important role in business finance. The right choice depends on how much you need, how quickly you need it, and whether you’re comfortable using assets as security.

If you’re planning a larger investment, such as expanding your premises or buying new machinery, a secured loan usually offers the best fit. You’ll be able to borrow more and benefit from lower rates, as long as you’re comfortable securing the loan against property or equipment.

If your priority is fast access to cash, or you only need a smaller amount to cover day-to-day costs, an unsecured loan is often more practical. The application process is quicker, and you don’t risk putting assets on the line, though you may face higher rates.

 

Choose a secured loan when:

✓ You need more than £250,000

✓ You want a longer term or a lower monthly payment

✓ You have commercial property, residential property, or significant assets to leverage

✓ You can wait 4 to 12 weeks for the valuation and legal process

✓ Minimising total interest cost over a long term is the priority

 

Choose an unsecured loan when:

✓ You need funds quickly, within 24 to 72 hours

✓ The amount is under £250,000

✓ You do not have assets available to secure against

✓ It is a short-term working capital need rather than a long-term investment

✓ You would rather not place a charge on property

The choice between secured and unsecured is not always obvious from the outside. A business that assumes it cannot secure lending because it rents its premises may have equipment or vehicle assets that qualify. A business that defaults to unsecured because it seems simpler may be paying significantly more than it needs to. A broker with access to both markets can tell you within a conversation which route makes more sense for your situation, before any credit searches are run.