Lloyds small business loans: alternatives for UK businesses

Lloyds Bank is one of the UK's biggest business lenders and offers a range of loans to small and medium-sized businesses. If you're thinking about getting a business loan from Lloyds, it's important to know what they provide and how it compares to other options. This article will help you make the best choice for your business.

What kinds of loans for businesses does Lloyds offer?

Lloyds offers a number of business loans that are tailored to meet the needs of businesses of all sizes.

Business loans: Lloyds offers small business loans between £1,000 and £50,000 (for enterprises with sales of less than £3 million). Depending on the size of the loan, the repayment time can be anything from 1 to 25 years. You can take out a loan and pay it back at a fixed rate or move with the market at a variable rate. 

Commercial mortgages: Lloyds offers mortgages for buying or refinancing business property starting at £25,000 and lasting up to 25 years.

Asset finance: Helps you pay for cars, machines, and tools over time. You can choose between hire purchase, finance leasing, and contract hire. Available to firms that have been in business for at least 13 months and have turnover of more than £100,000.

Invoice finance: Frees up cash that is stuck in unpaid bills. You can get up to 90% of the value of an invoice.

Overdrafts: Lloyds business overdrafts allow you to borrow between £500 and £50,000 from your business current account to help manage short-term cash flow. Lloyds also offers a range of business current accounts that can be used alongside their overdraft and lending products. For full details of associated fees and charges, visit the Lloyds business overdraft page.

Start Up Loans are part of a government-backed program for firms that have been around for less than two years. Loans of between £500 and £25,000 with a fixed interest rate of 6%, with free mentorship for a year.

Fees and interest rates for a Lloyds business loan

Lloyds' interest rates depend on a number of things, such as the size of the loan, the length of the term, your business's finances, and if you offer security. Lloyds currently offers a representative APR of 11.2% on small business loans of up to £50,000. For larger business loans, rates are agreed on application. For full details of current rates and charges, visit the Lloyds business loans page.

The government program for Start Up Loans has a flat 6% interest rate for everyone, no matter what their credit history is. This makes it easier to plan for new firms.

There may be arrangement fees, which are normally a percentage of the loan amount. If you pay off the loan before the agreed-upon term, you may have to pay early repayment fees, though these differ by product. For bigger loans or organisations that don't have a long history of trading, security may be needed. This could be property, equipment, or personal assurances from the directors.

Lloyds looks at applications based on typical lending standards, such as trading history (2+ years is normally favoured), profitability, credit history, and the quality of the business plan. It can take a few weeks to get approval for larger sums or more complicated applications.

How good are Lloyds business loans for small businesses?

For startups, there are broadly two routes depending on your stage and borrowing needs.

The government-backed Start Up Loan is the most accessible option for early-stage businesses. Lloyds works with the British Business Bank to offer loans of up to £25,000 per applicant, with a maximum of £100,000 per business where multiple directors apply. The rate is fixed at 7.5% APR, repayable over 1 to 6 years, and your business must have been trading for less than five years to be eligible. A year of free mentorship is included.

If you need more than £25,000 as a single founder, you move into Lloyds' standard business loan territory, where unsecured lending is typically capped at £50,000. Larger amounts are agreed on application and will depend on trading history, creditworthiness, and whether you can provide security, which makes this route significantly harder for most startups to access.

For established businesses with two or more years of trading history and solid finances, Lloyds' standard loans can be a strong option, particularly if you value keeping your loans and banking in one place.

How do Lloyds business loans stack up against other options?

For decades, UK businesses have used traditional bank loans like those from Lloyds. However, alternative lenders now provide some very good alternatives worth considering.

Speed of funding: Alternative lenders usually process applications faster than regular banks. Lloyds may take weeks to look into and authorise a loan, whereas platforms like Funding Circle can do it in a matter of days, important for firms that need money quickly. A small business loan through Funding Circle can be funded within days rather than weeks.

Flexibility: Most bank loans have certain rules that they must obey. Alternative lenders usually have more flexible terms, such as letting you pay off your loan early without any fees. Traditional banks don't often provide revenue-based repayment choices, which change payments based on your cash flow.

Accessibility: Banks have tight lending rules based on traditional measures. Alternative lenders look at more than just credit scores and trading experience, which can help enterprises that have been trading for a shorter time or that work in industries banks see as higher risk.

Transparency: Prices are frequently clearer up front online however, they are subject to certain requirements. Before you apply, you may use a business loan calculator to figure out how much it will cost. 

Security requirements: Many alternative lenders are more willing to give out unsecured loans than traditional banks, so you don't have to put your property or other assets at risk.

There is no one-size-fits-all solution. Your choice will depend on your business's stage, how much you need to borrow, how long you have to wait, and what factors are most important to you. Established firms with time and good finances could benefit from working with banks. Alternative lenders are typically a better fit for firms that are developing quickly or need money fast. The most important thing is to look at real offers instead of making assumptions.

Why should you get a business loan from Funding Circle?

Funding Circle aims to give growing businesses what they need. If speed, ease of use, and flexibility are more important than a relationship with a traditional bank. You may apply in 7 minutes, and the funds are paid out typically within 48 hours, no waiting weeks or long meetings in the branch.

You can borrow between £10,000 and £750,000 with periods that can be as short as 6 months or as long as 6 years. Rates start at 6.9% per year, with transparent pricing from day one. Use our business loan calculator to see exactly what you'd pay before applying.

No early repayment fees. Your plans might change. If you want to pay off your loan early, go ahead, no penalties, no surprises. With instant decisions, you won't have to wait and wonder if you'll be accepted. More than 110,000 UK businesses have trusted us to help them reach their goals, and 4.6 out of 5 customers would recommend us.

See how much you could borrow with Funding Circle business loans.