How to get a business loan in the UK: A step-by-step guide

The funding purpose influences which type of finance may be appropriate, how much the business needs, what documents will be requested, how the lender assesses the application and how the funds may be released.

A vague request such as "general working capital" gives a lender less context than a specific requirement. That does not mean every vague purpose is declined, but a clear use of funds helps you—and the provider—judge whether borrowing is appropriate and how repayment will be supported.

Common purposes include:

• Buying machinery to increase production capacity
• Purchasing stock for confirmed or expected demand
• Acquiring cars, vans, HGVs or specialist vehicles
• Covering payroll while waiting for customer invoices
• Refurbishing or purchasing commercial premises
• Funding mobilisation costs for a new contract
• Paying an upcoming tax or VAT liability
• Refinancing existing borrowing
• Supporting a planned business expansion

Being specific helps you decide whether finance is the right route and whether the proposed repayment is realistic. It also makes it easier to gather supporting quotations, contracts or forecasts where relevant.

Calculate the requirement rather than choosing a convenient round number. Consider the full project or purchase cost, VAT where applicable, your own contribution, supplier quotations, installation or delivery costs, working-capital requirements, a sensible contingency, existing cash reserves and the amount the business can realistically repay.

Borrowing too little can leave a project unfinished. Borrowing more than necessary increases cost and repayment pressure. For a fuller discussion of how lenders view affordability and capacity, see How much can my business borrow? A practical guide for UK businesses.

For example, a manufacturer purchasing an £80,000 machine may also need to account for delivery, installation, staff training and the cash required to operate while the machine is commissioned. The true requirement may therefore differ from the equipment price alone. This example is illustrative only.

The product should fit the purpose and the source of repayment. The table below outlines common UK business requirements and finance types worth considering. Eligibility, terms and structure depend on the finance provider.

Two products can solve the same problem in different ways. The option that appears lowest in headline cost is not automatically the most suitable once fees, security, term and repayment structure are considered. A specialist can help you compare structures, but the final decision should reflect your business's circumstances and risk tolerance.

Before applying, it is worth reviewing the factors lenders commonly assess. Different providers weight these differently, and no single profile fits every product.

Document requirements differ by lender and product. Commonly requested items include recent business bank statements, filed company accounts, current management accounts, cash-flow forecasts, details of existing borrowing, proof of identity and address, information about directors and shareholders, asset or vehicle quotations, property details, aged debtor and creditor reports, details of major customers or contracts, and evidence supporting the proposed use of funds.

Management accounts are internal financial statements showing recent trading performance, usually prepared more frequently than filed annual accounts. A cash-flow forecast estimates expected money in and out over a future period, helping show whether proposed repayments are realistic.

A newly established business may be asked for different information from a mature business. For a fuller overview of what to gather, see Preparing for a business loan application. Our funding readiness guide outlines information commonly requested before you apply.

Comparing finance should involve more than a headline rate. Review the amount offered, total amount repayable, interest rate, fees, repayment frequency, finance term, security requirements, personal guarantee requirements, early-repayment terms, flexibility, conditions attached to the offer, speed of completion and whether the repayment structure suits the business's cash flow.

You can apply directly to a lender or work through a commercial finance broker. Applying direct may suit you when you already know which provider and product meet your needs. A broker may help identify potentially suitable providers and organise the application, but cannot guarantee approval or the lowest available cost. Read our comparison: Business finance broker vs direct lender: which is right for your UK business?.

Tera works with a panel of finance providers. We are a credit broker, not a lender. Finance is subject to status and the terms of the finance provider.

The application should be consistent with Companies House records, filed accounts, bank statements, existing credit commitments, the stated use of funds, and ownership and director information. Inconsistencies do not automatically mean dishonesty, but they can create questions and delays.

Explain legitimate changes where relevant, such as a recent fall or increase in turnover, a large one-off transaction, new premises, a recently won contract, seasonal trading, director changes, or existing borrowing that is being refinanced.

Avoid submitting numerous poorly targeted applications in a short period. Before proceeding, ask whether a provider will carry out a soft or hard credit search and at what stage. A hard search can be visible to other credit providers and may affect a credit profile.

Underwriting is the lender's assessment of the application, the risks involved and whether the proposed finance is affordable and suitable under its criteria.

The lender may ask for more recent bank statements, updated management accounts, explanations of individual transactions, evidence of contracts, customer concentration information, details of existing facilities, proof of the deposit, asset information, property valuations or clarification about the repayment source.

Responding promptly and accurately can prevent avoidable delays, though a quick response does not guarantee approval. Tera can help collect information, communicate with providers and keep the application moving, but the finance provider makes the lending decision.

Understand the complete offer before signing. Check the amount being provided, interest and fees, total repayable, repayment amount and frequency, term, security, personal guarantee, conditions before funds can be released, late-payment consequences, early-repayment terms, events of default and whether the offer matches the intended purpose.

Missed repayments can have serious consequences. Secured assets may be at risk if repayments are not maintained. Seek independent professional advice where appropriate, particularly where property, significant security or personal guarantees are involved. This guide does not provide legal advice.

The route of the funds depends on the product. A business loan may be paid to the business bank account. Asset or vehicle finance may be paid directly to the supplier. Commercial property funds may pass through solicitors. Development finance may be released in stages. Invoice finance availability may change as eligible invoices are raised and paid.

Once funds are released, keep repayment dates visible, maintain an appropriate cash buffer, use the funds for the intended purpose and contact the provider early if you expect repayment difficulty. This article does not provide accounting advice.

There is no universal completion time. Timescales depend on product type, funding amount, complexity, document readiness, whether security is involved, valuations, legal work, provider workload and how quickly questions are answered.

A straightforward working-capital application may progress more quickly than commercial property or development finance, but no specific turnaround should be assumed. Complete, accurate information can reduce avoidable delays.

• Applying without a clear funding purpose — makes it harder to judge suitability and gather supporting evidence.
• Requesting an amount unsupported by the business's figures — can lead to a lower offer, additional questions or a decline.
• Choosing a product based only on speed — urgency matters, but structure and affordability matter too.
• Looking only at the headline rate — fees, term and security can change the real cost and risk.
• Failing to disclose existing borrowing — lenders assess total commitments, not just the new request.
• Sending incomplete or outdated documents — missing information is a common cause of delay.
• Making multiple poorly targeted applications — can create unnecessary credit activity and confusion.
• Ignoring security or personal guarantee terms — understand potential personal liability before proceeding.
• Overestimating future revenue — forecasts should be realistic and explainable.
• Accepting repayments that leave too little operating cash — affordability matters after the finance is in place.

Finding business finance can involve comparing different products, provider criteria and documentation requirements. Tera helps UK businesses understand their options, prepare the relevant information and approach suitable providers from our lender panel. Our team can support the application from the initial requirement through to provider questions and completion. Tera is a credit broker, not a lender. Any finance is subject to status, affordability and the terms of the finance provider.

Ready to explore your business finance options? Tell us what your business needs, how much you are looking for and what the funding will be used for. A Tera commercial finance specialist will review your requirement and discuss suitable next steps. Get a quote. No login required. No obligation to proceed. Human review on every enquiry.