Quick answer
How does a business loan work?
A business loan gives your company an agreed sum to repay under a written schedule. To compare proposals, establish how much reaches the bank, the total repayment, the dates of each payment, and any security or director guarantee. Funding Felix collects your enquiry; a lender makes the lending decision.
Key points
- Start with the cash requirement and repayment plan, rather than the largest available amount.
- An unsecured company loan can still require a director’s personal guarantee.
- Compare fees and payment dates alongside the rate.
- A completed Felix enquiry is a request for a conversation, not a loan application or approval.
What would the money actually pay for?
Put the business purpose into a sentence before choosing a product: “We need £30,000 for stock ordered in February, which we expect to sell between April and June.” That statement gives the conversation a starting amount, a date and a proposed source of repayment. “We want some extra cash” leaves all three unresolved.
Split the requirement into items you must pay, items you could delay and a contingency you can explain. A new location, for example, might involve a deposit, fit-out, equipment, wages before opening and extra stock. The supplier’s headline quote may cover only one part. A simple uses-of-funds list helps prevent borrowing for the visible cost while missing the cash needed to operate afterwards.
Secured or unsecured: what is the difference?
A secured loan is supported by identified assets. An unsecured loan does not take that same asset security, but a lender may ask a director to give a personal guarantee. The British Business Bank explains this distinction in its guide to business loans [1]. Unsecured therefore does not mean that a director can assume there is no personal exposure.
Ask the broker to show the security and guarantee provisions separately. Establish who is giving each commitment, which assets are involved and how the obligation ends. If you do not understand the document, obtain advice on that document before signing it. The product name on a marketing page cannot answer those questions for your agreement.
What will a lender need to understand?
A useful funding brief explains the company’s trading history, recent turnover, current commitments and the intended use of the advance. The later assessment may require bank statements, accounts, management figures and information about the people responsible for the business. The exact evidence depends on the provider; one provider’s minimum turnover is not a universal market rule.
Be precise about the period behind a number. A £50,000 month, a £50,000 year and a £50,000 seasonal peak describe very different businesses. If recent trading has changed, provide the normal figure and explain the change rather than presenting the strongest month as the usual one. Our enquiry records reported trading information, while checks that have not happened remain marked as unverified.
How do you compare the full cost?
Build a comparison using the same net amount and the same purpose. A lower instalment may reflect a longer term, while an arrangement fee deducted at completion can reduce the money available for the project. Ask for a repayment schedule and a settlement figure for the point when you think you might repay early.
For a fixed repayment loan, add all scheduled repayments and separate charges, then compare that total with the cash the business actually receives. Keep fees already included in the schedule out of the calculation a second time. This simple cash comparison does not replace the agreement, but it makes obvious differences easier to discuss.
| Ask for | Why it belongs in the comparison |
|---|---|
| Net amount received | Shows whether the project is fully funded after deductions. |
| All payment dates and amounts | Lets you put commitments into the cash-flow forecast. |
| Total repayment and separate fees | Shows the cash cost without relying on a headline. |
| Early settlement terms | Tests whether flexibility has a price. |
| Security and guarantees | Shows the commitments behind the borrowing. |
A worked repayment example
Suppose a company receives £25,000 and repays it over 36 months using a hypothetical fixed nominal annual interest rate of 12%, calculated monthly on the reducing balance. With no fees, equal monthly payments are about £830.36; total payments are about £29,892.88 and the interest cost is about £4,892.88. The example assumes payments at the end of each month and uses unrounded instalments for the totals.
These are illustration figures, not a Felix quote, an APR or a statement of available rates. If the company instead pays a £500 fee from its own cash, that fee belongs in the budget too. If it is deducted from the advance, only £24,500 reaches the company. Use the repayment calculator to explore the arithmetic, then replace the assumptions with the actual written proposal.
Can the business manage a quieter month?
Test the repayment against cash remaining after normal operating costs and existing commitments. Do not use turnover as though it were spare cash. A business can make more sales while paying suppliers earlier, carrying more stock or waiting longer for customers to settle invoices.
Create a second forecast with a plausible delay or lower sales assumption. Show which costs continue, when the tightest balance occurs and what you would do if the expected receipt arrived late. If the plan only works when everything happens on the best possible date, discuss that weakness before committing to repayment dates. Our cash-flow guide offers a simple layout for this exercise.
When might another category deserve a look?
If the requirement is specifically a piece of equipment, compare the ownership and payment structure of asset finance. If the gap sits in unpaid business invoices, examine invoice finance. A fluctuating need may call for a different facility from a single lump sum. These are categories to investigate, not recommendations for your company.
The useful question is what creates the cash gap and what closes it. Paying the previous loan with a new one may change the schedule without solving the operating problem. Include existing balances, settlement costs and the reason the new arrangement improves the position in any refinancing discussion.
What happens after you enquire with Felix?
You give the team the company details, amount, purpose, trading information and a way to contact you. We save the enquiry and show a reference. The team can clarify the brief and discuss a possible broker introduction before sharing it. Neither a provisional profile nor a reference number means the company has passed credit checks.
A broker and lender carry out their own work and provide any actual proposal. Read that proposal alongside your forecast. The next useful step is a complete brief and clear questions, rather than a commitment made from a marketing headline.
Frequently asked questions
Straight answers
How much can my limited company borrow?
That depends on the provider’s assessment and the proposed repayments. Funding Felix does not calculate an approved limit from turnover or a company score.
Does an unsecured business loan need a personal guarantee?
It can. Ask whether a guarantee is required, who signs it and what it covers. Unsecured describes the security structure, not a promise of no personal exposure.
Can I repay early?
Check the specific agreement and request a settlement calculation. Early payment does not automatically remove every remaining charge.
Does sending the Felix form run a credit check?
No. The current Felix enquiry saves your reported information for the team. It does not run a live company or personal credit search.
Do I need bank statements to start?
The enquiry does not require document uploads. A broker or lender may later request statements through an agreed secure route.
Sources and further reading
Where the external facts come from
Sources checked on 27 October 2026. Provider links are references; they do not imply a partnership or an available offer.
- British Business Bank: business loans ↗
Loan structure and the distinction between asset security and personal guarantees.
