Sole trader loans

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

Name Product Loan type Loan amounts Loan terms Turnover/trading criteria
The Start Up Loans Company Start Up Loan
Fixed rate unsecured loan
£500 to £25,000
1 year to 5 years
No specified minimum turnover,
maximum 2 years trading
Esme Business Loan
Fixed rate unsecured loan
£10,000 to £250,000
1 year to 5 years
£50,000 minimum turnover,
minimum 3 years trading
Representative example: Borrow £50,000 over 24 months at a rate of 8.40% p.a. (fixed). Representative APR 8.73% and total payable £54,491.93 in monthly repayments of £2,270.5.
iwoca Flexi-Loan
Variable rate unsecured loan
£1,000 to £200,000
1 month to 12 months
No specified minimum turnover or time trading
Representative example: Borrow £10,000 over 12 months at a rate of 40% p.a. (variable). Representative APR 49% and total payable £12,294.
loading

Compare up to 4 providers

Can sole traders get loans?

Yes, sole traders and self-employed business owners are eligible for most forms of business loan. However, 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 loan, 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.

More guides on Finder

    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