Learn: comparing loans

Before borrowing from any outside lender, some directors ask a fair question: should I just lend my company my own money instead? Putting your own funds in can be quick and cheap, but it is not free of rules. A director's loan has tax and legal consequences in both directions — money you lend to the company, and money the company lends to you. This article gives you the lie of the land. It is not our product, and it is not tax advice; for the detailed rules and current thresholds, use gov.uk and speak to an accountant.

What a director's loan account is

Your director's loan account (DLA) is simply a record of money owed between you and your company that is not salary, dividend or expense repayment. If you put your own cash into the business, the company owes you and the DLA is in credit. If you take money out that is not pay or a dividend, you owe the company and the DLA is overdrawn. Because a limited company is a separate legal person from its director — a point we explain in what is a body corporate — these are real debts between two distinct parties, and they need to be recorded properly in the company's books.

Lending money to your company

Lending your own money in is generally the simpler direction. The company can repay you when cash allows, and you can charge interest if you choose — though interest the company pays you is income you must declare, and the company may need to operate tax on it. Drawing the loan back out later is just repayment of what you are owed, not income, so it is often tidier than taking it as salary or dividend. Keep clear records and ideally a short written note of the terms, even with yourself, so the position is unambiguous.

When the company lends to you: s455 and benefit-in-kind

The rules bite harder the other way. If your DLA is overdrawn — the company has effectively lent you money — and it is not repaid within a set period after the company's year end, the company can face a temporary tax charge under what is commonly called section 455. That charge is repayable to the company once you clear the loan, but it is a real cash cost in the meantime. Separately, if the loan is large and interest-free or below a set rate, it can count as a benefit in kind, creating a personal tax charge for you and a reporting duty for the company. The exact thresholds and rates change, so check the current figures on gov.uk rather than relying on a number you half-remember.

Why this matters when comparing finance

Using your own money avoids external interest and keeps things in the family, which can be attractive for a small, short gap. But it ties up your personal cash, it must be documented, and getting the DLA wrong can create tax charges that outweigh the saving. An external loan keeps your own funds free and the obligation on the company, with costs set out plainly in advance — in our case on your Key Information Sheet (KIS) and Business Loan Agreement. We lend to the company, not to you personally, and we do not take a personal guarantee. That said, separateness has limits: there are narrow situations where a director can be exposed, which we cover in can a director be personally liable for a company loan.

Where to get the detail

This article is orientation, not advice. Director's loan tax — s455, benefit-in-kind, reporting — depends on current thresholds and your specific circumstances, so use the guidance on gov.uk and talk to your accountant before you act. Decide on the facts, recorded properly, not on assumptions.

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A business overdraft and a short-term loan solve overlapping problems in different ways. An overdraft is a flexible buffer attached to your current account; a short-term loan is a fixed sum you draw, then repay on a set schedule. Neither is automatically cheaper or better. Here is when each tends to fit, so you can choose with the trade-offs in front of you.

How each one works

An overdraft lets your account go below zero up to an agreed limit. You usually pay interest only on the amount you are actually overdrawn, day by day, plus any arrangement or usage fees your bank sets. It is revolving: as money comes in, the balance recovers and you can dip in again. A short-term loan is different. You agree a fixed amount over a fixed term, the money lands, and you repay it in instalments until it is cleared. Our live product is a short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, repaid weekly or fortnightly.

Flexibility vs certainty

The core trade-off is flexibility against certainty. An overdraft is flexible: ideal for a balance that swings up and down, where you cannot predict the exact day or amount you will need. But that flexibility has a sting — many overdrafts are repayable on demand, meaning the bank can reduce or withdraw the facility, sometimes at short notice. If you rely on it as permanent working capital, that is a real risk.

A fixed-term loan gives you certainty instead. You know the amount, the instalments and the end date from day one, and the lender cannot simply call it in if you keep to the schedule. The cost is that you commit to repaying the whole sum even if you end up needing less. For a known, one-off gap with a clear repayment date, that certainty is often worth more than flexibility.

