What Rate Should I Be Paying on a Business Loan in 2026?

If you took out a business loan more than a year ago, there's a good chance the rate you're paying no longer reflects the current market. Interest rates have shifted, new lenders have entered the space, and your business may be in a stronger position than when you first borrowed.

This guide gives you benchmark rates for every major type of UK business finance in 2026, so you can see exactly where your deal sits. We update these figures quarterly using Bank of England data and our own monitoring of published lender rates.

Rates by loan type: the 2026 picture

The table below shows typical rate ranges and what we consider a “good” rate for each loan type. These are based on rates available to creditworthy SMEs — businesses with at least two years of trading history, reasonable credit, and consistent revenue.

Sources: Bank of England effective interest rate tables, British Business Bank Small Business Finance Markets 2025/26 report, LoanLens lender monitoring. Last reviewed February 2026.

What affects your rate

The rate you're actually offered depends on several factors beyond the type of finance. Understanding these helps explain why your neighbour might be paying 9% for the same type of loan you're paying 14% for.

Credit profile is the single biggest factor. Lenders assess both your personal credit score (as a director) and your business credit rating. A clean history with no defaults or CCJs can mean the difference between the top and bottom of the range.

Time in business matters significantly. Lenders typically distinguish between businesses under 2 years old (high risk, higher rates), 2–5 years (standard rates), and 5+ years with audited accounts (best rates). Startups will almost always pay more.

Loan size affects pricing. Smaller loans (under £25,000) tend to carry higher rates because the lender's fixed costs are spread over a smaller amount. Larger facilities (£100,000+) often attract more competitive rates, especially from traditional banks.

Security dramatically changes the equation. Offering a personal guarantee, a charge over property, or asset security can reduce your rate by 3–8 percentage points. The trade-off is personal financial risk.

Industry sector plays a role too. Hospitality, construction, and retail are considered higher risk by most lenders. Professional services, healthcare, and technology typically get better rates.

Unsecured business loans

Unsecured business loans are the most common type of SME finance. You don't need to put up assets or property as security, which makes them faster to arrange — but the lender takes on more risk, and the rate reflects that.

In 2026, the typical range for unsecured term loans is 8–18% APR (Annual Percentage Rate). Anything under 12% is generally competitive. Above 15% and it's worth asking serious questions about whether better options exist.

The main high-street and online lenders for unsecured business loans include Funding Circle, Starling, iwoca, and Tide. Rates vary significantly between them, and many will give you an indicative rate after a soft credit check that doesn't affect your score.

Secured business loans

If you can offer security — typically a charge over commercial or residential property — secured loans are significantly cheaper. The typical range is 6–12% APR, with strong applicants getting 7–8%.

The catch is obvious: if your business can't repay, the lender can seize the secured asset. For property-secured lending, this can mean your home. Make sure you understand the risk before pursuing cheaper rates via this route.

Secured lending typically involves longer approval times (2–8 weeks vs days for unsecured) and usually requires a formal valuation of the asset. Legal fees may apply. Factor these costs into your comparison.

Asset finance and hire purchase

Asset finance is used for specific purchases — vehicles, machinery, equipment, technology. The asset itself acts as security, so rates fall between unsecured and secured lending at 5–15% APR, with 7–10% being competitive.

One wrinkle: asset finance rates often depend on the asset type and its expected depreciation. Vehicles and standard equipment get better rates than niche or custom machinery, because the lender can more easily resell them if you default.

Merchant cash advances

MCAs are the most expensive form of business finance, and by a wide margin. They don't technically charge interest — instead, you repay a fixed multiple of the advance (the “factor rate”) via a percentage of your daily card takings. But when you convert this to an effective APR, it's typically 20–100%+.

A typical MCA with a factor rate of 1.3 (borrow £10,000, repay £13,000) over 8 months works out to an effective APR of roughly 65%. That's not a typo.

MCAs have their place — they're fast, require minimal paperwork, and the repayment flexes with your revenue. But if you're using one because you couldn't get a term loan, it's worth trying again. Your circumstances may have changed, and even a 15% unsecured loan is vastly cheaper than most MCAs.

Bounce Back Loans

If you're still repaying a Bounce Back Loan (BBL), you have one of the best deals in UK business finance. The rate is 2.5% fixed, set by the government, with no early repayment charges and Pay As You Grow options that let you extend to 10 years or take payment holidays.

We include BBLs here mostly to confirm what you probably already suspect: refinancing a BBL to a market-rate loan will almost certainly cost you more. The only scenario where it might make sense is consolidating the BBL with other, more expensive debts into a single facility — and even then, run the numbers carefully.

Worked example: how much does rate really matter?

To make this concrete, let's look at the same £40,000 loan over 4 years at different rates.

That's nearly £200/month more, or almost £9,500 over the term. This is why checking your rate matters — even a few percentage points compound into significant money over time.

Frequently asked questions