Loans for limited companies

With corporation tax rising to 25% for businesses with profits over £50,000 as of last year and a decrease in the total number of private sector businesses in the UK in 2024 when compared to figures from 2023, many businesses are turning to loans for limited companies to help support their growth and stability.

We’ve put together this easy to digest guide to help you get to grips with loans for limited companies.

If you’re already sure you’d like to apply for a limited company loan, click the link below.

Find a limited company loan.

If not, or, if you’re just curious about the mechanisms behind limited company loans, read on.

What is a limited company business loan?

A limited company loan is very similar to a personal loan, except they’re designed exclusively for companies registered with Companies House, or in other words, limited companies. In the same way there are a wide range of loans available to you as a consumer, ranging from credit cards, to mortgages, to car leases, there are a great number of possible loans available for limited companies, ranging from invoice discounting to merchant cash advances. 

Limited company loans in action

Here are some examples of how limited company loans work.

Example A: Let’s say you’re the proud company director of a limited company. You’re putting together your end of year budgets, and you’ve spotted a short fall. Unless a client kindly pays their invoice early, you’re going to be stuck with negative working capital in the month of February.

To navigate this cash flow shortage, you could take out a working capital loan. You apply online, the lender considers your application and if you’re approved, they forward the funds. How you repay those funds varies from lender to lender, but if you took out a short term working capital business loan, you’ll likely repay in monthly instalments over the course of several months.

Example B: Now imagine you own a chain of restaurants. You’d like to refresh your customer-facing premises, but the costs of a renovation would eat into your working capital, hindering your ability to purchase ingredients and pay staff.

In this instance, you might consider a bridging loan. A bridging loan is a secured short term loan. You could use one of the restaurants as security for the loan, use the loan to refurbish your chain of restaurants, and then pay off the bridging loan plus interest and fees in a few months once you make up the money in sales.

What can I use a loan for a limited company for?

A limited company loan can be used for a range of purposes, including:

• Purchasing a collection of properties to create a buy to let portfolio

• Boosting cash flow

• Activating a growth campaign

• Paying off a corporation or VAT tax bill

• Onboarding and paying staff

• Funding a marketing campaign

• Coordinating a business development project

• Hiring a new sales executive

• Purchasing inventory and stock

• Bridging gaps in funding

• Renovating office premises

• Investing in equipment or replacing broken equipment

• Leasing a fleet of company vehicles

• Consolidating debts

• Paying legal fees or meeting compliance obligations

• Updating or upgrading your technology stack

• Researching and launching a new product

• Smoothing over mergers and acquisitions 

The pros of business loans for limited companies

There are some great benefits to limited company loans, we’ve outlined a few of these below.

Ownership and control

Unlike an investment, loans keep you in the driving street. There is a set agreement, a repayment plan, and you retain control of your own company.

Jump on new growth opportunities

Limited company business loans enable you to fund growth opportunities as they appear, rather than being forced to wait until you’ve accumulated enough profit.

A wide pool of loan types to consider

There are a wide range of limited company loan types and a great deal of flexibility in how you can use them, creating more flexibility and scalability in your business.

An edge when attracting talent

Limited company loans can provide your company with the resources you need to offer competitive salaries and benefits packages, enhancing your ability to attract the best talent.

Some risks and drawbacks to watch out for

All financing options have drawbacks and risks to watch out for, here are some of the ones you should consider before taking out a limited company loan.

Debt spiral

A debt spiral is when a business becomes increasingly reliant on debt and the debt becomes unmanageable, growing larger in size with compounding interest rates.

Overexerting yourself financially

It’s important to be careful not to take out too much debt. Overexerting your business financially beyond its means can lead to loss of control and even insolvency.

Interest and fees can eat into your profits

Loans usually come with a mixture of fees and interest rates, which can eat into your profits, particularly if you lose sight of the overall cost of financing.

Possible loss of assets

If you miss payments or default on a loan, it’s possible you may lose your assets through possession or repossession. This can occur whether or not you take out a secured loan. 

How much can I borrow?

We help eligible businesses obtain between £1000 and £20M in funding. The exact amount you’ll be eligible for will depend heavily on your unique circumstances. 

Will I be personally liable for the loan?

Maybe, that depends a lot on your agreement with the lender. As a limited company, there is some degree to which you are protected by limited liability, but this does not cover you entirely. If you sign a personal guarantee, you are certainly liable for the loan. If you did not sign a personal guarantee, that does not necessarily mean you are not liable. If this is a concern for you, consider discussing this with the lender before entering into an agreement.

