Business Loans in Scotland: Finance Options for Scottish Companies

Scotland's entrepreneurial landscape is dynamic and has enjoyed significant growth in recent years. And one of the elements helping to spark growth is greater access to finance, including small business loans, supporting entrepreneurs in their ambitions and encouraging SME growth.

We explore the business loans in Scotland that companies can leverage, plus regional funding initiatives, government schemes and grants for Scottish businesses.

What are the main business loans available in Scotland?

Recent research from the British Business Bank found that 62% of Scottish SMEs reported using finance more than those in Wales and Northern Ireland. However, many business owners in Scotland still report facing barriers to finance. Luckily, beyond bank loans, a growing number of alternative finance lenders are helping to give more businesses the chance to fund their growth plans.

Scottish businesses have a range of funding options to choose from, including secured and unsecured business loans, start-up loans, commercial mortgages and working capital finance. Whether you're looking to grow, manage cash flow or invest in new assets, the right loan will depend on your business size, stage, and goals.

Secured business loans

Most commercial loans from banks and traditional lenders are secured business loans, which are medium- long-term finance solutions that require you to use business assets as collateral. These loans are low-risk and usually offer competitive interest rates, but applications and approvals are often lengthy, and eligibility criteria can be strict compared to other finance options. 

Unsecured business loans

An unsecured loan is a short-term finance option that doesn’t require you to use business assets, such as equipment, property or inventory, as collateral. They’re quicker and easier to access compared to secured loans, often offered by digital lenders, who enable applications and approvals fully online. For instance, with iwoca’s unsecured business loans, you can apply online in a matter of minutes and get a funding decision within 24 hours.

Unsecured loans offer easier access to finance and more flexibility, but usually have higher interest rates than secured loans, due to the increased lender risk. 

Start-up loans

Start-up funding can be tricky to access, unless you’re seeking investment from equity partners or individuals from within your network, due to a lack of business credit history and track record. However, many alternative finance providers now offer business loans for Scottish start-ups. Like iwoca, alternative lenders focus on more than just credit scores or track records, putting more onus on business plans, cash flow and revenue potential. 

The British Business Bank also offers dedicated start-up loans, with borrowing periods of between 1 and 5 years, with a fixed rate of 6% p.a., but you’ll only get access to a maximum of £25,000. However, this can be a good starter fund to invest in staffing, equipment or promotional activity. 

Learn more at Delivering for Scotland’s start-up loans page.

Commercial mortgages and property finance

If you need funding to acquire new premises or refurbish existing sites, you can apply for a commercial mortgage, as a long-term loan to cover large-scale costs of property for business purposes. Alternatively, you could seek development finance, which is a shorter-term funding option to cover the costs of development/construction, in which funds are released in stages to align with key project milestones. 

You can also consider using bridging finance, which is a short-term loan to bridge a funding gap in your property acquisitions. In fact, several specialist providers offer bridge loans for Scottish businesses, including ScotLend, Finbri, Lowry Capital and Scottish Bridging Loans. 

Find out how to get a bridging loan in Scotland in our dedicated article. 

Working capital loans

If your focus is on financing ongoing operations, such as day-to-day expenses, bills and tax obligations, and managing cash flow during seasonal fluctuations, working capital loans and finance facilities might be your best option. 

Consider the following finance solutions to support working capital needs:

• Invoice finance: An advance of around 80–95% of your invoices’ value to unlock cash tied up in invoices due or late-paying clients.
• Business lines of credit: A revolving credit facility that enables you to draw down funds from a pre-agreed limit and top up once you’ve repaid.
• Inventory finance: A loan secured against existing and future inventory, providing the funds to stock up to meet demand or when cash is tight.
• Merchant cash advances: A form of revenue-based funding where lenders provide a lump sum of capital to be repaid as a fixed percentage of future card sales, helping to minimise cash flow problems. 
• Flexible business loans: Working capital loans are all about flexibility. Many digital lenders offer flexible loans tailored to specific working capital needs. For example, iwoca loans offer terms ranging from just 1 day to as long as 5 years, while working like a line of credit, meaning you only pay interest on the funds you draw down. Plus, you can enjoy free early loan repayments.