Comparing the cost honestly

On cost, an overdraft can be cheaper if you dip in only occasionally and clear it quickly, because you pay for what you use. A short-term loan is an expensive way to borrow when measured as an annual rate, because the fixed cost of arranging a small, short advance is spread over only a few weeks. We say that plainly. What we offer in return is transparency: before you sign, your Key Information Sheet (KIS) and Business Loan Agreement show the amount, term, total amount payable, total cost of credit, a simple annualised rate and the full schedule, and if you settle early, any early-settlement charge (up to 28 days' interest, often waived) is shown in your settlement figure first. We do not quote a consumer APR. Overdraft pricing comes from your bank, so compare its published rates and fees against our figures for your specific need.

Worth noting on regulation: lending to a company is outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001, so our loan is not covered by the Financial Ombudsman Service or the FSCS. Your bank's overdraft sits under its own regulatory regime. These are not like-for-like protections.

Which to pick

Choose an overdraft for an unpredictable, recurring buffer — provided your bank will grant or keep one, and you are comfortable it could be reviewed. Choose a short fixed-term loan for a specific, time-boxed gap where a guaranteed end date matters more than flexibility. And sometimes the answer is neither. If the pressure is ongoing rather than a one-off, more borrowing can deepen the problem. We set out steadier options in our guide to alternatives to short-term lending, and we are blunt about the situations where you should pause in when not to take a short-term business loan. Read both before you decide.

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A business credit card and a short-term loan are both ways to borrow, but they behave very differently in your accounts. A card is revolving credit you can use again and again up to a limit; a loan is a fixed sum you repay on a set schedule and then it is done. Which is cheaper depends almost entirely on how you use it. Here is the difference, and where each one earns its place.

Revolving vs fixed

A credit card gives you a limit you can spend up to, repay, and spend again. If you clear the full balance within the interest-free window each month, short-term purchases can cost nothing in interest — that is the card's strongest feature. A short-term loan is fixed: you agree an amount and a term, the money is advanced, and you repay in instalments until it clears. Our live product is a short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, repaid weekly or fortnightly. The difference between revolving and fixed credit is worth understanding in its own right; we cover it in running credit vs a one-time loan.

When a card is cheaper

For small, everyday business spending that you can repay in full each month, a card is usually the cheaper tool, because you avoid interest entirely inside the interest-free period. Cards also suit purchases you want to keep separate and easy to reconcile. The catch is what happens when you do not clear the balance: revolving interest then applies to the carried amount, and because there is no fixed end date, a balance can sit and accrue for a long time. A card rewards discipline and quietly punishes drift.

The discipline a card demands

That is the real distinction. A card hands you the schedule; a loan imposes one. With a card, only a minimum payment is compulsory, so it is easy to pay the minimum, carry the rest, and let the cost build month after month. A fixed-term loan removes that temptation: every instalment is set, and the debt clears on a known date whether you feel disciplined that month or not. If you know a balance might linger, the structure of a fixed loan can actually cost you less in the end than a card used loosely.

Cost and transparency

Being honest about our side: a short-term loan is an expensive way to borrow when expressed as an annual rate, because a small sum's fixed arrangement cost is spread over only weeks. We do not hide that. We show the amount, term, total amount payable, total cost of credit, a simple annualised rate and the full repayment schedule on your Key Information Sheet (KIS) and in your Business Loan Agreement before you commit, and if you settle early, any early-settlement charge (up to 28 days' interest, often waived) is shown in your settlement figure first. We do not quote a consumer APR. Card pricing comes from the card provider, so compare its published rate and fees against our figures for the specific amount and period you have in mind.

One structural point: lending to a company sits outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001, so our loan is not covered by the Financial Ombudsman Service or the FSCS. A business card may sit under a different regime — do not assume the protections are identical.

