If you are looking for the interest rate on a business loan, the truth is that nobody can quote you one until they have looked at your company. Lenders price each application from your accounts, your trading history, the security on offer, and the term you want. The nearest thing to a benchmark is what banks charged on new loans to small and medium-sized businesses: 6.63% in August 2026, on Bank of England figures. Your own offer can sit either side of that, and the number that decides what you pay is not the rate at all. It is the total you repay over the time you actually hold the money.

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What an interest rate on a business loan covers

Your interest rate is what a lender charges you for the money over the lending period. The sum you borrow is the principal; the interest is what you pay on top, usually spread across the repayment schedule and occasionally rolled up to the end. In other words, it's the cost of borrowing money.

The total you hand back is the principal plus that interest, plus whatever the lender charges for arranging it. Those fees are why two loans quoted at the same rate can cost you different amounts.

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What UK lenders actually publish

Search for a typical business loan rate and you will find confident-looking ranges. This page used to carry one. Follow any of them back and there is no lender or regulator behind it, only a broker or a comparison site, and none of them says what it measured, on what sample, in what month. There is no authoritative figure for what a UK limited company pays to borrow, so we are not going to invent one. What lenders publish about themselves is checkable, and this is what they published on 20 October 2026:

Those are not five prices for the same thing. Barclays shows why without leaving its own page: the same product, the same lender, the same day, and the rate runs from 14.9% to 8.5% on nothing but the size of the loan. Ours is an annual figure on an unsecured loan you can clear whenever you like, which is a different thing being measured.

A published rate is also only the rate you get if the lender says yes. Our SME Expert Index found in the second quarter of 2026 that 75% of brokers agree high street banks are reducing their appetite to lend. So the cheapest advertised number is often the one a company with a short trading record cannot have, and the comparison that matters is between the offers actually in front of you. If you are weighing a bank against a non-bank lender, our guide to business loans from banks and alternative lenders goes into the trade-off.

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What decides the rate you're offered

Lenders price risk, and every item below is a proxy for how likely they are to be repaid. Roughly in the order that moves a quote most:

• Security. A loan backed by property, equipment, or another asset prices below an unsecured one, because the lender has something to sell if the loan fails. What that discount is worth, with our own number on one side of it, is in our comparison of asset finance and an unsecured business loan, and the mechanics are in our guide to secured business loans.
• A personal guarantee, which is not the same thing. Most unsecured business loan lenders, us included, ask a director for a personal guarantee rather than a charge over company assets. It rarely changes the rate, but it changes who is on the hook if the company can't pay.
• Term and amount. A longer term usually lowers the annual rate, while a bigger sum adds risk, because more can change before it's repaid. One lender can quote the same company two very different numbers on that alone.
• Trading history and accounts. The further back your filed accounts and bank data go, the more a lender can price from evidence rather than caution. Accounts filed late, or filed in brief when a lender wanted the detail, cost you.
• Your credit profile. Your business credit file, and often your own, sets the floor. iwoca Credit Compass is free and shows your Equifax business credit score alongside four more, and what's affecting them – worth half an hour before you apply rather than after.
• Sector. Some trades are priced higher and a few are declined outright, usually on the default rates a lender has seen rather than anything about your company.
• The market you are borrowing in. Bank Rate has been 3.75% since 18 December 2025, with the next Monetary Policy Committee decision on 5 November 2026. It sets the floor, though not evenly: the same Bank of England series shows UK companies of all sizes paying 5.57% on new loans in August 2026, against the 6.63% small and medium-sized businesses paid. Being small costs about a point, every month, in public data.

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How rates are quoted, and why two offers rarely compare

Lenders describe the cost of borrowing in at least four units, and they are not interchangeable. The same money can be presented as 11.2% APR, 1% a month, a 4% flat fee, or a factor rate of 1.2 – and only one of those tells you what a year of borrowing costs.

