When a business needs extra funding to grow—especially during tough times like limited R&D budgets—taking out a loan can be a smart choice. Unlike raising funds from investors, loans let you get cash without giving away ownership in your company.
Here are 10 different types of loans that business owners and founders can explore:
1. Merchant Cash Advance (MCA)
Merchant Cash Advances are ideal for businesses that interact directly with customers, such as restaurants, retail stores, or salons. This financing option is gaining popularity because it’s fast, flexible, and based on your sales performance.
Here’s how it works: You get a lump sum of cash upfront, and the lender uses your card payment history to decide how much to lend.
Repayments are made automatically as a percentage of your daily or weekly card sales. Since repayments are tied to your earnings, you won’t feel pressure during slow periods—your payments go up or down based on your sales. This makes it great for managing cash flow.
2. Small Business Loan
Cash flow challenges are common for small businesses. Small business loans are created to help businesses with 50 or fewer employees. Whether you’re a startup or an established company, these loans can support your operations or fund your expansion.
You can borrow anywhere from £1,000 up to £500,000, depending on your business needs. The repayment period can go up to 25 years, and your interest rate will depend on factors like your business credit score, whether the loan is secured or unsecured, and your financial health.
3. Start-Up Loan
Launching a new business can be exciting, but not everyone has the money to get started. A government-backed Start-Up Loan can help new entrepreneurs turn their ideas into reality.
To qualify, your business must be less than 3 years old, and you must be at least 18 years old, live in the UK, and have the legal right to work there. Loans range from £500 to £25,000 and are paid back over five years.
Interest rates are lower than those of traditional loans. Instead of reviewing your past financial records, lenders focus on your business plan and future projections. However, you’ll still need to show that you can afford to repay the loan.
4. Short-Term Business Loan
Sometimes, your business may need a quick cash injection to deal with emergencies or unexpected costs. A short-term business loan offers a fast solution, often with approval and funding in less than 24 hours.
These loans typically have a repayment term of around 12 months, making them suitable for businesses that want to avoid long-term debt. While the loan amount might be smaller and the interest rate higher, it’s a great option if you’re confident you can pay it back quickly.
5. Invoice Finance
Invoice finance is perfect for businesses that rely heavily on invoicing, such as B2B service providers. It allows you to unlock cash tied up in unpaid invoices, giving you faster access to working capital.
If your business has at least £30,000 in annual turnover, you can borrow up to 95% of your invoice value. Your customers won’t be aware that their invoice has been used to secure funding, and everything continues as normal from their side. Funds are typically released within 48 hours, making this a speedy option.
6. VAT Loans
Paying your VAT (Value Added Tax) is a legal requirement, but the bills can put a dent in your business cash flow. VAT loans are designed to help businesses avoid late fees and penalties by spreading out these payments.
To qualify, your business must have a turnover of at least £85,000 and be trading for over a year. Loan amounts range from £5,000 to £5 million, and the typical interest rate for a 3-month term is around 2.9%. A reliable lender, like Swoop, can help you cover your VAT bill without hurting your budget.
7. Asset Finance
Buying equipment or machinery outright can be expensive. That’s why many growing businesses turn to asset finance, which lets you spread the cost of essential items over time.
This type of loan is ideal for purchasing things like delivery vans, computers, industrial tools, or even aircraft. You make regular payments over an agreed period, helping you maintain cash flow while still accessing the tools you need to grow.
8. E-commerce Financing
If your business operates mostly online, e-commerce financing is an innovative solution. It’s not a loan in the traditional sense—there’s no interest charged and it doesn’t affect your credit score.
Instead, the lender provides upfront capital and then takes a percentage of your future online sales as repayment. This option is especially useful for SaaS companies, D2C brands, subscription services, and online marketplaces. It’s a flexible way to get funding without giving away business ownership or damaging your financial record.
9. Islamic Business Loans
Islamic business loans are becoming more popular in the UK, with institutions managing over £5.4 billion in assets. These loans are interest-free, in line with Shari’ah (Islamic) law, which prohibits earning interest (riba).
Instead of charging interest, Islamic lenders share profits or provide asset-based lending. They also avoid funding businesses related to gambling, alcohol, or tobacco. You don’t need to be Muslim to apply—these loans are open to any business owner looking for ethical finance that aligns with Islamic values.
10. Business Loans for Women
Despite making up more than half of the UK’s population, only 18% of businesses are owned by women. One major barrier has been access to funding.
Today, more lenders are stepping up to close this gender gap with business loans tailored for women. These can include start-up loans, invoice finance, asset financing, and more—often offered through women-led organizations or initiatives. These options aim to support and empower more women entrepreneurs to succeed in business.
In Summary:
Whether you’re just starting out or looking to grow, there are many loan options tailored to fit different business needs. From fast cash through merchant advances to ethical lending and gender-specific funding, today’s founders have a wide range of tools to fuel their growth without giving up equity.
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