Choosing between them

Use a card for routine, recoverable spending you can clear monthly and reconcile cleanly. Use a short fixed-term loan when you need a defined sum bridged over a defined period and you want a guaranteed end date rather than an open balance. And if neither feels right — if the underlying issue is a persistent cash-flow gap rather than a one-off — borrowing of any kind may not be the answer. We set out steadier routes in our guide to alternatives to short-term lending.

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It is one of the most common worries a director has before borrowing: if the company cannot repay, will the lender come after me personally? For a loan from us, the general answer is no. But "generally" is not "never", and it is fairer to explain the exceptions than to pretend they do not exist. Here is the normal position, and the narrow situations where a director can become exposed.

The general rule: the company is separate

A limited company is a separate legal person from the people who own and run it. The company enters into the loan, the company owes the money, and the company's debts are its own — not yours. This is the foundation of limited liability, and it is why incorporation matters so much; we explain the concept in what is a body corporate. When we lend, we lend to the company, for business purposes, and we assess the company's ability to repay. We do not lend to you personally.

We take no personal guarantee

A personal guarantee is the usual way a director becomes liable for a company's debt: by signing a separate promise to pay if the company does not. We do not take a personal guarantee on our loan. That is a deliberate choice and a real difference from many lenders, who do ask directors to guarantee borrowing. Because we take no guarantee, the most common route to personal liability simply is not present in our agreement. If you want to understand the mechanism in general, see what is a personal guarantee — and always check whether any other lender you deal with is asking for one, because that changes your exposure entirely.

The narrow exceptions

Limited liability is strong, but it is not absolute. A director can become personally liable in specific, narrow circumstances, and these come from company and insolvency law rather than from our loan terms:

• Fraud or misrepresentation. If you obtain finance dishonestly — for example by giving false information — the protection of the company will not shield you, and there may be criminal as well as civil consequences.
• Wrongful or fraudulent trading. If you keep running up debts when you knew, or should have known, there was no reasonable prospect of avoiding insolvency, a court can order you to contribute personally. This typically arises in an insolvency process.
• A personal guarantee given elsewhere. If you have signed a guarantee for a different lender or supplier, you are liable under that document — even though our loan carries no guarantee.
• Breach of director's duties or misuse of company money. Directors owe legal duties to the company, and serious breaches can lead to personal claims.

None of these flow from simply borrowing from us and the company later struggling to pay. Genuine business difficulty, honestly handled, does not make you personally liable for our loan.

What to do if the company is struggling

The single most important protection is to act early and honestly. If repayment is becoming difficult, talk to us — there are options before things escalate — and take free, independent advice for the business from Business Debtline (businessdebtline.org) or a licensed insolvency practitioner (r3.org.uk). Continuing to trade and pile up debt while ignoring the warning signs is exactly the behaviour that can put a director at risk. Dealing with it promptly protects both the company and you.

The short version

For our loan: the company is liable, not you; we take no personal guarantee; and personal liability arises only in narrow cases such as fraud, wrongful trading or a guarantee you have given to someone else. If you are ever unsure where you stand, take advice — but do not let an unfounded fear of personal liability stop you from dealing openly with a problem.

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If your business is owed money it has not yet been paid, invoice finance and a short-term loan answer the same symptom — a cash-flow gap — from opposite directions. Invoice finance advances money against your unpaid invoices; a short-term loan advances a fixed sum you repay on a schedule. For a business sitting on a healthy sales ledger, the two are genuinely different choices, and one is often a much better fit than the other.

How invoice finance works

Invoice finance unlocks cash that customers already owe you. You raise an invoice, and the provider advances a percentage of its value up front, paying you the balance (less their charge) once the customer settles. It usually takes two broad forms. With factoring, the provider also takes over collecting the debt, so they chase your customers directly. With invoice discounting, you keep control of collections and the arrangement is typically confidential. Either way, the borrowing scales with your sales: more invoices, more available funding. It works best for businesses that invoice other businesses on credit terms and wait weeks to be paid.

