Self-employed business loans: Financing options for SMEs

What does self-employed mean?

Being self-employed means you run your own business. You handle the work, the finances and the tax - there's no employer paying you a salary.

But "self-employed" covers several different legal company structures:

• Sole trader: You and the business are legally the same thing. You're personally liable for all 'business' debts.
• Limited company: A separate legal entity registered at Companies House. The business is responsible for its own debts; the company directors have limited liability for company debts.
• Limited liability partnership (LLP): A partnership registered at Companies House with limited liability for its members, similar to a limited company.

Your company structure matters when it comes to borrowing. It determines which lenders you can access and what terms you'll get.

Can sole traders get unsecured business loans?

No. No unsecured business lender in the UK offers loans to sole traders. In line with other unsecured lenders, at iwoca we do not lend to Sole Traders.

As a sole trader, there's no legal separation between you and your business. Lenders can't assess business risk independently of personal risk, and there's no business credit file to evaluate. This makes unsecured lending to sole traders unviable - not just for iwoca, but across the industry.

If you're a sole trader looking for funding, there are a few alternative forms of funding available. These are detailed later in this article.

Can limited companies and LLPs get unsecured business loans?

Yes. Most unsecured business lenders in the UK offer loans to both limited companies and LLPs.

The legal separation between the business and its owners makes business lending possible. Unlike sole traders, limited companies and LLPs have their own credit history, their own accounts filed at Companies House, and their own liability for debts.

For lenders, this means:

• A business credit file to assess independently
• Clear business financial records (filed accounts, confirmation statements)
• Limited liability - the business stands behind the debt, not just the individual
• A legal structure designed for commercial borrowing

This is why limited companies and LLPs get access to more lenders, better terms and larger amounts than sole traders ever can.

Note that some lenders may still have minimum turnover and company age requirements; although any UK-based limited company or LLP is eligible to apply for iwoca's unsecured business loans.

What can you use a self-employed business loan for?

A self-employed business loan gives you the funds to keep things moving and invest in growth. Common uses include:

• Managing cash flow gaps: bridging the time between paying suppliers and getting paid by customers.
• Investing in growth: investing in software, expanding to new locations, or funding a marketing push.
• Purchasing stock or equipment: buying inventory, tools, vehicles or machinery to take on bigger jobs.

How to qualify for a self-employed business loan

If you're a limited company or LLP, getting a business loan is straightforward - especially with lenders like iwoca who focus on business performance rather than just paperwork.

Who can apply with iwoca?

To apply for an iwoca Flexi-Loan, you need to be:

• Applying from a limited company or LLP
• Based in the UK
• At least 18 years old

We don't lend to sole traders or standard partnerships.

What documents do you need?

When you apply, we'll typically look at:

• Your last 6-12 months' business bank statements

We may sometimes also look at:

• Your recent VAT returns
• Your recent company accounts

No lengthy business plans or detailed financial forecasts needed.

iwoca's Flexi-Loan for self-employed business owners

Our Flexi-Loan is built for self-employed owners of limited companies and LLPs who want fast, flexible finance without the hassle of high-street banks.

• Borrow between £1,000 - £1 million
• Get a decision within 24 hours
• Never face any early repayment fees

So far, we've lent over £4.5 billion to more than 100,000 small businesses across the UK and Europe.

Apply for an iwoca business loan

Options for sole traders

If you're a sole trader, we can't offer you a Flexi-Loan - and neither can other unsecured business lenders. But you're not without options, here are the top options available to you.

• Government-backed Start Up Loans: Borrow up to £25,000 at a fixed interest rate of 7.5% per year and repay over 1 to 5 years. Open to any business with less than 60 months trading history, including sole traders.
• Personal loans: Assessed on your personal credit and income. Rates vary by provider and credit history.

Alternatively, you could incorporate as a limited company. You would then be eligible to borrow from iwoca and most other business lenders. If you're likely to need repeated access tobusiness finance in the long run, then you should seriously consider this option.