Key takeaways
- Sole traders can borrow, but GOV.UK says they have unlimited liability, so they are personally responsible for every business debt.
- The government-backed Start Up Loan lends £500 to £25,000 at a fixed 7.5% a year over 1 to 5 years, to businesses fully trading for less than 5 years.
- A Start Up Loan is an unsecured personal loan, needs a credit check, has no application or early repayment fee and comes with up to 12 months of free mentoring.
- Monzo lends sole traders with a Monzo Business account £200 to £25,000, at a representative 19.9% APR above £10,000 and 29.9% APR up to £10,000, checked on 6 November 2026.
- Some online lenders lend only to limited companies: iwoca's homepage asks for a limited company or LLP, and Funding Circle's loan page refers to applying as a limited company.
- Sole traders can claim interest on business loans as an allowable expense, but not the loan repayments themselves.
- The GOV.UK finance finder lists 196 schemes, including regional loan funds for businesses that cannot get mainstream finance.
Yes, a sole trader can get a business loan, but the loan is in your own name and you are personally liable for it. The main routes are the government-backed Start Up Loan at a fixed 7.5%, bank and app lenders that accept sole traders, and community lenders. Lenders judge you mainly on your personal credit record and your Self Assessment income.
Why is borrowing different for a sole trader?
A sole trader and the business are the same legal person. GOV.UK says sole traders have “unlimited liability”, which means owners are personally responsible for all the debts of the business.
That has three effects:
- the lender can pursue your personal assets if the business cannot repay
- the lender checks your personal credit file, not a company credit file
- some lenders, mostly online lenders, do not lend to sole traders at all
A limited company director usually signs a personal guarantee to get a similar result for the lender. For a sole trader the liability is already there.
What loans can a sole trader get?
These are the main options, with figures from each provider’s own page on 6 November 2026.
| Option | Amount | Rate |
|---|---|---|
| Start Up Loan (government-backed) | £500 to £25,000 | 7.5% fixed |
| Monzo sole trader loan | £200 to £25,000 | 19.9% or 29.9% representative APR |
| NatWest Small Business Loan | £1,000 to £100,000 | Fixed, varies by applicant |
| Community lenders (CDFIs) | Varies | Varies |
Options are listed by type, not ranked. The rate you are offered depends on your credit record, trading history and the amount.
Start Up Loan
The Start Up Loan is the main government route for new sole traders. GOV.UK says:
- you borrow £500 to £25,000 at a fixed 7.5% a year
- you repay over 1 to 5 years, with no application or early repayment fee
- you must live in the UK, be 18 or over and have a business fully trading for less than 5 years
- it is an unsecured personal loan, and you must pass a credit check
- you get up to 12 months of free mentoring and help with your business plan
See our Start Up Loans guide for the application steps.
Bank and app lenders
Monzo lends £200 to £25,000 to sole traders aged 18 or over who hold a Monzo Business account. The representative APR is 19.9% for loans over £10,000 and 29.9% up to £10,000, with no late or early repayment fees.
NatWest’s Small Business Loan lends £1,000 to £100,000 over 1 to 7 years at a fixed rate. Its eligibility list says you must be a “director of the business”, and does not mention sole traders, so ask NatWest before applying.
Some online lenders lend only to companies. When we checked, iwoca’s homepage asked for a limited company or LLP, and Funding Circle’s loan page referred to applying as a limited company.
Government-backed and regional schemes
The Growth Guarantee Scheme supports term loans, overdrafts, asset finance and invoice finance of up to £2 million through accredited lenders. The GOV.UK page, published 29 June 2026, does not mention sole traders, so check with an accredited lender. See our Growth Guarantee Scheme guide.
The GOV.UK finance finder lists 196 schemes. It includes regional funds such as ART Business Loans in the West Midlands and BCRS Business Loans, some aimed at firms that cannot get mainstream finance. Our microloans guide covers community lenders.
What do lenders check?
Lenders look at you, because you are the business. Expect them to ask for:
- photo ID and proof of your home address
- your personal credit file, which most lenders search
- business or personal bank statements, often 6 to 12 months, or an Open Banking link
- recent Self Assessment tax returns or SA302 tax calculations
- a business plan and cash flow forecast for a new business
A short trading record narrows your choices. The Start Up Loan is designed for businesses under 5 years old.
Is loan interest tax deductible for a sole trader?
Yes, interest on a business loan is an allowable expense. GOV.UK lists “interest on bank and business loans” and “bank, overdraft and credit card charges” as costs you can claim. It says you cannot claim “repayments of loans, overdrafts or finance arrangements”.
So on a £10,000 loan you deduct the interest you pay each year, not the £10,000 you repay. Record the interest separately in your books.
Which applies to you?
- If you are starting out or trading under 5 years, compare the Start Up Loan’s 7.5% fixed rate first.
- If you need under £25,000 quickly and bank with Monzo, check its in-app offer, and compare the APR.
- If you need more than £25,000, ask your bank about a small business loan or a Growth Guarantee Scheme facility.
- If you need money only for short gaps, an overdraft may suit better. See overdraft vs loan.
- If you have been turned down, ask the lender why and look at the community lenders in the finance finder.
- If you borrow often or want limited liability, read limited company vs sole trader.
What to do now
- Check your credit file before you apply.
- Get your last two Self Assessment returns ready.
- Work out how much you need and what the monthly repayment will be.
- Use soft-search eligibility checks where lenders offer them.
- Compare the total amount repayable, not just the rate.
Frequently asked questions
Can a sole trader get a business loan?
Yes. Sole traders can get Start Up Loans and loans from some banks and app lenders, but some online lenders lend only to limited companies.
What is the interest rate on a Start Up Loan?
GOV.UK says the Start Up Loan has a fixed rate of 7.5% a year, repaid over 1 to 5 years.
Is a sole trader personally liable for a business loan?
Yes. GOV.UK says sole traders have unlimited liability and are personally responsible for all the debts of the business.
Can I claim loan interest as a business expense?
Yes. Interest on bank and business loans is an allowable expense, but repayments of the loan itself are not.
Do I need a business plan to get a loan?
For a Start Up Loan you need one, and free help is available to write it. Other lenders often ask for one if you have a short trading record.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 6 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.