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What Does Business Loan Consolidation Actually Cost?
Before you commit to consolidating your business debt, you need to know what it will actually cost — not just the monthly payment, but the interest rate, the arrangement fee, and what you might owe on early repayment charges to your existing lenders. This guide breaks all three down with real numbers.
By Daniel · Last updated 10 April 2026
Key takeaways
- →Three cost components to factor in: interest rate (ongoing), arrangement fee (one-off), and early repayment charges on your existing loans (one-off).
- →Secured consolidation loans typically cost 8–12% APR; unsecured 12–18% APR.
- →Arrangement fees are usually 1–3% of the loan amount — on £100k, that is £1,000–£3,000.
- →Always calculate the total interest paid over the full term, not just the monthly saving — a longer term can increase total cost even if monthly payments fall.
Cost 1: The interest rate
This is the biggest ongoing cost — what you pay the lender every month for the use of their money. Business consolidation loans are priced based on risk: the less risk you pose to the lender, the lower the rate you get.
| Loan type | Typical APR range | What affects it |
|---|---|---|
| Secured (property as collateral) | 8–12% APR | Property value, LTV (loan-to-value ratio), credit profile |
| Unsecured (good credit) | 12–15% APR | Credit score, turnover, trading history |
| Unsecured (average credit) | 15–18% APR | As above, higher risk premium |
| Specialist / adverse credit lenders | 18–30%+ APR | Past CCJs, missed payments, thin file |
These are indicative market ranges as of April 2026. Your actual rate will depend on your individual circumstances. Always get a quote in writing before committing.
Cost 2: The arrangement fee
Most business lenders charge an arrangement fee (sometimes called an origination fee or facility fee) when they set up a loan. This is a one-off cost, but it can be significant — and it is often added to the loan balance, which means you end up paying interest on it for the full term.
What to expect
- Typical range1–3% of the loan amount
- On a £50,000 loan£500–£1,500
- On a £100,000 loan£1,000–£3,000
- On a £200,000 loan£2,000–£6,000
- When it is paidUsually on drawdown — either added to loan or paid upfront
Watch out for broker fees too. If you use a broker to arrange the loan, they may charge their own fee (typically 1–2% of the loan) in addition to the lender's arrangement fee. Always ask for the total cost of credit, including all fees, before you proceed.
Cost 3: Early repayment charges on your existing loans
This is the one people most often miss. When you consolidate, your existing loans get settled early. If those loans have early repayment clauses — and many do — you will pay a penalty for doing so.
Early repayment charges (ERCs) are typically expressed as a number of months of interest. A 3-month ERC on a £60,000 loan at 12% APR, for example, works out as roughly £1,800.
| Loan type | Typical ERC |
|---|---|
| Term loan (fixed rate) | 1–3 months interest, sometimes up to 6 |
| Merchant cash advance (MCA) | Full outstanding balance — MCAs use a factor rate (e.g. 1.3 × amount advanced), charged upfront. There is no discount for settling early. |
| Business overdraft | Usually none — check terms |
| Business credit card | None (but full balance must be repaid) |
| Bounce Back Loan (BBL) | None — no early repayment penalty |
| Asset finance | Varies — check with your provider |
The practical step: before you speak to any lender or broker, ring each of your existing providers and ask for a settlement figure. That is the exact amount you need to pay to close the account today. Collect these figures and use them in your consolidation calculation.
Worked example: does consolidation make sense?
A plumbing business with three loans
Current situation
| Loan | Balance | Monthly | ERC |
|---|---|---|---|
| Term loan (14% APR) | £35,000 | £820 | £700 |
| Business credit card (22% APR) | £12,000 | £360 | None |
| Overdraft (18% APR) | £8,000 | £120 | None |
| Total | £55,000 | £1,300/month | £700 |
Consolidation loan: £55,700 at 10.5% APR over 4 years (secured)
Monthly payment
£1,428
Fixed for 4 years
Arrangement fee (2%)
£1,114
Added to loan
Total interest paid
£13,200
Over 4 years
Monthly saving: approximately £-128/month — marginally higher than before. But the credit card and overdraft are now fully cleared, the rate on those balances drops from 18–22% to 10.5%, and the term loan at 14% is also refinanced cheaper. Over 4 years, total interest is significantly lower than continuing on existing terms.
