How much does a business loan cost? UK rates and fees 2026

What a business loan costs depends on the type of finance, the size and length of the loan, whether it is secured and how strong the business is. This page sets out the typical rates, fees, terms and loan sizes for each main type of UK business finance, based on published rates from 148 lenders on our panel, October 2026. Every figure is a range worked out from that data, and the method is explained at the end. Last updated October 2026.

We are a broker, not a lender: we search the market and approach lenders suited to your business. The figures are indicative. The rate and fees you are offered are set by the lender after it assesses your application.

01Business loan costs by type of finance

"Typical starting rate" is the middle half of the starting ("from") rates that lenders on our panel publish for each type of finance: a quarter of products start lower and a quarter start higher. The smaller line shows the lowest starting rate and the highest rate any product quotes. "Typical term" and "typical loan size" are the median minimum and maximum across the products of that type.

Rates are yearly unless shown otherwise, before arrangement or service fees. Merchant cash advances use a factor rate, not an annual rate: a factor of 1.25 means £1.25 is repaid for every £1 advanced. Bridging is priced per month. Invoice finance charges apply to the money you draw and sit on top of a service fee. Commercial mortgages are priced on each property and deal, so our panel data holds no published rates for them; see commercial mortgages and the commercial mortgage calculator.

For context, the Bank of England's Bank Rate is 3.75%, set on 18 December 2025 (Bank of England, Official Bank Rate history, checked 19 October 2026). The average effective interest rate on new bank loans to SMEs was 6.63% in August 2026 (Bank of England, Money and Credit August 2026, published 29 September 2026). More official figures are on our UK small business statistics page.

02What drives the cost of a business loan

• Credit record: missed payments, defaults or a CCJ narrow the lenders that will look at a case and push pricing towards the top of each range.
• Security: a charge over property or an asset lowers the lender's risk. That is why secured loans and asset finance start lower than unsecured loans. See collateral and loan to value.
• Trading history and profit: several lenders on our panel publish separate, lower rate bands for businesses that have traded longer. Two or more years of accounts and steady profit open the lower end of the ranges.
• Sector: some lenders specialise in particular sectors or exclude others, so the choice of lenders, and the price, varies by industry.
• Term and size: short, small loans usually carry higher yearly rates. Longer loans often have lower rates but more interest in total, because you borrow for longer.
• Bank Rate: variable rates move with the Bank of England's Bank Rate.

Our guide to business loan interest rates explains how rates are quoted (annual, flat and factor rates) and how to compare two offers fairly. The UK business finance rate index shows rates by loan size and is rebuilt from our panel data whenever it changes.

03Worked examples: what a loan could cost

These examples use only the ranges on this page and standard arithmetic. They are illustrations, not quotes, and leave out any fees not shown.

Example 1: a £50,000 unsecured loan over 3 years

For a loan repaid in equal monthly instalments, the monthly payment is M = P × r ÷ (1 − (1 + r)⁻ⁿ), where P is the amount borrowed, r is the yearly rate divided by 12 and n is the number of monthly payments. Total interest is M × n − P. Here P = £50,000 and n = 36.

If the lender also charges a 3% arrangement fee (inside the typical 1% to 8.5% range for unsecured loans that publish one), add £50,000 × 3% = £1,500. At the median starting rate, the total cost of borrowing would then be £12,398 + £1,500 = £13,898.

Example 2: a £300,000 bridging loan for 9 months

Bridging interest is usually charged monthly and often rolled up or retained, so it is paid at the end rather than each month. Simple interest is amount × monthly rate × months. At the median starting rate of 0.89% a month: £300,000 × 0.89% × 9 = £24,030. A 2% arrangement fee adds £300,000 × 2% = £6,000, so interest and arrangement fee total £30,030, before valuation, legal and exit fees. Multiplying the monthly rate by 12 (0.89% × 12 = 10.68%) shows why bridging suits short periods only.

For detailed bridging and development finance, including live lender criteria, see our specialist site Bridge & Build Finance, or our business bridging loans page and bridging loan calculator.

Example 3: a £30,000 merchant cash advance

A merchant cash advance is repaid as a share of card takings, and the cost is fixed by the factor rate: amount repaid = advance × factor. At the median starting factor of 1.22: £30,000 × 1.22 = £36,600, a cost of £6,600. That cost is the same whether the advance is repaid in four months or twelve, so the yearly equivalent is higher the faster it is repaid. Our merchant cash advance calculator works this through for your takings.

Example 4: invoice finance on £100,000 drawn

The discount charge is a yearly rate on the money you actually draw. If a business kept £100,000 drawn for a full year at the median starting discount rate of 6.95%, the discount charge would be £100,000 × 6.95% = £6,950. The service fee, a percentage of turnover, is charged on top and varies by lender. Our guide to how much invoice finance costs shows how the charges combine.

04Fees to watch for

The rate is only part of the cost. Across the products on our panel:

• Arrangement fees: 76% of unsecured loan products and 76% of asset finance products can carry an arrangement fee. Where unsecured lenders publish one, it typically runs from 1% to 8.5% of the loan; for secured loans, 2% to 3%; for merchant cash advances, 3.5% to 10%; for revolving credit, 1% to 7%. Fees are often deducted from the loan or added to it.
• Early repayment charges: our panel data flags 6% of loan and asset finance products as able to charge an early repayment charge. Some short-term products charge the full interest whatever the repayment date.
• Personal guarantees: 95% of unsecured loan products ask for a personal guarantee from directors. A guarantee is not a fee, but it is a real cost if the business cannot repay.
• Invoice finance extras: service fees, minimum fees, same-day payment fees, audit fees and notice periods. Ask for them all in writing.
• Property costs: secured loans, bridging and commercial mortgages usually involve valuation and legal fees as well as the lender's own fees.
• Broker fees: any broker fee depends on the lender, with nothing to pay upfront.

05How to keep business loan costs down

• Compare total cost, not the headline rate. Add interest, arrangement fee and any exit fee for the period you expect to borrow. Our business loan calculator shows monthly payments and total interest.
• Offer security where it makes sense. Secured and asset-backed finance starts lower than unsecured lending; see secured vs unsecured business loans.
• Match the product to the need. Use asset finance for equipment, invoice finance for slow-paying customers and a term loan for one-off investment, rather than expensive short-term money for everything.
• Get your paperwork ready. Up-to-date accounts, management figures and bank statements let lenders price on the facts. See documents needed for a business loan.
• Check your credit files first. Correct errors before applying; see how to improve your business credit score.
• Borrow for the right length. A longer term lowers the monthly payment but usually raises the total interest; Example 1 shows how much the rate alone changes the total.
• Search the market. Lenders price the same business differently. We approach lenders whose criteria fit your business rather than relying on one bank's answer.

06How we compiled this

07How to cite this page

You are welcome to use these figures. Please link to this page as: Smart Funding Solutions, "How Much Does a Business Loan Cost? UK Rates and Fees 2026", updated October 2026, https://smartfundingsolutions.co.uk/knowledge-hub/business-loan-costs/

08Find out what finance would cost your business

Tell us what the funding is for and we will search the market and approach lenders suited to your business, from small business loans to secured loans and asset finance. Use Instant Quotes to see which lenders on our panel match your business, or send us your details. Any broker fee depends on the lender, with nothing to pay upfront.