Compare £20,000 business loans for August 2019

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.

Last updated:

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):

  • A start-up loan. Government-backed start-up loans are available for sums of up to £25,000 to be repaid over terms of 1-5 years. They boast competitive, fixed interest rates and even come with free mentoring. Your business will need to meet certain strict criteria, including having been around for less than two years.
  • A standard, fixed-term business loan. With a traditional business loan you’ll have a lump sum transferred into your bank account and make monthly repayments on the balance for a pre-agreed length of time. These loans are available with fixed or variable interest rates.
  • A business cash advance. If you’re not sure when you’ll be able to pay back your loan because of fluctuating sales, consider a business cash advance. With this, you’ll pay back a fixed percentage of your sales until your debt is cleared. If business is booming, you’ll clear your debt faster. If things are slow, it’ll take longer. Either way, it’ll cost you the same amount.
  • Asset finance. With asset finance, you can spread the cost of assets for your business over a longer period. It’s more expensive than paying outright, but it could be a good way of accessing the latest equipment without a huge initial outlay. The assets can be repossessed if you stop making repayments.
  • Asset refinance. This option lets you unlock the capital held in existing assets – essentially by using them as security on a loan.

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?

Textile studio in a small business

Compare loan rates

Get live, personalised quotes on unsecured or secured loans from a large panel of lenders through our partner funding options.

Compare now
Technician using specialist equipment

Asset financing

Borrow against equipment or property to accelerate growth. Compare a panel of lenders through our partner funding options.

Get quick quotes
Restaurant worker taking card payment from a customer over counter

Merchant cash advance

Get a lump sum up-front to repay in line with volume of future sales. Compare a panel of lenders through our partner funding options.

Get quick quotes

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.

Secured and unsecured business loans

Personal guarantees

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.

Personal guarantees for business loans

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 loanMonthly: £877.43
Overall: £21,058.27
Monthly: £922.90
Overall: £22,149.56
Monthly: £1,017.92
Overall: £24,429.99
3-year loanMonthly: £599.42
Overall: £21,579.05
Monthly: £645.34
Overall: £23,232.37
Monthly: £743.27
Overall: £26,757.78
5-year loanMonthly: £377.42
Overall: £22,645.48
Monthly: £424.94
Overall: £25,496.45
Monthly: £529.88
Overall: £31,792.66

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:

  • A good personal credit score and business credit score
  • A consistent history of profits
  • A reasonable plan for paying back your debts

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

We exist to help you find better. The offers we've compared on this page are from a range of products whose details we can track; we don't cover every product on the market...yet. Unless we've indicated otherwise, products are shown in no particular order or ranking. The terms "best", "top", "cheap" (and variations of these) aren't product ratings, although we always explain what's great about a product when we highlight it; this is subject to our terms of use. When you make major financial decisions, it's wise to consider getting independent financial advice. Always consider your own financial circumstances when you compare products so you get what's right for you.

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site