Business loan interest rates

What are business loan interest rates right now?

There is no single business loan rate. Each lender sets its own price for each business, so the most useful starting point is the official data, then the typical range for the kind of finance you need.

The SME average is a helpful anchor, but it is an average of what was lent, not a price list. It is weighted by the amount lent, so larger bank loans, which are often secured and priced at slimmer margins, count for more than small ones. A small unsecured loan, or finance from an online lender, will usually cost more. A strong company borrowing against property at a low loan to value may pay less.

Where rates have come from

Bank Rate rose to a peak of 5.25% in August 2023 and stayed there for a year. It was then cut in steps to 3.75% in December 2025, and it has not changed since. In September 2026 the Monetary Policy Committee voted 6 to 3 to hold, with the three dissenting members voting for a rise to 4%. The next decision is due on 5 November 2026. If you are weighing a variable rate against a fixed one, the possibility of a rise is worth building into your numbers, and the section on fixed and variable rates shows how.

Typical interest rates by type of business finance

The type of finance matters more than almost anything else. Lending secured on property sits at the bottom of the range, because the lender has something valuable to fall back on. Short-term unsecured finance, arranged in days and often with light paperwork, sits at the top.

These are indicative ranges drawn from published lender examples and market data, for UK limited companies, as of October 2026. They are not quotes, and some businesses will be offered rates outside them in both directions. Use them to judge whether an offer is in the right area, then compare the actual offers on the same basis. Our guide to commercial loans sets out what each type is for and how lenders size it.

How lenders set your interest rate

Every business loan rate has two parts. The first is the lender’s own cost of money, which tracks Bank Rate and wider market rates. The second is a margin that covers the lender’s running costs, its profit and, most of all, the chance that the loan is not repaid. Two businesses borrowing the same amount on the same day can be offered very different rates because the lender sees different risks.

Government schemes change the picture a little. Under the Growth Guarantee Scheme, the government guarantees 70% of the lender’s loss on an eligible loan. That can help a lender say yes, but the lender still sets the rate, so a scheme loan is not automatically cheap. Ask the lender to show the rate and total cost with and without the scheme where both are possible.

Lenders also price for what they cannot see. Up-to-date management accounts, a clear explanation of what the money is for and evidence that repayments are affordable all reduce uncertainty, and lower uncertainty tends to mean a lower margin.

APR, flat rate, factor rate: reading the quote

Business finance is quoted in several different ways, and the numbers are not interchangeable. A rate that looks low can cost more than a rate that looks high. Before comparing, check which of these you are looking at.

Representative APR

For regulated credit, the FCA’s rules require a representative APR in an advert to be one that at least 51% of borrowers are expected to receive. Up to 49% may be offered more. Most lending to limited companies is not regulated credit, so even that protection may not apply. Treat an advertised rate as a starting point, and ask for your own APR and a repayment schedule once the lender has assessed your application.

Fees change the real rate

An 8% interest rate repaid monthly is an APR of about 8.3% before fees. Add a 3% arrangement fee deducted from a £50,000 five-year loan, so you receive £48,500 but repay on £50,000, and the APR rises to about 9.7%. Our guide to comparing business loans sets out how to put offers side by side.

What different interest rates cost in pounds

Rates are easier to judge in pounds. The table shows the cost of borrowing £50,000 over five years with equal monthly repayments at a range of rates. It ignores fees.

Two points stand out. First, the gap between a good rate and an average one is real money: moving from 12% to 8% on this loan saves about £5,900. Second, the monthly figure hides much of the difference. A rate of 20% rather than 10% adds about £262 a month, which may feel manageable, but it more than doubles the total interest.

The term matters too

A longer term lowers the monthly payment but increases the total interest. At 10%, £50,000 over three years costs about £1,613 a month and £8,081 in interest. Over seven years it costs about £830 a month, but £19,725 in interest. Match the term to how long the thing you are buying will earn its keep. Try your own figures in the business loan calculator.

