Sole trader loans

Find out how to get a loan if you work for yourself, including which lenders offer business loans for sole traders.

1 - 7 of 9
Name Product Finder Score Loan type Loan amounts Loan terms Turnover/trading criteria Key benefit
Funding Options Unsecured Loan
4.5
★★★★★
Unsecured loan
£1,000 to £20,000,000
12 to 72 months
£5,000 per month annual turnover,
6 months trading
Representative example: Borrow £50,000 over 24 months at a rate of 7.63% APR. Monthly repayment of £2,252.94 and the total amount payable is £54,070.56.
Nest Unsecured Business Loan
4.0
★★★★★
Fixed rate Unsecured loan
£10,000 to £5,000,000
No specified loan terms
£200,000 annual turnover,
12 months trading
iwoca Flexi-Loan
3.8
★★★★★
Variable rate Unsecured loan
£1,000 to £500,000
1 to 24 months
£25,000 annual turnover,
6 months trading
Your business loan rate varies based on your circumstances. Interest applies only to your outstanding balance on days you use the loan – there are no early repayment fees. Limited companies only.
Representative example: Borrow £10,000 over 12 months at a rate of 40% p.a. (variable). Representative APR 49% and total payable £12,294.
mcl finance Small Business Loans (formerly mycashline)
4.0
★★★★★
Fixed rate Unsecured loan
£5,000 to £100,000
1 month to 24 months
£15,000 monthly annual turnover,
12 months trading
Love Finance business loan
3.8
★★★★★
Fixed rate loan
£5,000 to £500,000
No specified loan terms
£10,000 (subject to loan type) annual turnover,
3 months trading
NatWest Fixed Rate Small Business Loan
4.1
★★★★★
Fixed rate Unsecured loan
£1,000 to £50,000
12 to 84 months
No specified minimum turnover,
12 months trading
Borrow £10,000 over 5 years at a rate of 11.7% pa (fixed). Representative APR 12.35% and total payable £13,255.89 in monthly repayments of £220.93 Other amounts available at alternative rates. Rates depend on your circumstances and loan amount and may differ from the Representative APR. Subject to status, business use only.
Tide Start-up Loan
3.5
★★★★★
Fixed rate loan
£500 to £100,000
12 to 60 months
No specified minimum turnover,
max 36 months trading
Connect your business bank account and gain access to business loans (Terms & Conditions apply).
6% APR representative (fixed).
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Can a sole trader borrow money?

Yes, sole traders and self-employed business owners can qualify for business loans but will find it more difficult to borrow money than a limited company. You’ll need to meet specific lending criteria when applying for a business loan, such as minimum annual turnover or trading history. This could limit the number of loans you’ll be eligible for.

As a sole trader, you may also be eligible for a government-backed Start Up Loan, which offers loans of up to £25,000 to new businesses and business owners looking to get their company off the ground.

Keep in mind that you generally won’t be able to get a personal loan to fund your business, even if you’re self-employed and operate as a sole trader.

How much can sole traders borrow?

It’s likely you’ll be unable to borrow as much as an established business, unless you have comparable trading history or earnings to support a larger loan. As with any loan product, you should only borrow as much as you actually need to avoid expensive interest repayments.

What types of finance are available to sole traders?

Most forms of business finance and loans are available to sole traders, but you might find you’re limited in how much you can borrow. The types of business loans available to sole traders include:

What can I use a sole trader loan for?

You can use a sole trader loan for any worthwhile business purpose. This includes the following:

  • Purchasing equipment
  • Covering business expenses
  • Funding business premises
  • Managing cash flow

Am I eligible for a sole trader loan?

In order to be eligible for a sole trader loan, you will generally need to meet the following criteria:

  • Be at least 18 years old
  • Be a UK resident
  • Have a UK-based business

Depending on the type of business loan you require, you may also need to provide additional evidence and documentation, such as business plans and trading history.

Can I get a sole trader loan with bad credit?

Yes, you may be able to get a business loan as a sole trader even if you have bad credit, but you may find you have fewer options compared to someone with good credit. As a sole trader, lenders may put more weight on your personal credit history when considering you for a loan compared to a larger business.

You may be better off applying for a secured business loan, or, if applicable, asset or invoice financing. Lenders may consider these types of loans as less risky forms of borrowing and therefore may be more likely to approve you, even if you have bad credit.

How to apply for a sole trader loan

  1. Identify the type of loan you need. Are you looking to fund new equipment or premises, or do you need invoice financing to help manage your cash flow?
  2. Calculate how much you need to borrow. As a sole trader, it’s especially important that you don’t end up having to pay more in unnecessary interest.
  3. Find a lender. There are many business lenders that specialise in certain types of business loans, so it’s worth comparing all your options.
  4. Check your eligibility. Once you’ve found a suitable lender, make sure you meet its lending requirements before applying.
  5. Apply for the loan. Contact the lender to make a loan application, including all necessary documents.

Pros and cons of sole trader loans

Pros

  • There are both government and commercial loans available
  • Multiple loan and finance options
  • Can help improve your cash flow or finances

Cons

  • You may be limited in the loans you can get compared to recognised businesses
  • Borrowing can be expensive

Bottom line

Business loans can be a key source of finance for sole traders. It’s important to understand the options available to you and how much you can afford to borrow, before you start applying for a loan.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though 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, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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Written by

Writer

Tom Stelzer is a writer for Finder specialising in personal finance, including loans and credit, as well as small business and business loans. He has previously worked as a freelance writer covering entertainment, culture and football for publications like FourFourTwo and Man of Many. He has a Master of Media Arts and Production and Bachelor of Communications in Journalism from the University of Technology Sydney. See full bio

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