Key takeaways
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Business loan requirements usually come down to trading history, cashflow and a clear plan for the money.
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Lenders ask for bank statements and financial statements as standard, with heavier requirements for larger loans and loans supporting the purchase of assets and property.
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Allica's business loans are backed by a personal guarantee from the directors who are ultimate beneficial owner(s), with no early repayment charges.1
Choosing the right type of business loan
Before you apply for a business loan, check that you're choosing the right product at the right time. Each type of business financing does a different job, so it's not a one-size-fits-all equation.
A term loan (what most people mean by "business loan") gives you a lump sum for a defined purpose, such as hiring ahead of growth or covering a one-off cost, repaid in regular instalments.
Using Allica products to give you a bit more context:
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For equipment or a vehicle, asset finance1,2 is usually better, as the asset itself secures the borrowing.
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For flexible, short-term cash, an overdraft1 can work better than a loan.
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For property, a commercial mortgage1 is the more suitable secured option. Or there's bridging finance1,3 if you need short-term funding before potentially moving to a mortgage.
Loans aren't the only way to raise money for your business – you might be weighing raising funds through equity. For a primer on the difference between debt financing and equity financing, check the linked article. For the broader picture about your options, read our guide to business finance.
What lenders assess when you apply for a business loan
Business loan applications are assessed against a few consistent factors, and understanding them helps with loan approval:
| Factor | What lenders look at | Why it matters |
|---|---|---|
| Trading history | Filed accounts over multiple years, showing revenue trends and profit margins | Lenders want a consistent record, not just one good year. Or, they'll need you to explain the odd bad year. |
| Cashflow or debt service cover (DCS) | Whether the business generates enough free cash to cover repayments alongside existing commitments | A business can look profitable on paper but still be tight on cash |
| Credit profile and personal guarantees | Business credit score, director credit histories and existing credit agreements | A personal guarantee from the owner or directors is standard, giving the lender an alternative way to get their money back if the business can't make its repayments |
| Security | Whether the loan needs assets pledged as collateral, or is unsecured with a personal guarantee instead | Unsecured loans are a little more straightforward, but usually come with a lower limit than secured lending (like a commercial mortgage) |
How to prepare your business loan application
A strong loan application starts with clarity: what's the money for, why does it make commercial sense, and how will you repay it? A business with a clear answer and the evidence to back it all up is in a much stronger position than one that "just needs the cash".
Generally speaking, eligibility and lending requirements scale with loan size. With Allica, for smaller loans we'll typically ask for three to six months of bank statements, plus either 12 months of management accounts or two years of filed accounts. Larger loans require more: six months of bank statements, two years of filed accounts, and up-to-date management accounts if your last filed accounts aren't recent.
Most lenders will also want a statement of assets, liabilities, income and expenditure, plus details of existing business debt. Prepare this in advance to avoid delays. If your everyday banking isn't already with the lender, be ready to grant open banking access too.
How the business loan application process works
Each lender will have their own requirements and specifics, so we'll focus on the process at Allica to give you the clearest explanation possible.
1. Get a decision in principle and estimate
You can check your eligibility and get an indicative rate before starting your full application. It takes a couple of minutes at most – you just have to share some basic information about your business, what you're borrowing for and how much you need.
Then, you'll get an indicative rate, estimated monthly repayment, and a decision in principle. There are no personal credit checks or commitments at this stage.
2. Underwriting and the formal offer
If you choose to go ahead with the full application, you'll be asked to provide more specific information and some financial documents (as outlined above).
An underwriter reviews your application in detail and decides if we're comfortable with approving your loan.
If it goes ahead, you'll get a formal offer setting out the loan amount, interest rate, term, any fees, and the conditions to meet before you get your money.
Read it carefully, especially the total cost of borrowing and details of the personal guarantee.
3. Drawdown and repayment
Once you've met the offer's conditions, the money is paid into your business account and the loan becomes active. From there, you'll make monthly repayments covering both capital and interest for the agreed term.
Frequently asked questions
How long does it take to get a business loan in the UK?
It depends on the lender and loan size. With Allica, you get a decision in principle in minutes and we aim to give a full decision within one business day. Larger or more complex applications may take longer.
What documents do I need to apply for a business loan?
Typically, bank statements, management accounts or filed accounts, and a statement of your business's assets, liabilities, income and expenditure. Larger loans (like mortgages or growth finance) need more history and context.
Is Allica's business loan secured or unsecured?
It's unsecured, so no business assets are needed as collateral. It's backed instead by a personal guarantee from the director(s) who are ultimate beneficial owner(s).
How much can I borrow with a business loan?
Allica business loans are a maximum of £150,000. Your eligibility will depend on your financial profile, cashflow and ability to service the debt.
Our other loan products are much larger. For example, we can lend up to £15 million for commercial mortgages.
Does applying for a business loan affect my credit score?
A decision in principle doesn't require a personal credit check. A full application does, for the guarantors (directors who are also ultimate beneficial owners).
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All lending subject to status, lending criteria, and satisfactory credit assessment. Terms and conditions apply. For more information visit here.
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Asset finance and growth finance services are provided by Allica Financial Services Limited trading as Allica Bank Asset Finance. Registered office: 4th/5th Floor, 15 Worship Street, London EC2A 2DT. Incorporated under the laws of England and Wales with company number 12784979. Allica Financial Services Limited is not authorised or regulated by the Prudential Regulation Authority or the Financial Conduct Authority. The asset finance and growth finance products offered by Allica Bank Asset Finance are not regulated products.
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Bridging Finance services are provided by Allica Bridging Finance Limited. Registered office: 3rd Floor 12-18 Grosvenor Gardens, London, England, SW1W 0DH. Incorporated under the laws of England and Wales with company number 10859711. Allica Bridging Finance Limited is not authorised or regulated by the Prudential Regulation Authority or the Financial Conduct Authority. The bridging products offered by Allica Bridging Finance Limited are not regulated products.
Links were live and information was correct at the time of writing the article.
Disclaimer: This is information – not financial advice or recommendation.
The content and materials featured in this article are for information and education only, and are not intended to take into consideration any particular recipient’s financial situation. The product details referred to are correct at the time of writing. The information does not constitute financial advice or recommendation and should not be considered as such.