Government-backed business loans in Scotland, grants and local initiatives

Beyond the various types of loans available to Scottish companies from banks and private lenders, the government also provides business loans in Scotland through dedicated loan schemes and funding initiatives, including grants for supporting economic and regional growth in the country.  

Here are the main business loan schemes and grants currently available in Scotland:

What is the Scottish Loan Scheme?

The Scottish Loan Scheme (SLS) provides funding from £250,000 up to £2 million for Scottish companies seeking growth with viable business plans and financials. You may be able to access up to 5 million in exceptional cases. 

Loans typically have repayment terms between 1 and 7 years, and funding can be used for working capital, capital expenditure, business expansion and marketing investments. 

To qualify, businesses must be based in (or be relocating to) Scotland, with at least a couple of years’ trading history and a minimum turnover of £250,000, plus be able to demonstrate a clear ability to repay the loan and promote fair work practices (such as paying the Living Wage and not breaching zero-hours contract rules). Personal guarantees are not required, in most cases.

What is Social Investment Scotland?

For social enterprises, charities and community-focused businesses, Social Investment Scotland (SIS) offers funding designed to create positive social impact and is suited to organisations prioritising community development and sustainability​.

Loan ranges vary by fund, for example:

• SIS Community Finance Fund currently provides loans from £25,001 to £375,000, with flexibility to consider smaller amounts, offering term loans and bridging loans, tailored to diverse needs, and fast access to funds without lengthy application forms. It was established with the support of (and is still backed by) various high-street banks and lending partners, such as Virgin Money UK, NatWest Group, Lloyds Bank and Ceniarth.
• The Scottish Social Growth Fund (which is managed by SIS) provides loans for larger funding needs (between £100,000 and £500,000) and longer repayment terms (up to 14 years), typically used for:
  
  • Buying or refurbishing property
  • Upgrading existing facilities
  • Expanding services into new areas or markets
  • Developing trading activities or new products
  • Financial sustainability through recovery or growth

Small business grants

For new and growing businesses in Scotland, start-up and small business grants can provide a valuable source of funding. In addition to financial support, some grants offer additional resources specifically designed to help new enterprises succeed.

Examples of small business grants in Scotland

• Start It: This grant provides up to £5,000 for social enterprises and projects, to be used for legal fees, rent, marketing, equipment, insurance, etc.
• Techscaler Minimum Viable Product (MVP) Small R&D Grant: This grant supports research and development activities aimed at creating new products or services, offering between £5,000 and £50,000, and is available for tech start-ups that have participated in the Techscaler Executive Education Programme.

Local business start-up grants

• Renfrewshire New Business Grants: Various grants, including grants for start-ups, digital development, premises and training (ranging from a few hundred pounds to £25,000) with 50% match funding.
• Orkney Islands Council New Business Start-Up Grant: Grants from £500 to £1,500 for new businesses in Orkney.
• West Dunbartonshire Council Business Start-Up Grant: Small-scale grants of up to £500 to help local individuals with business start-up costs.
• Business Gateway Edinburgh: Loans for start-ups based in the Scottish capital, up to £4,000
• Highland Council Start-up Grant: Supporting new businesses within the Highlands with grants of up to £1,000 available. 
• Aberdeen City Start-up Grant Scheme: Start-up grants available to new sole traders and limited companies in Aberdeen, offering funding up to £1,000, where there is no business premise, or £3,000, where the start-up is taking on a rateable business premise.
• King’s Trust Scotland: Business support from the King’s Trust, helping people in Scotland between 18 and 30 become self-employed and start their own businesses, including one-to-one guidance and financial support.

Note: Be aware that these schemes are regularly changing, while new grant schemes emerge, so check the individual websites and consult with relevant councils. For a full list of available grants, support and business loans in Scotland, visit Scotland’s Find Business Support portal.