Can I get a commercial loan for a limited company?

Much like the businesses themselves, loans for limited companies come in all shapes and sizes and offer a range of financial relief for all types of companies. Designed to help limited companies grow, a loan for limited companies is an unsecured sum of money lenders offer for any company registered under Companies House. 

Whether or not you can get one will depend heavily on the unique circumstances of your business, however, in general, you will likely be able to find a loan if you are over the age of 18, if your company is based in the UK, and if you’ve been trading for at least 6 months. Whether or not that loan will have favourable terms is another question, one our expert team could help you get to grips with.

What are the requirements for a limited company loan?

The only way you can apply for a limited company loan is to be registered with Companies House as the lender will have to check beforehand. If you’re registered, you’ll be able to complete an online form and apply for the loan by sharing some basic information about your business. The lender you’ve chosen will then review and decide whether to grant your business loan.

Can a private limited company get a loan?

Yes, as limited companies can be either private or public, both types of companies are eligible to receive loans. The difference between private and public limited companies is that private companies don’t publicly share trade shares and are limited to a maximum number of shareholders whereas public limited companies trade publicly on the stock exchange. 

Private limited companies can also accept loans from their own shareholders or find a lender and apply.

Do I need good credit to apply for a limited company loan?

In short, no your business doesn’t need good credit to apply for a limited company loan but it might affect your ability to apply with traditional high street lenders and to get favourable terms. Businesses with bad credit may be restricted by how much they can borrow, will likely receive high interest rates, and lenders can apply their own terms to the loan once it’s granted. 

Do I need a credit score for a business loan?

Yes, you’ll need a personal or business credit score when applying for a business loan. A credit score is a number between 300 and 850 that's worked out based on credit history which is- the number of active bank accounts, total levels of debt, any repayment history as well as other factors such as the number of direct debits etc.

A credit score is given to every person- both personal and business account owners- and you’ll start developing a score the moment you open a bank account or set up a direct debit. Lenders will take into consideration a business’s credit score before granting a loan.

What is the minimum credit score for a business loan?

The minimum credit score for a loan like a limited company loan is generally between 640 to 700 which is an average score. Before granting a loan, lenders will review any outstanding debts and other loans your business has against its name as well as regular outgoings. They will then calculate the risk of lending your business the money before either rejecting or granting your loan request.

How can I get a first-time business loan?

If you’ve just started up a limited company and want to apply for funding, you'll need to have a great personal credit score, an impressive business plan, as well as ample collateral to qualify for a first-time business loan from a bank. Lenders will be looking for predicted evidence your business will thrive before committing to giving your company a loan.

How can I get a business loan with no money?

Lenders can offer your limited company an unsecured loan if your business doesn’t have any money or cash flow. We’ve previously written a guide to unsecured business loans and why they may be the most suitable option for your company. There are a wide range of lenders to choose from with unsecured loans so it may work out to be the best option for your limited company.

Different types of loans available for businesses

If you’re a limited company owner or want to understand what types of funding options are available to you, there are several options available that could suit your funding needs:

Secured loans

Secured loans are supported by assets that lenders use as security to ensure they will get back the same value from the loan if the business can’t make repayments. Some examples of assets are property, vehicles and other items that have value and can guarantee a lender money back should anything go wrong.

Unsecured loans

Unlike secured loans, an unsecured loan is given out by lenders without a backup of assets or other valuable items. Whilst they tend to be for smaller value, an unsecured loan is quicker to process and suits smaller businesses like limited companies. 

Limited company loans

Limited company loans are loans exclusively for businesses registered as limited companies at Companies House. They’re suitable for all types of businesses that are either publicly or privately trading and have been introduced to help limited companies grow.

Short term business loans

Short term loans, as the name suggests, are loans granted to businesses with a shorter repayment term in place. If you apply for a short term business loan, the lender will have their own repayment terms which can be anywhere between 3 months and 2 years.

Find a loan for your limited company with Funding Options by Tide

We help eligible limited companies find business funding, whether that’s in the form of a bridging loan to support construction projects, a commercial mortgage to help you move business premises, or a working capital loan to help you smooth out cash flow shortages. Just click the link below to find out if you’re eligible for a loan of between £1,000 and £20M. Don’t worry, while a full application would impact your credit score, simply checking if you’re eligible won’t.

Find a limited company loan.