A business loan is a sum a lender advances to a company that the company repays over an agreed term with interest, used to fund purchases, expansion, or working capital.
General information, not financial, legal, or tax advice. Verify current terms and eligibility with the provider before applying.
How a business loan works
A lender assesses a business that applies for a loan, looking at factors such as trading history, turnover, cash flow, existing debt, and the purpose of the borrowing. If approved, the lender advances a principal amount that the business repays in instalments over an agreed term, usually monthly, with interest charged on the outstanding balance. The interest rate may be fixed for the term or variable, and the agreement sets out the schedule, any fees, and the conditions the business must meet. These terms vary by lender and by the profile of the business, current as of 20 June 2026.
Secured and unsecured business loans
A business loan can be secured or unsecured. A secured loan is backed by collateral, such as property or equipment, that the lender can claim if the business does not repay, which can support a larger amount or a lower rate. An unsecured loan is not tied to a specific asset, though the lender may still ask for a personal guarantee from a director or owner. The choice affects the amount available, the rate, and the risk to the business and its owners.
Term loans and other forms of borrowing
A business loan is often a term loan, where a set amount is advanced and repaid over a fixed period. It sits alongside other forms of business borrowing such as a line of credit or business overdraft for flexible short term needs, invoice financing against unpaid invoices, and asset finance for equipment. A business chooses the form that matches what it needs the money for and how it expects to repay, and should compare the total cost of borrowing and any fees and confirm current terms with the lender.
Frequently asked questions
What is a business loan?
What is the difference between a secured and an unsecured business loan?
How is a business loan repaid?
What can a business loan be used for?
Definitions, fees, features, and eligibility change and vary by region. This page was last reviewed on 20 June 2026. Confirm current terms with the provider before applying.