Sole Trader Loans & Finance from £1K – £500K

Apply for an unsecured sole trader business loan today

Breaking down financial barriers for UK sole traders

What are sole trader loans?

Sole trader loans are available to businesses owned and run by a self-employed individual. Unlike limited companies, sole traders are not required to submit paperwork via Companies House, making it more difficult for them to access funding through traditional methods. A sole trader loan can be secured against personal or business assets, or unsecured where no collateral is necessary. We work with lenders experienced in providing sole traders loans up to £500k.

• Unsecured funding

• £1,000 – £500,000

• 1 – 3 year repayment terms

what are sole trader loans

Can a sole trader get a business loan?

Yes, sole trader business loans are available. However, finding an appropriate lender to borrow the money from can be harder than it is for limited companies. This is because sole traders are perceived as ‘high risk’, and many lenders refuse to lend on the basis of bank statements alone.

Where can I get a small business loan?

You can get a small business loan from many places, such as a traditional high street bank, online lenders, or online brokers. At SME Loans, we are a brokerage. That means that we work with a panel of lenders to help find small business owners the finance they need.


How to get a small business loan?

With SME Loans, all you need to do is complete our online application. The form is quick to complete and only requires you to provide some personal information, as well as some details related to your business.

As a credit broker, it is our job to match you with the right lender who can provide the finance you need for your business.

What are the sources of finance for a sole trader business?

According to the Federation of Small Businesses, 3.4 million sole proprietorships and 4.3 million non-employing businesses are operating in the UK. Though their options can be limited compared to larger private and public companies, sole traders have various solutions available to fulfil their businesses’ financial needs. These are the sources of finance available to a sole trader are:

• Unsecured business loans

• Retained profits

• Hire purchase

• Secured loans from banks

• Crowdfunding options

sole trader finance on laptop

Unsecured sole trader loans

An unsecured sole trader business loan enables you to access a certain amount of money upfront. After receiving the cash, you repay the loan in monthly instalments until the amount has been paid in full. Unsecured business loans can help sole traders manage cash flow and business finances, without having to provide assets as security.

  • As a sole trader, it’s likely that you’ll be asked by the lender you’re matched to for a personal guarantee. Lenders often use personal guarantees as security for ‘higher risk borrowers’.
  • Much like personal loans, a personal guarantee agrees that if your business defaults on loan repayments, you, as the sole trader, will be personally liable for repaying the loan to the lender.


Retained Profits

This funding source benefits sole trader businesses with positive net income net incomes. It works best for profitable businesses and enables the sole trader to reinvest profits into the company. By retaining earnings, money can be spent to fund expansion without taking out a bank loan or borrowing from a lender or investor.


Hire purchase

For sole traders interested in acquiring certain assets for their business, hire purchase may be the best option. With hire purchase, you pay a proportion of the asset’s value as a down payment before paying a ‘rental fee’ in monthly instalments until the full payment has been cleared and you can keep and own the asset.


Secured loans from banks

Sole traders can approach traditional lending facilities such as banks when applying for secured sole trader finance, credit line or credit card. However, these facilities often refuse to lend to sole traders because they perceive their businesses as ‘higher risk’. They will often charge high rates to compensate for the risk, and many sole traders will wait weeks to find out their application has ended in rejection.


Crowdfunding options

In 2016, crowdfunding provided 15% of total startup and venture-stage equity investments in the UK, and this figure continues to grow after year. Crowdfunding platforms like Crowdfunder allow sole traders to pitch their business ideas online to a pool of potential investors who can choose to support them via donations. Under the umbrella term ‘crowdfunding’, you will also come across the terms ‘peer to peer’ and ‘equity’.


Peer to Peer (P2P)

Debt-based crowdfunding, also known as peer-to-peer lending, functions similarly to loans, except that you lend the money from a pool of people. These platforms operate like marketplaces and bring together lenders with sole traders needing loans:

  • Investors receive interest on money invested into your business
  • P2P platforms often charge fees to use their sites
  • A poor credit score can hinder your ability to receive finance

Equity-based Crowdfunding

Equity crowdfunding is the process of making an investment in exchange for shares in a sole trader’s business. As a sole trader, the investor takes partial ownership of the company and can then profit from the company doing well in the future. With equity crowdfunding:

  • Sole traders must give up partial ownership of the business
  • Platforms typically charge monthly fees or success fees after being matched with investors
  • There can be a large amount of competition on the platform

What are the best sole trader loans in the UK?

