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Compare £20,000 business loans
A £20,000 loan could spark a new lease of life into your business. Discover how to choose the right one and keep the overall cost down.
Comparison of lenders
Whether you need £20,000 up-front or to slowly grow your business over time, there’s a range of business finance options that could help. Here, we run through some of the most popular options available.
How can my business borrow £20,000?
If you’re looking for a lump sum to be paid up-front, your options include (but aren’t limited to):
If you’re looking for ongoing access to business credit, you may wish to consider the following options:
- Invoice finance. There are two main types of invoice finance: invoice discounting, where the lender will use your unpaid invoices as security for your loan, or invoice factoring, where the lender will buy your unpaid invoices from you (at less than their full value).
- A business line of credit. If you need the lump sum up-front, but still like the idea of ongoing credit, consider a business line of credit. This works in much the same way as a credit card or overdraft, as you only pay interest on the amount borrowed, but you’re typically offered a much higher credit limit.
How can we help?
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Merchant cash advances
Access a lump-sum of funding upfront for a fixed cost and then repay when your customers pay you.
Business credit cards
Boost your spending power, track employee spending and enjoy perks and rewards with a business credit card.
Loan security and personal guarantees
Depending on a lender’s assessment of your circumstances, you may be required to secure the loan. With a secured loan, you’ll put a business or personal asset up as collateral. If you fail to repay, the lender can recoup its losses by selling the asset.
With an unsecured loan, you don’t have to offer any collateral. That makes for a speedier process, but your business will need good credit and a healthy outlook.
A personal guarantee is a contract stating that you’ll be personally responsible for paying back a loan if your business is unable to do so. This is usually offered as an alternative to a secured loan.
How much does it cost to repay a £20,000 business loan?
|Interest rate of 5% fixed p.a.||Interest rate of 10% fixed p.a.||Interest rate of 20% fixed p.a.|
|2-year loan||Monthly: £877.43|
|3-year loan||Monthly: £599.42|
|5-year loan||Monthly: £377.42|
How to compare £20,000 business loans
Here are some of the key factors to consider:
- Overall cost. It can be easy to obsess over interest rates and fees (the annual percentage rate, or APR, is designed to provide a benchmark for comparison, taking into account both interest and any mandatory charges), but more importantly, how much is this loan going to cost your company overall? When you’re trying to identify the best business loan, the loans that are cheapest overall are naturally a good place to start.
- Duration of loan. This will normally be dictated by what you can afford to repay each month: borrowing for longer is the natural way to keep your monthly costs down, but don’t forget that doing so will usually push up the overall cost of borrowing.
- Eligibility. Never apply for a loan without checking that the business is eligible for it. It’s a waste of time and demoralising, but what’s more, the application could be visible to future prospective lenders through your company’s credit record.
- Security required. Does the finance require security, and if so, do you have a suitable asset that you’re willing to put forward?
- Flexibility. Nobody knows what’s around the corner, let alone three or four years down the line. Different types of business finance offer different levels of flexibility, and even within the same class of product, different lenders will have different policies. If your business is volatile, flexibility should be high on your list of requirements.
Is my business eligible?
Eligibility terms will vary from lender to lender, but you can boost your chances of being approved for a loan by demonstrating:
First and foremost, any lender will want to make sure that the monthly repayments would be comfortably affordable for the business, given its normal income and outgoings.
What about a broker/matching service?
“Matching services” are able to almost instantly check which lenders would offer you a £20,000 loan, saving you valuable time and stopping you from damaging your credit score via multiple failed applications.
Many brokers and matching services charge referral fees from lenders they refer customers to, so for the most part, they’re free for businesses to use.
However, this means they rarely have access to the full market – they’ll only refer you to lenders who have agreed to pay these referral fees. That means you may not be offered the very best deal you’re eligible for.
Frequently asked questions
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Compare £30,000 business loans
There are a few different ways your company can get its hands on £30,000. We unpack them to help you choose the right way forward.
Compare business loans for £15,000
Learn about the different business finance products that could give your company access to £15,000.
Compare £10,000 business loans
Learn about the range of funding options available to help SMEs borrow £10,000 and explore which could be right for your company.
Compare fast £5,000 business loans
Learn about finance options that could give your business fast access to £5,000.
£100,000 business loans
There are a few different ways your company could get its hands on £100,000, and since the cost of borrowing will be significant, it’s worth comparing them.
Compare £50,000 business loans
Identified an opportunity to grow your business, but don’t have the cash lying around to take advantage of it? We’ll guide you through some of the ways your company could access £50,000.
How a personal guarantee on a business loan works
If you run a small business and need to borrow money, you may be asked to give a personal guarantee. We’ve looked at how it works and what risks it carries.