What are commercial loans?
Commercial loans are a type of finance product designed to fund business activity. The term can be used to describe any commercial lending, such as unsecured business loans, secured business loans, merchant cash advance or property finance.
A commercial business loan can help your business access the funds it needs to grow. There is a wide range of commercial lending options available, and the right one will depend on your business’s needs and ambitions.
Commercial loans vs business loans: what’s the difference?
The terms commercial loan and business loan are often used interchangeably, but there can be subtle differences depending on the lender.
A business loan is a term that encompasses any financing provided to a company. It typically covers a range of options, from short-term working capital loans to long-term borrowing for growth, equipment, or expansion.
A commercial loan is also a type of business loan, but it is typically aimed at larger corporations with more complex financial needs. Commercial lending often involves higher loan amounts, longer repayment terms, and additional security, such as property.
For small and medium-sized businesses, there’s usually no practical difference. But, if you’re looking for a large facility or funding for property or a major investment, you may see the term “commercial loan” used.
Types of commercial loans
Secured commercial loans
A secured commercial business loan allows you to borrow against a UK property, which can increase approval likelihood, unlock larger sums, and reduce pricing compared to unsecured borrowing.
Secured loans typically range from £25k to £2 million, with terms of 2 to 15 years, and a loan‑to‑value of up to 75%. You can secure funds against commercial, residential, or buy-to-let properties and use them for working capital, stock, growth, or refinancing.
This could be the right option for your business if you’re looking to borrow a large sum or if you’re a newer company that doesn’t have fully established accounts but does have available equity to secure.
Unsecured commercial loans
An unsecured commercial business loan provides your business with a lump sum without requiring property as collateral. It can be arranged faster than a secured loan, with decisions made in as little as 24 hours and funds often sent within 48 hours.
Unsecured loans are typically for smaller amounts, borrowed over a shorter term, with loans available up to £500k over 1 month to 6 years.
They can be riskier to lenders as there is no security to fall back on, which means they are often more expensive than secured loans. However, they can be easier to access if you don’t have suitable collateral, and you won’t be putting your assets at risk.
Revolving credit facilities
A revolving credit facility is a pre‑agreed line you can draw, repay and redraw as needed. This makes it an ideal option if your cash flow is uneven or unpredictable.
You only pay interest on what you use, and once approved, you can typically withdraw within 48 hours, making it a practical safety net for covering payroll, stock or unexpected bills.
Facilities are commonly available for up to two years but are usually renewable if you’ve kept within the limits and met the minimum payments.
Asset finance
Asset finance helps you acquire equipment for your business without a large upfront outlay. Two popular options are hire purchase and finance lease.
Lenders typically secure the loan against the asset you’re purchasing. It can be used to buy hard assets, such as machinery or vehicles, or soft assets, like IT software or catering equipment; however, some lenders may only lend for specific types of assets.
It can be an effective way to get the assets you need quickly and spread the costs over time without impacting your cash flow.
Commercial mortgages
A commercial mortgage is a loan secured against commercial property, either the premises from which you trade or an investment property let to other businesses.
They can be used to buy property or land for commercial use, or you can use the property as collateral to secure funding to reinvest in your business.
Commercial bridging loans
A bridging loan is a short-term financing option commonly used for acquisitions, chain breaks, or renovations when you need to bridge the gap between debt and incoming cash. It enables you to act quickly when funds are tied up.
The loan is typically repaid when you receive the funds from the sale of an asset, or when you obtain a longer-term loan, such as a commercial mortgage. They are a short-term option, with a typical maximum term of 24 months.
Bridging loans can be an expensive option if not repaid quickly, and interest is often charged monthly rather than annually.
Commercial finance eligibility
To qualify for commercial funding, your business must meet the lender’s requirements and eligibility criteria.
Although the specific criteria will be different for each lender, here are the basic requirements that you’ll need to meet to qualify for a commercial loan:
- You must be a UK resident with a business registered in the UK
- Your business must have been operating for at least 6 months for certain products
- You will need to have a clear purpose for the loan
There may be specific criteria related to factors such as your company’s turnover. However, meeting these criteria should ensure a smoother application process and improve your chances of approval.
How to apply for a commercial loan
The process of applying for a commercial business loan should be quick and straightforward. When you apply through Aurora Capital, you just need to follow these steps:
- Complete your application online: Provide your business details, turnover, and how much you want to borrow
- Submit paperwork: This includes bank statements from the last 3–6 months and the latest company accounts
- Get a decision: Your application can be processed within 24 hours, with funds often sent within 48 hours
- Receive the funds: Once you have been approved and signed the agreement, the funds can be transferred to your business bank account
When you apply for commercial finance with Aurora Capital, you can get a decision on your eligibility within minutes with no impact on your credit score.
Commercial loans FAQs
What can I use a commercial loan for?
Commercial loans can fund a wide range of business needs, from purchasing property or equipment to boosting cash flow, covering operating costs, refinancing existing debt, or supporting growth plans.
The right loan type will depend on factors such as your business goals, the speed of funding required, the stage of your business, and the amount you wish to borrow.
How quickly can I get a commercial loan?
Timelines vary by lender and loan type. At Aurora Capital, we can often approve your application in as little as 24 hours, with funds available within 48 hours.
Larger loans secured using property may take longer, especially if valuations or additional checks are needed.
Will applying for a commercial loan affect my credit score?
Most of our lenders will only run soft credit searches when you apply for a business loan, so this shouldn’t affect your company’s credit score. Some lenders will conduct hard searches, which can have a minor impact on the company’s credit score.
If you decide to agree to the loan and take the loan, the lender will most likely leave a hard footprint on your company’s credit file.
Do I need to provide security for a commercial loan?
Not always. It is possible to get an unsecured commercial loan, but they’re typically for smaller amounts and shorter terms.
The lender may also require a personal guarantee, which means you would be personally responsible for the loan if your business is unable to repay it.
For larger borrowing or better rates, lenders may require security such as property, vehicles, or other business assets.
What documents do I need to apply for a commercial loan?
Most lenders will require proof of identity, details of your business registration, recent business bank statements, and information about your business turnover and the purpose of the loan.
You may also need to provide management accounts or financial statements, such as profit and loss and balance sheets, especially for larger borrowing.
For secured loans, property details or asset valuations will be required, and some lenders may ask for details of any existing debt or legal charges on the asset.
