How Big is a Small Business Loan? - Borrow £500 to £250K

Small business loans can vary in size, depending on the needs of the business, the type of loan required, and what is on offer from the lender. However, generally in the UK, these types of loans range between £500 to £250,000. 

The lowest borrowing tier for a small business loan typically ranges between £500 to £25,000 and is usually used by start-up businesses or those that require only small-scale funding. The purpose of a loan this size is to help businesses get off the ground, manage operations, or cover short-term expenses and cash flow.

The middle borrowing tier often ranges between £25,000 to £100,000 and is likely to be used to expand and scale operations and invest in its growth. Expanding its operations could include entering new markets, expanding teams, investing in equipment and technology, or purchasing inventory. A loan at this level could also be used by a medium-sized business to manage its increased operational costs during its stages of growth. 

The top tier with the highest borrowing amounts can range up to £250,000, and would likely be applied for by an established business that has solid financial records. One of the ways that a financially successful business could use a large loan, like this, would be to acquire a competitor company. This would allow the business to further expand its offerings and services, while also eliminating some of its market competitors. 

Our small business loans at BEF can range between £500-£250k, with the average request for a loan being around £75k. We understand every business is different, so we are dedicated to working alongside you to get to know your business and its needs, before finding a suitable loan.

Our flexible small business loans mean there is no one-size-fits-all. You will be able to find a loan that can allow your business to grow and thrive, and that you’ll be able to pay back affordably each month.

When considering the loan amount a lender will offer to a borrower, several factors are considered. This ensures that the right loan amount is offered to a business that aligns with its operational goals and financial capabilities. The sum that a company can borrow depends on set criteria that lenders use to assess a business’s financial wellness, which include:

Revenue
A lender will typically assess a business’s annual revenue to determine whether the company has the financial capacity to repay a loan. Having a higher, consistent revenue stream suggests a company is more likely to repay its loan in full and on time.

The majority of lenders often use the same income multiples to determine how much they are willing to lend a business. This involves calculating the business’s net profit, before multiplying that amount by 4 or 5. 

Creditworthiness
The business’s credit history will be evaluated, with a strong credit rating indicating that the business is responsible when managing debt and finances. This can result in a higher loan amount being granted or a loan being offered on better terms with less interest. This is typically why most businesses struggle to receive a loan from a bank, however, at BEF, even if your credit score isn’t perfect, please still get in touch as we may be able to help you. 

Business History
The history of the business and its operations will also be analysed in the loan application process. This means that start-ups or businesses that have operated for under 2 years often find it difficult to be accepted for a loan.

This is a result of insufficient financial statements such as profit and loss (P&L) reports, balance sheets, and cash flow statements, which are all crucial documentation for lenders to evaluate a business's ability to repay the loan. 

Debt-to-Income Ratio

The amount of debt a business has will also be compared to its income by potential lenders. A business with a lower debt ratio shows that it can take on more debt responsibly, and will still be financially capable of repaying the new debt. 

To work out a company’s debt-to-equity ratio, the formula includes dividing the business’s total liabilities and debt by its shareholders’ equity. A ratio that is lower than 1.0 is considered good, while a ratio above 2.0 is regarded as a risk. 

Risk

The type of company and the industry it operates in will also be considered when a lender is looking at a loan application. Some industries and types of businesses are considered to be at higher risk than others, affecting their eligibility for a loan, the amount, and the terms offered.

Some industries classified as high risk include tech companies like cryptocurrency, as they are uncertain, have limited history, and have rapid market changes. Hospitality and tourism are also considered risky due to economic downturns, natural disasters, pandemics, construction and real estate development, due to long timelines, market fluctuations, and overrunning costs.