Bank term loan
A fixed amount borrowed from a bank or other mainstream lender and repaid in regular instalments over an agreed term, with interest.
- Secured on assets
- Personal guarantee likely
How it works
You borrow a set amount and repay it, with interest, in regular instalments over an agreed number of years. The interest rate can be fixed or variable.
- Secured loans are backed by an asset such as property or equipment. They can be larger, last longer and cost less, but the lender can take and sell the asset if you do not repay.
- Unsecured loans need no asset, but lenders usually ask for a personal guarantee from the owners or directors. They usually cost more and run for up to about five years.
Compare offers by their APR (annual percentage rate), which includes the lender's fees as well as interest.
Upsides and downsides
Upsides
- Predictable repayments make planning easier
- You keep full ownership of the business
- Secured loans can offer larger amounts, longer terms and lower rates
Downsides
- Secured loans put the asset at risk, and unsecured loans usually need a personal guarantee
- Applications can take time because lenders carry out detailed checks
- Harder to get without a trading record or good credit history
Risks
- Losing the asset used as security if you cannot repay
- Being personally liable under a guarantee if the business cannot repay
- Variable rates can rise during the loan
What it costs
- How it is priced
- Interest (fixed or variable) plus fees. Compare offers using the APR
- Costs that are easy to miss
- Arrangement fees
- Valuation and legal fees for secured loans, which you may have to pay even if the loan is refused or reduced
- Early repayment charges on some loans. Check the terms
Depends on the lender, your security and how much you can afford to repay.
Have a quote? True cost of a loan: work out the APR-equivalent and total cost
Does it fit?
Could fit when
- You have a trading record and can show the repayments are affordable
- You need a set amount for a clear purpose, such as equipment, premises or growth
- You have assets you are prepared to offer as security, or are willing to give a guarantee
Unlikely to fit when
- You need money in days
- Your income is too uncertain to support fixed repayments
- You are not prepared to give security or a personal guarantee
Who can use it
- Business types: Sole trader, Partnership, Private limited company, LLP, Public limited company, Community interest company, Co-operative or community benefit society, Charity
- Needs sales (revenue)
- Lenders assess your credit history and whether you can afford the repayments
- Secured loans need an asset with enough value to act as security
Am I ready?
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- Recent accounts
- Cash flow forecast
- Bank statements
Regulation and protections
Many smaller businesses can take an unresolved complaint about a bank or other financial firm to the Financial Ombudsman Service. A small business qualifies if its annual turnover is under £6.5 million and it either has a balance sheet total under £5 million or employs fewer than 50 people. Micro-enterprises (fewer than 10 staff and turnover or balance sheet up to €2 million) are also covered.
Small businesses can only complain to the Ombudsman about lending matters on or after 1 April 2019.
Types of provider: High-street banks; Challenger banks; Specialist and non-bank business lenders.
Also consider
Sources
- British Business Bank: What are the different types of business loan? · checked 7 October 2026
- Financial Ombudsman Service (small business): Who we can help · checked 7 October 2026