Compare sole trader business loans with Funding Options by Tide

Here are some terms you might come across as a sole trader seeking business loans: 

• Cash flow: This is your business’s liquidity. How much money you currently have access to, as well as how much is coming in and going out on a regular basis.  

• Collateral: This is an asset you can place up as security against a loan.

• Credit score: A number lenders use to assess the likelihood you will repay loans. 

• Personal guarantee: Applying as a sole trader rather than a limited company may mean you are asked to provide a personal guarantee, which means you are personally liable for the debt. 

• Loan term: The length of time over which you will repay the loan.   

Business loans help sole traders manage the initial start-up costs of building their business, bridge cash flow gaps, invest in growth opportunities, and manage any surprise financial challenges. 

While a sole trader loan is taken out by the individual (so the individual is responsible for the repayments) a limited company loan is taken out by the company, meaning the company is responsible for the debts, repayments, and liabilities.

In the first instance, all responsibility falls on you and your personal finances are used to assess affordability.

On the other hand, company records are usually used to assess affordability when applying for company loans, however, this is not always the case, as sometimes, like when a company is under six months old, company loans can still require a personal guarantee.

If you leverage a broker like Funding Options by Tide, you could be eligible to borrow between £1,000 and £20M.

Eligibility varies depending on the lending provider. The best way to find out if you’re eligible is to get a quote here. Getting a quote won’t affect your credit score and if you are eligible, we’ll help connect you to our network of over 120 lenders.

While the following list isn’t exhaustive, here are a few items that can improve your eligibility chances for business financing for sole traders:

• You’re a UK resident and are over 18

• Your personal credit score is fair or above

• You want to use the loan for business purposes

• You pass affordability checks

• You’ve been trading for longer than six months

• You’ve submitted at least one self-assessment tax return

• You have an asset you’d like to put up as security if seeking a larger loan

• You do not trade in gambling, porn, or weapons

If you do not meet the above requirements that doesn’t mean you won’t be able to find a sole trader business loan. These are just some areas lenders look at when considering eligibility. Sole trader loan requirements may include presenting a business plan.  

• Improve your credit score: Paying your bills and loans on time can help boost your credit score, improving your chances of getting additional funding. 

• Gather all necessary documentation: Gather your tax returns, financial statements, business plan, and identification documents together before applying to speed up the process. 

• Compare lenders: Different lenders have different requirements, use a broker like Funding Options by Tide to find the lender most suited to your needs.

Getting accepted for a loan as a self-employed individual is usually harder than getting accepted for a limited company loan, but don’t let this dissuade you.

At Funding Options by Tide, we help you get started with your sole trader loan application by matching you with over 120 lenders. We’ll help you find the most suitable lender and our support team is here if you need to talk about your personal circumstances. You can even apply for a sole trader loan if you have bad credit.

To find loans for sole traders, just click here and submit your information.

Here’s an easy step-by-step guide to applying for a business loan as a sole trader. 

• Assess your financial health by looking at your credit score, payment history, and affordability. 

• Consider any outstanding debts you can pay off now to boost your application. 

• Use a broker like Funding Options by Tide to find a suitable lender. 

• Compare interest rates, eligibility, terms and conditions, and online reviews of the available lenders to determine which lender you’d like to leverage. 

• Gather all necessary documentation and put together a business plan if required. 

• Submit your application, ensuring all information is up to date and correct. 

• The lender will review your application by assessing your creditworthiness and affordability. If you’re applying for asset financing of some form, they may assess the asset too. 

• If approved, the funds will be released to your account. 

The timeline varies greatly depending on the lender and what you are purchasing. For example, applying for an overdraft at the institution you currently bank with could take only a few minutes, with a decision being made and the funds being extended to you within the hour. On the other hand, applying for a start-up loan could take several months. 

Here are some general timelines for standard applications. 

• 1-2 weeks: Researching lenders, deciding on the lender most suited to your needs, and preparing your application. 

• 2-3 weeks: Loan submission, application, and approval. 

• 2-5 days: Funds hit your account. 

Using a broker like Funding Options by Tide can show you which lenders are available for you to use. We show you how much you’re eligible to borrow and match you to our network of lenders. When deciding on the right lender, look at the terms and conditions of each, compare their interest rates, and review any testimonials online. 

Your business plan should outline your target market, any strengths and weaknesses, your unique selling proposition, competitive advantages, and your financial goals and projections. Use your plan to demonstrate your ability to repay the loan. 

Applying for a sole trader loan doesn’t need to be overwhelming. Just focus on one step at a time, gather together all your documentation (including bank statements and proof of income), and reply to any queries from the lender promptly. If you ever do feel overwhelmed, feel free to chat to our support team. 

You should always be aware of any potential risks before seeking financing solutions. For sole trader business loans, these costs and risks include: 

• Interest rates: Most loans and financing options come with interest rates, which is the cost of borrowing, calculated as a percentage of the loan amount. 

• Fees: Late payment can result in fees. 

• Personal liability: You are personally liable for the loan repayment and your assets and personal credits score may be at risk if you default. 

Interest rates aren’t the only thing to compare when considering which lender to choose. Consider the late repayment fees, APR, total cost of borrowing, any final balloon payments, processing fees, administration costs, and any legal fees you may be charged if you default. 

Taking on a business loan involves inherent risks, but here are some tips to help you mitigate these risks: 

• Assess the lender thoroughly before agreeing to a loan. Always read the terms and conditions. 

• Build an emergency fund. 

• Set up direct debits or standing orders to ensure repayments are made in a timely manner. 

• If you are worried about repaying the loan, always communicate openly with your lender. 

It’s an exciting time for lending – there are lots of new promising products and services being offered and as a sole trader seeking business loans, you’ll get to enjoy the advantages of these new trends. 

Here are a few of the up and coming trends we’ve seen: 

• Open banking: This enables data sharing between different banks or financial institutions, potentially leading to faster loan approvals and more accurate decision making. 

• Alternative financing options: P2P lending, invoice financing, and merchant cash advances are all alternative lending solutions that are gaining traction.  

• Digital lending platforms: These platforms are simplifying the loan application process, making it faster and more convenient for sole traders to find funding. 

• Data-driven underwriting: By using advanced analytics and AI to make lending decisions, data-driven underwriting is helping lenders assess risk more accurately.