How a short-term loan works

A short-term loan does not depend on your invoices at all. You agree a fixed amount over a fixed term, receive it, and repay in instalments. Our live product is a short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, with weekly or fortnightly repayments. Because it is small and short, it suits a specific, time-boxed gap rather than ongoing working-capital needs. You can see what we currently offer, with the real amounts, terms and costs, on our business loans page.

Comparing the two

The decisive question is whether you have a strong sales ledger. If you are owed substantial sums by reliable customers, invoice finance is often the more natural and proportionate tool: it draws on money you have genuinely earned, and the facility grows with your turnover. It does, though, tie you into an arrangement around your ledger, can involve your customers in collections (with factoring), and carries its own charges set by the provider.

A short-term loan is simpler and faster to arrange for a small amount, and it does not involve your customers at all. But it is an expensive way to borrow when expressed as an annual rate, because the fixed cost of arranging a small sum is spread over only a few weeks. We are upfront about that. In return we show the cost plainly — amount, term, total amount payable, total cost of credit, a simple annualised rate and the full repayment schedule, all on your Key Information Sheet (KIS) and Business Loan Agreement — and if you settle early, any early-settlement charge (up to 28 days' interest, often waived) is shown in your settlement figure first. We do not quote a consumer APR.

A note on regulation

Both invoice finance and our lending are typically business-to-business arrangements outside FCA consumer-credit regulation; in our case that is because a company is not an individual under Article 60B FSMA RAO 2001. So our loan is not covered by the Financial Ombudsman Service or the FSCS, and the same broad point may apply to an invoice finance facility. Check the provider's own terms rather than assuming a particular protection applies.

Which to choose

If unpaid invoices are the heart of the problem and your ledger is solid, look hard at invoice finance first — it is usually the better-matched answer. If you do not invoice on credit terms, or you simply need a small, defined bridge over a short period, a short fixed-term loan may suit better. And if the strain is structural rather than a one-off, more borrowing can make it worse; we set out steadier routes in our guide to alternatives to short-term lending. Match the tool to the cash-flow problem, not the other way round.

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There is no single "best" business lender, only the one that fits a particular need. A director comparing iwoca, Cubefunder, Capify and us is really comparing four different models: how much you can borrow, how long for, whether a human or an algorithm decides, and what the money costs. What follows describes those differences in general terms. We will not invent another lender's rates or fees, and we will be honest about where we are not the right answer.

What each model tends to suit

The wider market is varied. Some lenders specialise in larger facilities and longer terms, often with a flexible drawdown line and a credit decision that blends data with human review. Others build their proposition around merchant cash advances, where repayments flex with your card takings. Others again focus on speed and a largely automated decision for smaller, shorter amounts. Each of those has a place. If you need tens of thousands of pounds over a year or more, you are not really in our part of the market at all.

We are deliberately small-ticket and short-term. Our live product is a short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, with weekly or fortnightly repayments. That is a narrow, specific tool: a small gap, bridged quickly, then closed. If you want to compare what we actually offer today, the current amounts, terms and costs are set out on our business loans page.

Speed, decisions and who you are dealing with

Speed matters, but it is not the whole story. We typically approve within an hour and fund the same business day where everything checks out. We still credit-check your company through business credit reference agencies, and we run an identity check on the director. A faster "yes" is not always a better "yes" — the right question is whether the borrowing genuinely solves the problem, or just moves it a few weeks down the road.

Who you are lending to also differs. We lend to UK limited companies and LLPs (bodies corporate), for business purposes, to the company rather than to you personally. We do not take a personal guarantee. Other lenders structure things their own way, and some do ask for guarantees or security; that is for them to set out in their own documents, so always read them.