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APR, and what 'representative' really means

An APR is the annual cost of the loan with compulsory fees folded in, which is what makes it the one figure you can hold two offers against. It assumes you borrow the full amount and keep it for the year, so it suits a loan you will hold for the term and overstates one you will clear in a month.

A representative APR is narrower still. It is the rate at least 51% of accepted applicants get, or better – a comparison tool, not a quote. Everyone else pays more, and nobody tells you which group you are in until you apply.

Our own rate for your company comes out of what we can see in your accounts and your bank data rather than off a tariff, so the figure that counts is the one in your offer.

Our terms, in one place:

• How much: £1,000 to £1 million.
• Rate: from 1.5% per 30 days, charged on your outstanding balance for the days you use the loan.
• Term: a fixed term of 12 months to five years, with no fee for repaying early.
• Fees: none on a 12-month loan. Longer terms may carry a fee, typically 5% for 13 to 24 months and 6% beyond that.
• Personal guarantee: every new Flexi-Loan needs a personal guarantee from at least one director, though not every director has to sign.
• Who we lend to: UK limited companies.

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A monthly rate is not a small rate

Short-term lenders often quote per month, and a monthly number always looks smaller than the annual one it is. 1% a month is 12% over a year in simple interest, and 12.68% if it compounds monthly. Nothing dishonest in that, as long as you convert before you set it against an APR.

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A flat fee costs about twice what it looks like

A flat fee is charged on the whole sum you borrowed for the whole term, not on the balance as it falls. You pay the balance down every month and the fee doesn't notice, so you keep paying for money you have already given back. Convert a flat rate on a monthly-repaid loan into an APR and it roughly doubles: 4% flat is about 8% APR. Equipment and asset deals are often quoted this way and almost nobody converts it for you, so a page setting a 4% flat rate against a 12% APR has made the first look about three times cheaper than it is.

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A factor rate has no time in it

Merchant cash advances and some short-term products quote a factor rate instead of a percentage. A factor rate of 1.2 on £10,000 means you repay £12,000, whenever you clear it. There is no annual anything in that number, so it can't be set against an APR directly, and it is the one structure that gets dearer the faster you repay.

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Fixed or variable

A fixed rate stays the same for the whole term, so your repayment is a number you can put in a cash flow forecast. A variable rate moves with a benchmark, usually Bank Rate, which means your repayments can fall and can also rise. The four other lenders in the table above all fix the rate on their smaller loans, and the choice between the two tends to appear only on larger, longer facilities.

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The rate matters less than how long you hold the money

Two things decide what a loan costs you in pounds: the rate, and what the rate is charged on. The second is the one that gets missed.

A conventional term loan prices the term you signed up to. Clear it in month four and, unless the agreement says otherwise, you can still find yourself paying for the rest of it. We do it the other way round. We charge interest on your outstanding balance for the days you use the loan, and there is no fee for repaying early, so the bill follows how long you actually hold the money.

On £10,000 at our representative rate of 3.33% per 30 days, that difference looks like this. To see the figures for your own amount and term, use our business loan calculator.

You choose a fixed term of between 12 months and five years, so you know the repayment schedule from the outset. Because there's no fee for repaying early, you can clear it as soon as the cash arrives – many of our customers only take out our finance for a few weeks, or even days. An iwoca Flexi-Loan is a business loan with flexible repayment options, and that is where it earns its keep: the gap between money going out and money coming in.

Flexi-Loan in action: VCare24 Victoria Simpson's care business waits 30 to 60 days to be paid by local authorities, while 200 staff need paying every month. She draws around £200,000 to cover payroll and pays it back within a week, as the payments come in. Read Victoria's story

None of which makes us the cheapest money on the table. If your company has filed accounts a bank is comfortable with, you can wait a few weeks for an answer and you want the money for four years, a bank's fixed-rate loan will cost you less and you should take it. Borrowing by the day wins on the other kind of need: a tax bill landing before your customers pay, payroll ahead of a big invoice, stock for a season you can already forecast.