Leading business loan providers in Scotland

When exploring business finance solutions, you can source various options from UK high-street banks, brokers, financial institutions and digital lenders. However, if you’re seeking loan providers in Scotland, there are specialist options and lenders who support Scottish companies. 

Here are some of the main business loan providers in Scotland to consider:

• Scottish National Investment Bank: Providing tailored debt and equity finance to Scottish businesses, particularly those focused on innovation and sustainability.
• DSL Business Finance Ltd: A not-for-profit lender offering business loans through the Investment Fund for Scotland (£25,000–£100,000), plus start-up loans (starting from £500), supporting early-stage businesses and underfunded Scottish SMEs.
• Bank of Scotland (part of the Lloyds’ Group): Supporting Scottish businesses with secured or unsecured business loans, commercial mortgages and government-guaranteed funding facilities, used for expansion, investment or property needs.
• NatWest/RBS: Offering small business loans (£1,000 to £100,000), larger, long-term loans (potentially into the millions) and specialist finance products to support Scottish SME growth.
• Highlands and Islands Enterprise (HIE): An economic development agency offering business loans, grants, guarantees and blended investment for companies in the Highlands & Islands regions. 
• Scottish property loan providers: As mentioned earlier, there are several specialist Scottish property loan and finance providers to explore, such as Lowry Capital, Finbri and Scottish Bridging Loans.

Also, there are numerous mainstream UK banks and lenders offering business loans to Scottish companies, while various flexible business finance lenders, like iwoca and Fleximize, can offer fast access to short-term finance. Also, it’s worth considering peer-to-peer (P2P) lending platforms, like Funding Circle, where you can find lenders willing to offer business loans in Scotland that meet your financing needs.

Key considerations when choosing a business loan in Scotland

When searching for finance solutions and comparing lenders, it’s important to define your funding requirements, including how much you need, what you need it for and your preferred repayment model. Also, cash flow forecasting will help you judge the affordability/viability of different loan options. 

Here are some key considerations when choosing a business loan in Scotland:

1. Eligibility criteria: Most bank, private and government-backed loans require a viable business plan, evidence of profitability or projected profitability, and a clear economic impact. Specific eligibility requirements can vary, so it’s crucial to review them in detail before applying.
2. Interest rates and repayment terms: Understanding the interest rates, whether fixed or variable, and the repayment terms is essential. Government-backed loans often offer more favourable rates, but businesses should carefully compare all options to identify the best deal, including the total cost of borrowing (with all potential fees considered).
3. Application process: The loan application process typically involves submitting a detailed business plan, financial projections and proof of trading history (plus key structural details). Many lenders also require an assessment of your business’s impact, particularly for government schemes designed to foster economic growth and job creation.

Using a flexible business loan for your Scottish company

Whether you need an injection of capital for business expansion, to purchase key assets or to support cash flow management, fast access to finance and flexible terms can help Scottish SMEs to fund their growth journey. 

iwoca has supported over 150,000 SMEs across the UK in achieving their ambitions. We provide fast and flexible business loans, tailored to the needs of SMEs across Scotland. Our Flexi-Loan offers rapid access to funds without lengthy application processes or the need for collateral. 

Key features of our Flexi-Loan solution include:

• Loan amounts: Businesses can borrow between £1,000 and £1 million, making these loans suitable for everything from short-term cash flow needs to larger investments in growth.
• Flexible repayment terms: Repayment periods range from as little as 1 day right up to 60 months, with the option to repay the loan free of charge.
• Fast access to funding: With decisions often made within hours, funds can be deposited into your account as quickly as the same day, providing the speed you need to keep up with your business.
• Transparent pricing: iwoca offers clear, upfront pricing with no hidden fees, so businesses know their costs from the outset.
• Interest on outstanding balance: Interest is only charged on the outstanding loan balance, not the entire loan amount, which helps to reduce overall borrowing costs​.

‍Apply for a loan from iwoca or use our business loan calculator to find out your likely repayments.