We believe it is vital to recognise the importance of sole trader businesses in the UK economy. Because of this, we are committed to providing easy access to funding for sole traders among the other types of businesses we help. With so many options available, it can be tricky to narrow it down. When finding the best sole trader loan for your business, you need to take into consideration:

• How long your business has been trading, and what your monthly turnover looks like

• How much you need to borrow and how long for

• Whether you want to provide collateral

• Your ability to make repayments

Why choose our sole trader loans vs. our competitors?

Our dedicated account managers are experienced in providing unsecured loans for sole traders across the UK and can find the most competitive rates for your business. We keep the process simple and do the hard work for you, comparing sole trader lenders so you don’t have to. As well as this, we also provide:

  • Financial Conduct Authority Approved. The lenders that we work with are upheld to lending best practice, registered in England and Wales, authorised and regulated by the Financial Conduct Authority.
  • Bespoke Repayment Plans. We will find a repayment plan that suits your business’ needs. Choose to pay back over 1 – 3 years.
  • 1 Month Cooling Off. If you change your mind you, have one month to cancel your loan agreement, free of charge.
  • No Application Fees. Unlike other brokers, we never charge fees to customers for applying or setting up their loans.

What are the benefits of sole trader loans?

When applying for an unsecured sole trader loan, the main advantage is that you don’t have to provide security through collateral. Not only does this keep valuable business assets safe, but it also means that you can access funds far quicker. Our sole trader loans can be arranged so that cash arrives in your account in just 24 hours. Other advantages include:

• Online application – No need to wait weeks or months for an appointment at your High Street bank.

• Greater chance of approval – With so many lenders on our panel, the likelihood of finding a good match increases.

• Maintain business control – You keep 100% ownership of your business and get to make all decisions associated with the loaned money.

• Competitive interest rates – By applying through a broker, you benefit from access to the lowest rates on the market.

Am I eligible for sole trader loans?

We aim to help as many sole traders as possible gain approval for finance. When applying for a sole trader loan, our simple requirements are as follows:

  • Registered in the United Kingdom
  • Actively trading for a minimum of 6 months
  • Has a sole trader that is over the age of 18

If you want to find out more about whether your sole trader business is eligible for finance, please get in touch at 01244 506279.

Excluded business types:

  • Gambling, drugs, weapons, chemical manufacture, pornography, banking and money transfer services.

How can I get a sole trader loan?

We have designed our application with busy sole traders in mind. To avoid any confusion when applying, we’re on hand to guide you through any questions you may have. In order to apply, simply follow these steps:

• Step 1: Complete our 1-2-page online application form. As well as being asked for your personal information, we will also want to understand more about your sole trader business, including how much funding you’re seeking. Please ensure to carefully read through our terms and conditions before making an application.


• Step 2: Within hours of submitting your application, you will be matched by us to the most suitable lender. You will then receive the lender’s full terms of agreement regarding your business funding.


• Step 3: Once you have carefully read through the lender’s terms, you will need to sign and agree to them. After the agreement has been returned to your lender, the loan amount will be deposited to your account within just 24 hours.

what is a sole trader

What is a sole trader?

A sole trader business is a type of business entity where the company is owned and run by one person. Also known as a sole proprietorship, if you run your own business, you work for yourself and, therefore, fall under the category of self-employed.

As the head of your business, you are wholly liable for the successes and/or failures of your sole trader business. While being a sole trader does come with big responsibilities, there are several attractive benefits. This includes the advantage of being able to take home 100% of the profit your business makes after tax.

  • Once you decide to go into business by yourself and become self-employed, you will need to register your sole trader business with HM Revenue & Customs.


Sole trader registration

In comparison to setting up a limited company, registering as a sole trader is relatively easy. There is little to no paperwork and you can benefit from your business affairs remaining private. In order to register, you can either:

  • Print off and complete the form and send it to the required address
  • Phone HMRC at 0300 200 3310
  • Complete the form online via HMRC’s portal

Before registering and being given a company number, you will first need to decide on a name for your business. HMRC states that you can trade under your own name or another, however, you cannot:

  • Include Ltd, limited, limited liability partnership, LLP, public limited company or PLC in the name
  • Use the same name as an existing trademark
  • Be offensive in the name you choose

For more information on registering or setting up as a sole trader, read our useful blog post on how to set up a sole trader business.