Cost and transparency

Here is the honest part: a short-term loan is an expensive way to borrow when you express the cost as an annual figure, because the fixed cost of arranging and servicing a small sum is spread over only a few weeks. We do not pretend otherwise. What we do is show the cost plainly before you commit — the amount borrowed, the term, the total amount payable, the total cost of credit, a simple annualised rate and the full repayment schedule, all on your Key Information Sheet (KIS) and in your Business Loan Agreement. We do not quote a consumer APR. Settling sooner still saves you money because it stops the remaining interest; an early-settlement charge of up to 28 days' interest may apply, often waived, and is shown in your settlement figure before you confirm.

One important point of difference: lending to a company is outside FCA consumer-credit regulation, because a company is not an individual under Article 60B FSMA RAO 2001. That means our loan is not covered by the Financial Ombudsman Service, the FSCS or the BBRS; after our internal complaints process, the final step is the courts. A different lender's regulatory position may differ — check theirs, do not assume ours applies to them.

How to choose well

Start from the need, not the brand. How much, for how long, and what happens to your cash flow while you repay? If the honest answer is that borrowing would make a strain worse, the better move may be no loan at all. We set out cheaper or steadier routes in our guide to alternatives to short-term lending, and we would rather you used one of those than take finance that does not fit. If a small, short, transparent bridge genuinely is what you need, compare the real figures and decide with your eyes open.

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Whether we can lend to your business depends heavily on how it is legally structured. We can lend to limited companies and limited liability partnerships (LLPs); we cannot lend to sole traders as structured. That is not about the size or health of your business — it is about what kind of legal entity is doing the borrowing. Here is the difference and why it matters, so you know where you stand before you apply.

The three structures in brief

A limited company is a separate legal person, distinct from its owners and directors. A limited liability partnership (LLP) is also a body corporate — a separate legal person — owned by its members. A sole trader is different in kind: there is no separate entity at all. The business and the individual are legally the same person, so the trader owns the assets, keeps the profits and bears the liabilities personally. That single distinction — separate legal person or not — is what drives our eligibility rules.

Why we can lend to companies and LLPs

We lend to UK limited companies and LLPs because both are bodies corporate: there is a separate legal entity to enter the loan and to owe the money. We lend to that entity, for business purposes, and we assess the company or LLP itself — its turnover, bank-account history and business credit file. We explain what a body corporate is in what is a body corporate. Because we lend to the entity rather than to an individual, the borrowing sits outside FCA consumer-credit regulation: a company or LLP is not an individual or relevant recipient of credit under Article 60B FSMA RAO 2001. That framing is central to how, and to whom, we can lend.

Why we cannot lend to sole traders as structured

A sole trader has no separate legal entity, so a loan to "the business" would in fact be a loan to the individual. Lending to an individual is a different kind of activity that falls within the consumer-credit regime, which our product is not built for and which we are not set up to provide. So it is not that we doubt sole traders or their businesses — it is that the structure puts the borrowing in a different legal category from the one we operate in. This is a feature of how the law treats the structures, not a judgement about you.

What this means in practice

If you trade through a limited company or an LLP, you are in principle eligible to apply, subject to our checks on the company's affordability and a credit check on the entity plus an identity check on the director or member. You can see what we currently offer, with the real amounts, terms and costs, on our business loans page. If you trade as a sole trader, we will not be able to lend to you as you are, however well your business is doing.

If you are a sole trader and want access

One route some sole traders consider is incorporating — forming a limited company — which creates a separate entity we could lend to. But that is a significant business decision with tax, legal and administrative consequences, and it does not make you eligible automatically: a brand-new company has little trading history to assess. Weigh it properly rather than doing it just to borrow. We set out the trade-offs in should I switch from sole trader to limited company before applying for finance. Whatever you decide, decide on the full picture, not on a single loan.

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When you borrow from us, the contract you sign depends on the kind of credit you are taking. A one-time loan of a fixed sum is governed by a Business Loan Agreement. Running credit — a line you can draw on, repay and draw again — is governed by a Revolving Credit Facility Agreement. They look similar at a glance but commit you to different things. Here is the distinction, so you know what you are signing.