Our business loan calculator will run your own figures rather than ours, and our guide to debt financing covers what borrowing commits your company and its directors to beyond the interest.

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Short-term loans cost more a year, and sometimes less in total

Long-term loans usually carry lower annual rates, in return for collateral and a stronger credit profile. Short-term loans are usually unsecured and priced higher, because the lender has less time to recover its costs and less warning if something changes.

Higher a year is not the same as more money, though. A higher annual rate over three months can be fewer pounds than a lower annual rate over four years, and that is the comparison to make rather than the two percentages. If the need has a date on it, short-term business loans are usually the right shape.

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The fees that don't show in the rate

A lower rate doesn't always mean a cheaper loan, and the gap is usually fees. Funding Circle's own illustration makes the point for us: on £100,000 over 24 months, their calculator shows a completion fee of £6,900 and interest of £9,252, for £116,152 repaid. The fee is more than two-fifths of what the loan costs, and none of it is in the headline rate.

What to look for:

• An arrangement or completion fee. Charged when you draw the money, and sometimes taken out of it, so less lands in your account than you asked for.
• An early-repayment charge. This is the thing that decides whether clearing the loan when the cash arrives saves you anything. NatWest and Barclays both publish none on their small business loans, and neither do we.
• A late-payment or default fee. Worth reading before you need it.
• Valuation and legal fees. On a secured loan these come before the money does, and they are yours whether the loan completes or not.
• Broker commission. If you are going through an introducer, ask what they are paid and by whom.

Then ask every lender for the one figure that settles it: the total amount repayable over the period you actually expect to hold the money.

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How to get a better rate

Rates vary enough that comparing properly is worth real money, and a representative APR tells you where a lender starts rather than where you will land. Beyond comparing, four things move your own number:

• Clear what you can of existing debt before you apply, because every current commitment comes out of what a lender thinks you can afford.
• Offer security or a personal guarantee if you are comfortable with it, and be sure you understand what you are putting behind the loan before you do.
• Check your credit file for mistakes and get them corrected. Errors are more common than people expect, and they are free to fix.
• Keep your accounts filed on time and in full. A lender that can read your last two years prices on evidence; one that can't prices on caution.

And the slow one: repay well. We report repayments to Experian and Equifax every month, as most lenders do, so the facility you are offered in two years is partly built by the one you are repaying now.

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Business loan interest rate FAQs

What counts as a good interest rate for a business loan?

There is no number, and anyone who gives you one is guessing. A good rate is the lowest total repayable you can get, for the length of time you actually need the money, from a lender that will lend to your company. A rate you are declined for is worth nothing, and a low rate with a completion fee and an early-repayment charge can cost you more than a higher rate with neither.

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Does checking business loan rates affect my credit score?

Comparing published rates doesn't, because nothing is being searched. An application can, depending on the lender and the stage it reaches. Checking what you could borrow with us won't affect your credit score. If you want to see what a lender sees before anyone looks, Credit Compass shows you your own file for free.

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How is interest calculated on a business line of credit?

On a line of credit you are charged interest only on the balance you have drawn, worked out daily or monthly, often with an arrangement fee and sometimes a fee on the part you leave undrawn. A loan is different: interest is set against an agreed sum over an agreed term. We don't offer a line of credit. A Flexi-Loan is a business loan with flexible repayment options, where interest runs on your outstanding balance for the days you use it.

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Sources

• Bank of England, Money and Credit, August 2026: effective interest rates on new loans to small and medium-sized businesses and to UK companies of all sizes. Read 20 October 2026.
• Bank of England, Bank Rate, and the official Bank Rate history. Read 20 October 2026.
• NatWest Small Business Loan, Barclays business loans, Metro Bank commercial loans, and Funding Circle small business loans, from each lender's own product page. All read 20 October 2026.
• iwoca business loans page, read 20 October 2026, for our rate, fees, and early-repayment figures.
• iwoca SME Expert Index, second quarter of 2026, for the broker figure.