Fixed, variable and tracker rates

A fixed rate stays the same for an agreed period, often the whole term for smaller loans and 3 to 5 years for larger property loans. A variable rate can change. A tracker is a variable rate set at a fixed margin above Bank Rate, so it moves when Bank Rate moves. Many larger secured loans and commercial mortgages are trackers.

Which is better?

Neither is better in every case. A fixed rate gives certainty and protects you if rates rise, which suits a business with tight margins or a fixed budget. It can cost a little more at the outset, and fixed-rate loans often carry break costs or early repayment charges if you repay early. A tracker usually costs nothing extra to repay early and falls if rates fall, but your payments can rise at short notice. Some tracker loans also have a floor, a minimum rate that applies even if Bank Rate falls below it.

A practical test is to work out the payment at today’s rate and at 2 percentage points higher. If the business could not comfortably meet the higher figure, a fixed rate, a smaller loan or a longer term may be safer.

What is a good interest rate for a business loan?

A good rate is one that is competitive for your type of finance and your business’s risk, and that the business can afford with room to spare. There is no single number, but you can test an offer three ways.

• Against the benchmark. For an established, profitable company borrowing a meaningful sum from a bank, an offer close to the official SME average of 6.63% is competitive. Secured property lending at a low loan to value may beat it.
• Against the range for that product. Use the typical rates table. An unsecured loan at 12% APR is in the normal range. A short-term facility at an equivalent APR of 60% is not unusual for that product, but it is an expensive way to fund anything long term.
• Against the return. The money should earn more than it costs. If a £50,000 machine will add £20,000 a year to profit, a loan costing £3,000 a year in interest makes sense. If the gain is uncertain, a cheaper rate does not make the borrowing safer.

Some signs suggest an offer is worth questioning: a rate quoted only as a factor rate or monthly rate, fees that are not shown in pounds, pressure to sign quickly, or a rate well above the typical range without a clear reason. Ask the lender to explain how the price was set. If something feels wrong, check the firm on the FCA Register.

How to get a lower interest rate

You cannot change Bank Rate, but you can change how risky your application looks.

1. Get your accounts up to date. Filed accounts plus recent management accounts show the lender what the business earns now, not just last year.
2. Check both credit files. Lenders look at the company and usually the directors. Correct errors and settle small arrears before you apply.
3. Offer security where it makes sense. A charge over property or a valuable asset can lower the rate a long way, but it puts that asset at risk. Our guide to secured vs unsecured business loans weighs the trade-off.
4. Borrow the right amount for the right term. Very small and very short loans are often the most expensive per pound. Matching the term to the asset or project usually gets a better price.
5. Show how the loan will be repaid. A short cash flow forecast and a clear purpose reduce the lender’s uncertainty.
6. Use your existing bank as one quote, not the only quote. Compare it with other lenders on the same amount and term.
7. Ask about every fee and every charge. A slightly higher rate with no arrangement fee can be cheaper than a lower rate with a large one.
8. Avoid scattered applications. Several hard credit searches in a short time can make you look riskier. Ask whether a lender does a soft search first.

Our borrowing checklist covers what to prepare before any funding conversation, and our guide on how to get a business loan walks through every step of an application.

Is business loan interest tax deductible?

For a limited company, interest on borrowing used for the business is generally deductible when working out the company’s taxable profits, which reduces the Corporation Tax it pays. Arrangement fees on business borrowing are usually treated in the same way. Repayments of the loan itself are not deductible.

Very large borrowers can be affected by the Corporate Interest Restriction, but it only applies where a group’s net interest costs exceed £2 million a year, so most small and medium-sized companies are not affected. The treatment depends on your circumstances, so check with your accountant.

Where Business Loan Advice fits

We are not a lender and we do not give personal advice. We are preparing a service that will introduce UK limited companies directly to lenders. No lenders are confirmed yet, so we cannot currently obtain quotes or make introductions. You will not pay us a fee. If a lender pays us commission after the service launches, we will tell you before asking your permission to refer you.

In the meantime, the business loan calculator, the commercial mortgage calculator and these guides are free to use with no sign-up. If your limited company is planning to borrow, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.

Common questions