The Business Loan Agreement: a fixed one-time loan

A Business Loan Agreement covers a single, fixed advance. You agree an amount and a term, the money is paid out once, and you repay it in set instalments until it clears. There is a defined beginning and a defined end. This is the contract behind our live product, the short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, repaid weekly or fortnightly. What you are committing to is precise: a known sum, a known schedule and a known finish date. Once it is repaid, the agreement has done its job and there is nothing left running.

The Revolving Credit Facility Agreement: running credit

A Revolving Credit Facility Agreement is built for a different shape of borrowing. Rather than a single advance, it sets up a limit you can draw against, repay, and draw against again, as your needs rise and fall over time. The agreement governs the whole facility — the limit, how drawdowns work, how interest applies to what you have actually drawn, and your ongoing obligations — rather than one fixed loan. A running-credit facility is a second product we are introducing; we are describing the concept here, not claiming it is available to everyone today. For what we currently offer, the position is set out on our business loans page. The broader difference between borrowing once and having a line to dip into is covered in running credit vs a one-time loan.

What each one commits you to

The practical difference is the nature of the commitment. Under a Business Loan Agreement you commit to repaying one defined sum on a fixed timetable — simple, finite and easy to budget for, but inflexible if your needs change. Under a Revolving Credit Facility Agreement you commit to the rules of an ongoing arrangement: you are not obliged to draw the full limit, and you typically pay for what you draw, but the facility and its terms persist until ended, and the discipline of managing a revolving balance is on you. One is a single transaction; the other is a relationship with a limit.

What both have in common

Whichever agreement applies, the essentials are the same. We lend to the company, not to the director personally, and we take no personal guarantee. Before you sign, you receive a Key Information Sheet (KIS) — the plain-English pre-contract summary — setting out the cost in clear terms: the amount or limit, the term, the total amount payable, the total cost of credit, a simple annualised rate and the repayment details. We do not quote a consumer APR. Knowing how to read that summary is the best protection you have; we walk through it in how to read a Key Information Sheet. And in both cases the borrowing sits outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001, so it is not covered by the Financial Ombudsman Service or the FSCS.

The short version

Use a Business Loan Agreement when you need a fixed sum once, with a clear end date. A Revolving Credit Facility Agreement is for an ongoing line you draw on as needed. Read whichever applies alongside your KIS before you sign, so you know exactly what you are committing to.

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A merchant cash advance (MCA) and a term loan both give you a lump sum now, but they collect it back in completely different ways. An MCA takes a percentage of your future card takings; a term loan takes fixed instalments on set dates. If your business runs on card sales, the choice between flexible and predictable repayment is the heart of the decision. Here is how each works, and where each fits.

How a merchant cash advance works

With an MCA, a provider advances you a sum and you repay it as a fixed percentage of your daily or weekly card takings until the agreed total is cleared. The defining feature is that repayments flex with trade: on a strong sales day you repay more, on a quiet day you repay less. There is no fixed instalment and often no fixed end date — how fast you clear it depends on how busy you are. That makes an MCA naturally suited to businesses with steady card income, such as shops, cafés and restaurants, whose revenue is seasonal or uneven.

How a term loan works

A term loan is the opposite shape. You agree a fixed amount over a fixed term and repay in set instalments, regardless of how trade goes that week. Our live product is a short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, repaid weekly or fortnightly. You know the amount, the instalments and the end date from the outset, which makes budgeting straightforward. You can see what we currently offer, with the real amounts, terms and costs, on our business loans page.

Predictability vs flexibility

This is the core trade-off. An MCA's flexibility is genuinely useful when income is lumpy: a slow week automatically means a smaller repayment, easing pressure when you most feel it. But that flexibility cuts both ways. Because there is no fixed end date, a long run of quiet trading stretches the advance out, and the total cost can be hard to compare with a fixed loan precisely because the repayment amount keeps moving. A term loan gives you certainty instead: the instalments do not change, so you can plan around them — but you must meet them even in a poor week. Neither is simply better; they suit different revenue patterns and different temperaments.