Top Tip: Register your business name as a trademark to prevent others from trading under it. The Intellectual Property Office has published a trade marks manual to help you apply and register your sole trader business’ trademark.

What expenses can I claim as a sole trader?

Sole traders incur running costs when managing their businesses. Luckily, a number of these costs can be claimed as business expenses, referred to as ‘allowable expenses’, which means that the business owner can pay less income tax and make more of a profit.

Income received by your business – allowable expenses incurred = profit.

· Office costs: claim items you’d normally use for less than 2 years, eg:, stationary

· Travel costs: covers expenses such as vehicle insurance, repairs and servicing, fuel and parking, vehicle license fees, train bus air and taxi fares, hotel rooms

· Clothing expenses: includes uniforms, protective clothing needed for work, costumes needed for the business

· Staff costs: employee salaries, bonuses, pensions, benefits and agency fees

· Things that are bought to sell on: stock, raw materials and direct costs from producing goods

· Financial costs such as insurance or bank charges

· Business premises costs: heating, lighting, business rates

· Advertising for marketing

sole trader business loans

HMRC’s rules are complex when it comes to claiming expenses, so in order to account for your expenses properly, you need to keep thorough and accurate records of everything being spent. Sole traders are legally bound to keep these records for a minimum of 6 years.

Similar to limited companies, sole traders can claim back expenses incurred that relate directly to their business. As expected, expenses can only be claimed if they are ‘wholly and exclusively’ incurred in the performance of your business duties. You can claim expenses when filing for your annual self-assessment, and should remember to not mix business with personal.


How do I do a self-assessment tax return?

When setting up your sole trader business, you’ll need to register for Self Assessment and file a tax return annually at the end of the tax year (5th April).

Did You Know? Self Assessment is a system that HMRC uses to collect income tax. Once you’ve completed your sole trader registration, you can expect to receive a letter in April explaining when and how to complete your first self-assessment form.

Once registered, an online account for your business’ Self Assessment will be set up with your Unique Tax Reference number, which you will use for all correspondence with HMRC.

Other responsibilities for sole trader businesses include:

  • Paying income tax on your profits and National Insurance Contributions
  • Keeping records of both your business’ sales and expenses
  • Registering for VAT if your business turnover is greater than £85,000


How much National Insurance will I pay as a sole trader?

Sole traders pay income tax that is based on their business profits. The amount paid is calculated from the Self Assessment tax return that is required to be submitted annually. Sole traders must pay their National Insurance Contributions (NIC), a flat rate Class 2 which equates to £2.95 per week (2018 / 2019).

If your sole trader business’ annual profits exceed £8,424 then you are also required to pay Class 4 which is 9% of your profits a year.

Frequently Asked Questions

If we haven’t answered all of your questions about sole trader loans, then take a look at some of the most frequently asked questions below.

A sole trader loan is a form of finance tailored to self-employed individuals who run their own businesses. Sole trader loans are used to help self-employed business owners who struggle to be accepted for traditional forms of finance. Usually, the loan can be either secured or unsecured.

To receive a sole trader loan from an online broker, you will need to fill out an online application. The form will require you to provide some information about the business, such as how long it has been trading for. Furthermore, you’ll also need to state your personal information, contact details, and how much money you want to borrow.

Once your loan application is accepted, one of our lenders will be in touch to discuss your loan options and any other questions you have.

At SME Loans, we understand how important it is that your business is performing at its best and has the ability to grow. That’s why we work with a panel of top-regulated lenders who can offer competitive rates on their loans. Our online form is safe and secure and can be completed in minutes, making the process as easy as possible.

If you’re not quite sure about taking out a loan, our guide to sources of business finance is worth reading for more information about the forms of finance available to businesses. We include links to great financial products, such as invoice financing, business credit cards, and more business loans.

You can still get a sole trader loan, even with a poor business credit history. You may find it harder to be accepted for the specifics you require, but you can still find a business loan when applying with an alternative credit broker or lender.

It is always recommended to improve your business credit score in order to get the best loan possible. For more information, such as affordable tools and tips to help manage your credit score, try reading our useful guide.

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