This illustrates an important point: consolidation is not always about cutting the monthly payment — it can be about reducing the total cost and simplifying your finances even when the monthly figure stays similar.
When consolidation makes financial sense
Good candidates
- ✓High-rate debt (credit cards, MCAs, overdrafts)
- ✓Multiple repayments causing admin headaches
- ✓New rate is meaningfully lower than existing average
- ✓Cash flow relief needed even if total cost is similar
- ✓Term shorter than current weighted average
Be cautious when
- ✗New rate is higher than all your existing loans
- ✗ERCs wipe out several months of savings
- ✗You are extending the term by more than 2 years
- ✗Existing loans are nearly paid off
- ✗You are in financial difficulty — seek advice first
Run the numbers for your situation
Enter your current loans into our consolidation calculator and see what a single loan might cost per month — with a low and high rate estimate based on typical market rates.
Try the consolidation calculatorFrequently asked questions
What interest rate can I expect on a business debt consolidation loan?
Typical rates range from 8–12% APR for secured consolidation loans (backed by business property) and 12–18% APR for unsecured. The rate you actually get depends on your credit profile, trading history, and how much you want to borrow. Some specialist lenders go higher for riskier profiles.
What is an arrangement fee on a business loan?
An arrangement fee (sometimes called an origination fee or product fee) is a one-off charge by the lender for setting up the loan. Typical fees are 1–3% of the loan amount. On a £100,000 loan, a 2% arrangement fee is £2,000. Some lenders add this to the loan (so you pay interest on it); others require it upfront.
Do I have to pay early repayment charges on my existing loans before I consolidate?
Possibly. Many fixed-rate business loans include early repayment charges (ERCs) that kick in if you settle before the agreed end date. ERCs are often 1–3 months of interest, but can be higher on longer-term loans. Check each of your current agreements before proceeding — these costs need to factor into your consolidation decision.
Does consolidation always reduce my monthly payments?
Usually yes — spreading debt over a longer term reduces monthly payments even if the rate is similar. But if your new interest rate is significantly higher than your existing loans, or if you extend the term substantially, you could end up paying more total interest. Always compare the total cost over the full term, not just the monthly payment.
How long does a business debt consolidation loan typically last?
Most business consolidation loans run for 2–7 years. Shorter terms mean higher monthly payments but less total interest. Longer terms lower your monthly cash flow pressure but increase what you pay overall. Most businesses find 3–5 years balances these two concerns.
Related guides
What Is Business Debt Consolidation?
How the process works, step by step
My Business Has Too Many Loans
All four options when debt is getting on top of you
How to Exit a Merchant Cash Advance
Five ways to refinance or escape an expensive MCA
Can I Consolidate With Bad Credit?
What lenders look at and what to realistically expect
Find out what rate you could get
We'll connect you with FCA-authorised commercial finance brokers who specialise in business debt consolidation. No impact on your credit score to enquire.
Sources
- British Business Bank — Small Business Finance Markets Report 2024/25
- Bank of England — Official Bank Rate and monetary policy reports (April 2026)
- Financial Conduct Authority — Consumer Credit Sourcebook (CONC), 2024
- LoanLens market rate monitoring — indicative rates sourced from UK commercial lenders, April 2026
Disclaimer: All figures are indicative estimates based on typical UK market rates as of April 2026. Actual rates and fees depend on your credit profile, trading history, security, and individual lender criteria. This guide is for information only and does not constitute financial advice. Business loans are regulated by the FCA. Always use an FCA-authorised broker. If you are in financial difficulty, Business Debtline offers free, independent advice on 0800 197 6026.