Comparing the cost

On cost, both can be an expensive way to borrow, and we will not pretend our short-term loan is cheap when expressed as an annual rate — the fixed cost of arranging a small, short advance is spread over only a few weeks. What we commit to is showing the cost plainly before you sign: the amount, term, total amount payable, total cost of credit, a simple annualised rate and the full repayment schedule on your Key Information Sheet (KIS) and in your Business Loan Agreement. We do not quote a consumer APR. Settling early still saves you money because it stops the remaining interest; an early-settlement charge of up to 28 days' interest may apply, often waived, and is shown in your settlement figure before you confirm. An MCA's pricing is usually expressed as a factor on the advance rather than an interest rate, which makes a like-for-like comparison harder — read the provider's figures carefully.

On regulation, our lending to a company is outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001, so it is not covered by the Financial Ombudsman Service or the FSCS. An MCA provider's regulatory position may differ; check theirs rather than assuming.

Which to choose

If your income arrives mostly through card payments and varies week to week, an MCA's repayment flexibility may genuinely fit better. If you want a defined sum, a fixed end date and instalments you can plan around, a short term loan may suit. And if the underlying problem is ongoing rather than a one-off bridge, more borrowing can deepen it — we set out steadier routes in our guide to alternatives to short-term lending.

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If you trade as a sole trader and have found you cannot borrow from us as you are, you may be wondering whether to incorporate — to set up a limited company — before applying. It is a reasonable question, but it is a real business decision with tax, legal and administrative consequences, not just a box to tick for a loan. Here is what changes when you incorporate, what it means for borrowing from us, and where to get the proper detail. Incorporating does not automatically make you eligible, and you should not do it for that reason alone.

Why your structure affects lending with us

We lend to UK limited companies and LLPs — bodies corporate — for business purposes, and we lend to the company rather than to its director personally. We cannot lend to a sole trader as structured, because a sole trader is not a separate legal person: there is no company to lend to, and lending to the individual would be a different kind of regulated activity entirely. We explain how the structures compare for borrowing in limited company, LLP or sole trader: lending eligibility compared. So incorporating changes the picture because it creates a separate entity we can lend to — but it is one factor among several, not a guarantee.

What incorporating actually changes

Becoming a limited company is more than a name change. The main shifts are:

• Limited liability. The company becomes a separate legal person, so in most cases your personal assets are protected if the business runs into trouble — though directors still have duties and there are narrow exceptions.
• Tax. Company profits are subject to corporation tax, and you take money out as salary and/or dividends rather than simply drawing profits. This can be more or less efficient depending on your numbers; it is not automatically cheaper.
• Administration. A company must file accounts and a confirmation statement at Companies House, keep statutory records, and meet reporting deadlines. There is more paperwork and more visibility.
• Public record. Your company's existence, directors and filings are on the public register.

What it does not change

Incorporating does not, by itself, make you a good lending prospect. A brand-new company has little or no trading history and may have a thin business credit file, and we assess affordability on the company — its turnover, bank-account history and business credit file — not on your personal income. So a freshly formed company can still be declined, or offered less, simply because there is not yet enough to assess. Forming a company the week before you apply will not conjure a track record. If and when you do qualify, you can see what we currently offer, with the real amounts, terms and costs, on our business loans page.

Weigh it as a business decision

The honest framing is this: incorporate if it makes sense for your business overall — for liability protection, tax position, credibility with customers and suppliers, or growth plans — and treat improved access to company lending as a possible benefit, not the reason. Switching purely to chase a small, short-term loan rarely stacks up, especially once you account for the running costs and admin of a company.

Where to get the detail and how to incorporate

The mechanics of forming a company, and your filing duties afterwards, are handled through Companies House — start at gov.uk, which sets out how to register and what you must file. For the tax consequences of moving from sole trader to company, take advice from an accountant, because the right answer depends on your figures. Decide on the full picture, not on a single application.

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