What Do Lenders Look for in a Business Loan Application?
When applying for a business loan, most UK business owners want to know one thing: what do lenders actually look for?
Understanding how lenders assess your application can make the difference between a quick approval and a frustrating rejection. While requirements vary depending on the lender and loan type, most providers look for similar core indicators that show your business is reliable, creditworthy, and capable of repaying the loan.
In this guide, The Funding Group explains exactly what lenders are looking for — and how you can strengthen your application to secure the funding your business needs.
💼 1. Trading History and Business Age
Lenders want to see that your business is established and has a track record of trading. The longer you’ve been operating, the more data a lender can use to assess your financial stability.
What they look for:
Minimum trading history (often 6–12 months)
Consistent or growing revenue over time
Experience in your sector or market
Startups can still get funding, but may need to rely on government-backed loans, personal guarantees, or equity investment instead of traditional bank loans.
📊 2. Business Financial Health
Arguably the most important factor — lenders want reassurance that your business is financially healthy and can manage the monthly repayments without strain.
You’ll be assessed on:
Turnover and profit – healthy revenue and profit margins
Cash flow – the ability to cover expenses and loan repayments
Debt-to-income ratio – how much debt you currently have
Balance sheet strength – assets vs. liabilities
💡 Top tip: Include a 12-month cash flow forecast in your application to show lenders how the loan fits into your business plan.
💳 3. Business and Personal Credit History
Lenders will check your business credit score, and often your personal credit score, especially if you're a sole trader, director, or giving a personal guarantee.
What they look for:
Timely repayment history (no defaults or missed payments)
Low credit utilisation
No County Court Judgments (CCJs) or insolvency history
Responsible use of existing credit facilities
Improving your credit score — even by a few points — can make a big difference to your loan terms and approval chances.
📁 4. Supporting Documents
Providing clear, up-to-date, and accurate documents is crucial. Lenders use these to verify the details in your application and assess risk.
Common documents include:
Last 3–6 months of business bank statements
Latest annual accounts or management accounts
VAT returns and tax returns
A well-prepared business plan (for startups or large loans)
Proof of ID and business registration
💡 Pro tip: Incomplete or inconsistent documents are one of the main reasons for delays or rejections.
📝 5. Loan Purpose and Use of Funds
Lenders want to understand why you’re applying and how the funds will help your business. A clear, specific purpose increases trust and credibility.
Strong loan purposes include:
Buying stock or inventory
Hiring staff or opening new premises
Upgrading equipment or technology
Bridging a cash flow gap
Weaker purposes might be:
Repaying other loans (without explanation)
Unclear or vague “general growth”
Personal use (not allowed)
Be specific: “We’re applying for £50,000 to fund a marketing campaign and hire a business development manager over the next 6 months.”
💰 6. Affordability and Repayment Capacity
Even if your business is profitable, lenders still need to ensure you can afford the monthly repayments under different scenarios — such as seasonal dips or slow months.
Lenders may ask:
What is your average monthly revenue and profit?
Can your cash flow handle the additional repayment?
What happens if revenue drops?
💡 Pro tip: Use your cash flow forecast to map out future repayments, showing how the loan will be serviced without compromising your business’s stability.
🧾 7. Existing Debt and Financial Obligations
Lenders will assess how much existing debt your business currently holds. Too much outstanding borrowing — or multiple concurrent loans — can be a red flag.
They’ll consider:
Total outstanding debt
Types of existing loans (secured/unsecured)
Repayment history on those loans
Whether the new loan will be used to consolidate debt
Some lenders are open to refinancing or top-up loans, especially if you've been reliable with previous repayments — and The Funding Group can help you find those flexible lenders.
🔐 8. Security or Personal Guarantee
Some loans require security in the form of business assets (like equipment, vehicles, or property). Others may request a personal guarantee from directors.
Options include:
Secured loans – lower interest rates, higher borrowing limits
Unsecured loans – no asset needed, but often require a personal guarantee
Personal guarantee insurance – may be required by certain lenders
Being willing to provide a guarantee or security can significantly improve your approval odds — but always understand the risks involved.
👔 9. Industry Risk Profile
Certain industries are seen as higher risk due to volatility, regulation, or failure rates — such as hospitality, construction, or startups in new tech.
Lenders will consider:
Your sector’s stability and growth outlook
Any recent disruptions (e.g. post-Brexit changes or supply chain risks)
Your experience in the industry
If your business is in a high-risk sector, provide extra reassurance with strong financials, customer contracts, or future revenue forecasts.
🚀 10. Growth Potential and Business Plan
Some lenders — especially growth lenders or investors — want to see that your business is scalable and has a clear strategy for growth.
They may want to know:
What milestones you’ve already achieved
Future targets and KPIs
Your market size and competitive advantage
How the loan will support your roadmap
A strong business plan, even if only 1–2 pages long, can help paint this picture clearly and win lender confidence.
🤝 How The Funding Group Can Help
At The Funding Group, we specialise in helping UK SMEs and startups find and secure the best business finance — fast.
Whether you’re applying for a small working capital loan or a six-figure growth facility, we make the process easy and transparent by:
✅ Matching you with 100+ lenders across the UK
✅ Reviewing your documents and strengthening your application
✅ Comparing real offers without impacting your credit score
✅ Providing one-on-one support from a dedicated broker
We understand exactly what lenders look for — and how to present your business in the best possible light.
✅ Final Tips to Improve Your Application
Organise your finances before applying
Check your credit profile and improve it where possible
Be clear about your loan purpose and repayment plan
Keep your documents accurate and up to date
Don’t apply to multiple lenders directly — use a platform like The Funding Group to compare options efficiently
📞 Ready to Get Started?
If you're planning to apply for a business loan, don’t leave it to guesswork. Let The Funding Group help you find the right lender, the best deal, and the smoothest path to approval.
Whether you’re a limited company, sole trader, or partnership — we’ll guide you every step of the way.
