What Interest Rates Do Business Loans Charge in the UK?
Kyrelos Khir
Manager · Mar 17, 2024 · 7 min read
UK business loan interest rates vary significantly by product type, borrower profile, and lender. Understanding what determines your rate and how to compare offers correctly prevents you from accepting an expensive deal when a cheaper one is available.
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Typical rates by product
Unsecured business loans: 6% to 30%+ APR, depending on the borrower's credit profile, trading history, and loan term. Fintech lenders at the lower end accept strong profiles; higher rates apply to shorter-term products or businesses with adverse credit. Secured business loans: 4% to 12% per annum, with the best rates available to established businesses with significant property equity and clean credit.
Asset finance: 3% to 8% flat rate per annum (approximately 6% to 16% APR equivalent). Invoice finance: service charge of 0.5% to 3% of annual turnover per month, plus a discount charge on funds drawn at roughly base rate plus 2% to 5%. Merchant cash advances: factor rates of 1.1 to 1.5, making them the most expensive form of business finance when converted to an APR equivalent.
How to compare rates correctly
Always compare the total amount repayable, not just the headline rate. A loan at 10% APR with a 2% arrangement fee can cost more than a loan at 12% APR with no arrangement fee, depending on the term. Ask every lender for the total amount repayable over the full agreed term, inclusive of all fees.
Flat rate vs APR is a common source of confusion. A flat rate of 5% on a 3-year loan is not the same as 5% APR. Because you are repaying the capital over the term, the effective rate is roughly double the flat rate. Always ask for the APR, which accounts for the declining balance. Spark Finance presents all offers showing APR and total repayable so you can compare like for like.
"The businesses that get the best rates are not the ones that negotiate hardest. They are the ones that approach the right lenders, in the right way, with a well-packaged application."
- Kyrelos Khir, Manager
Frequently Asked Questions
What is the average business loan interest rate UK?
The average across all products and profiles is not a particularly useful number. For unsecured loans to creditworthy established businesses, representative rates of 6% to 15% APR are typical. For higher-risk profiles or short-term products, rates of 20% to 30% are common.
The bottom line
The best available rate for your business depends on your profile, the product, and who is lending actively at your size and sector. A broker with 100+ lenders finds the most competitive option. Start at apply.sparkfinance.co.uk.
Check your eligibilityAbout the author
Kyrelos Khir
Manager
Kyrelos is a finance manager at Spark Finance with a focus on invoice finance and working capital solutions for UK businesses. He helps businesses in professional services, recruitment, and manufacturing unlock cash tied up in their debtor books through factoring and discounting facilities.
