Sole Trader Loans

Looking to grow your business? Or just need a little extra working capital to keep your business moving? 

Our small business loans are available between £5,000 – £500,000 for almost any purpose.

We’re not a bank. Our lending criteria is different, and we look at more than just your credit profile.

Check your eligibility online in just two minutes, with no impact on your credit score, and you could receive your funds in as little as 24 hours.

How does the business loan work?

Unlike a traditional loan, Capify’s is paid back in very small amounts regularly. The repayments are completely automated so you don’t need to do anything. Many business owners love our regular payments, because they don’t have to save a large amount by a fixed date each month.

To be eligible for a business loan, you'll need to:

The benefits of a Capify business loan

It can be difficult to access suitable business funding and financing when you’re a sole trader. 

Investing the time necessary to properly understand the options open to you, while simultaneously running your business, is no easy task. This is where understanding sole trader loans more effectively can really give you a head start.

Over the course of this article, you’ll learn the basics of sole trader loans, which will allow you to make a more informed decision about the right loan for your business.

Table of Contents

What is a sole trader loan?

There are 3.5 million sole traders in the UK currently, with numbers reaching a record high in 2018. 

A sole trader is, as the name implies, a business that is owned and operated by one self-employed individual. In other words, it’s an individual working for themselves. This can include freelancers, consultants, and other individuals in business. 

You can still have employees as a sole trader, but the business must be owned by you as an individual. Sole Traders complete a Self Assessment to declare their earnings and tax due each year. You can register as a Sole Trader at

A sole trader loan is a broad term that applies to any loan provided to a business that operates as a sole trader.

Sometimes getting customers to pay an invoice as sole trader can be difficult, learn more about how to get paid for your work here.

How does a sole trader business loan work?

A sole trader loan or sole trader startup loan works like any other loan, in as much it’s essential for your loan provider to assess your financial circumstances. Through this, they determine your likelihood of being able to consistently make your loan repayments. So, for example, with a sole trader loan, you will be asked to provide evidence of the recent financial history of your business. If your business processes card payments, the volume of transactions and the average amount will also paint a picture of your financial health.


Can all sole traders get a loan?

As with any other loan, there’s no simple answer. The reason is that every lender will have different criteria you must meet in order to qualify. For example – your business must have been trading for at least six months, or you must have an annual turnover of at least £60,000. It’s important that your business is established, as loan providers need to examine your business finances in order to calculate your suitability for a loan. If you’ve just started your business, you may find it difficult to find a sole trader loan – however, certain companies may offer special packages just for new businesses.


Would it help to become a Limited Company?

Becoming a Limited Company involves altering the legal definition of your business structure. You can still operate a Limited Company on your own, however, a distinction is drawn between owners and directors (shareholders and managers). You may find it easier to get a loan as a Limited Company, but operating as one and becoming legally recognised as one is a more complicated process. With many companies out there offering sole trader business loans specifically for sole traders, becoming a Limited Company is not essential.

What else should you consider about sole trader loans?

The advantage of loans for sole trader businesses is that they are highly versatile, and can serve as a cash injection for your business to cover a wide variety of costs. As many loan providers now offer dedicated sole trader business loans, you may also find that the packages are already well tailored to your circumstances. A disadvantage is that as a small trader you have considerably higher liability than a Limited Company. As such, you may encounter limits as to the amount of money you can borrow, payment term restrictions, and increased interest rates.

Is a guarantor or security required?

Sole trader loans can be secured or unsecured. Secured loans are secured on your property and would be taken as repayment if you can’t repay the loan. If you’re a sole trader that’s likely to be your home, vehicle, or something else of value. Unsecured loans are not secured on property. 

It depends on the specifics of the loan you’re applying for. You can find both secured and unsecured loans as a sole trader. As with all loans, there are both benefits and drawbacks to secured and unsecured sole trader business loans, so make sure you fully understand the terms and conditions of your loan. If you have not been in business for very long, have had recent cash flow problems, or you have bad credit, then a guarantor may be required. 

If you take card payments, Capify can offer a merchant cash advance and business loan for sole traders. If you’re both a sole trader and a homeowner, Capify can lend over £50,000. The loan won’t be secured on your home either.

Find out how much you could raise

Use our sole trader loan calculator to find out how much funding you could raise. Simply put in your details, and our business loan calculator will show you the best loan options available. Find our dedicated sole trader business loans calculator below.

Sole traders can still have employees, a sole trader is someone who is classed as both the owner and operator of their business – there is no distinction between ownership and management. The benefit of this kind of loan is that you can generally be approved quite quickly, as a sole trader is a much simpler business structure. Something to seriously consider, however, is that if you cannot make the loan repayments, you will still be liable for the debt – not your business as an entity.

Table of Contents