Compare Interest Rates on Small Business Loans from Top UK Providers (2026

Securing a business loan is often a key step for small business growth — whether you’re funding expansion, managing cash flow, buying equipment, or hiring staff. But in 2026, one of the most important factors for financial planning is interest rate — the cost you pay to borrow money.

This guide breaks down the current interest rate landscape for small business loans in the UK, compares rates from top providers, explains how different types of loans differ, and gives tips for choosing the most cost-effective financing for your business.

How Business Loan Interest Rates Are Set in the UK

Interest rates on business loans are influenced by macroeconomic conditions. In 2025, the Bank of England lowered its main interest rate to around 4%, the lowest in several years, as part of a strategy to stimulate economic growth. AP News

Commercial lenders typically base their lending rates on this benchmark, then add a margin depending on risk, credit history, and loan features. So when base rates fall, borrowing can become cheaper — although the actual rate you are offered still heavily depends on your business’s profile.

Typical Business Loan Interest Rates in the UK (2026)

According to recent market data, here are typical ranges for small business loans in the UK:

Loan Type	Typical APR Range	Notes
Secured business loan	~4% – 10% APR	Lower rates because the loan is backed by assets. Christie Finance
Unsecured business loan	~7% – 15% APR	Common for smaller loans and younger businesses. Christie Finance
Invoice finance	~2% – 5% (effective rate)	Cost depends on invoice value and advance percentage. ExpertSure™
Asset finance	~5% – 12% APR	Used for equipment and vehicles. ExpertSure™
Merchant cash advance	~15% – 35%+ APR	Very high cost for fast access. ExpertSure™
Commercial mortgage	~5% – 9% APR	Long-term property financing. Christie Finance

These ranges reflect what lenders commonly quote for UK SMEs — but your actual interest rate may vary based on creditworthiness, loan size, term length, and whether security (collateral) is provided.

Interest Rates from Top UK Providers (Representative Examples)

Below are some well-known UK lenders and the representative rates they advertise for small business loans (where available):

1. British Business Bank / Start Up Loans

·         Representative fixed APR ~6% for loans up to £25,000. Forbes

·         Designed for newer businesses (under ~36 months trading).

·         Includes mentoring support and no personal guarantee.
Best for: Start-ups needing affordable, predictable finance.

2. HSBC Small Business Loan

·         Representative APR: ~8.6% – 11.3% (varies by amount and term). Forbes

·         Loan sizes typically £1,000 – £25,000 on advertised examples.
Best for: Established businesses with solid credit looking for competitive pricing.

3. Metro Bank Small Business Loan

·         Representative APR from ~9.6% fixed for smaller loans. Forbes

·         Terms ~1–5 years.
Best for: SMEs needing short-term funding with transparent pricing.

4. NatWest / RBS / Ulster Bank

·         Representative APR ~11.6% – 12.24% for fixed-rate loans. Forbes

·         Available for larger loan amounts (e.g., up to £100,000).
Best for: Larger SMEs with established banking relationships.

5. Funding Circle

·         Competitive APR range ~6.9% – 12%. fundingagent.co.uk

·         Peer-to-peer or marketplace-style small business lending.
Best for: Businesses wanting a mix of speed and competitive pricing.

6. Barclays Business Loan

·         Typical APR ~11.2% – 14.9%. fundingagent.co.uk
Best for: Small businesses seeking flexible terms from a well-known high street bank.

7. Lloyds Bank Business Loans

·         Competitive fixed APR ~11.2%. fundingagent.co.uk
Best for: SMEs wanting a trusted lender with broad product support.

8. iwoca

·         Offers fast business loans with broader APR ranges (e.g., 6% – 49%). fundingagent.co.uk

·         Rates vary significantly based on business risk and loan features.
Best for: Fast, flexible lending to businesses that might not qualify with traditional banks.

How to Interpret These Rates

When comparing rates, it’s important to look at APR (Annual Percentage Rate) rather than just the headline interest rate. APR includes some fees and shows the true cost of borrowing over a year. Lower APRs mean less cost overall, but lenders may vary widely in how they quote and apply fees.

For example:

·         A 6% APR loan from a government-linked program (like the British Business Bank’s start-up offering) may be easier for a new business to service than a commercial loan at 12% APR from a high street bank — especially if security isn’t required. Forbes

On the higher end, lenders like iwoca may quote APRs well into the 20s or higher for businesses with lower credit scores or higher perceived risk. fundingagent.co.uk

Fixed vs Variable Rates

Business loans in the UK can be either fixed or variable:

·         Fixed rates guarantee the same interest rate for the term, which makes budgeting simpler.

·         Variable rates can change with market movements, often linked to the Bank of England base rate — which as of recent policy has been relatively low following cuts in 2025–2026. AP News

Variable rates can start lower than fixed rates but may rise if base rates increase, so they’re best suited to businesses with flexible cash flow.

Tips to Get Lower Interest Rates

Here’s how small businesses can often secure better rates:

✔ Improve Your Credit Profile

A strong business and personal credit score usually unlocks lower APRs.

✔ Offer Collateral

Secured loans (backed by property or equipment) often have 4%–10% APR, lower than unsecured options. Christie Finance

✔ Shop Around

Compare multiple lenders — including banks, specialist lenders, and online marketplaces — to find competitive pricing.

✔ Consider Government–Linked Options

Programs like Start Up Loans often offer stable, low fixed APRs and additional support. Forbes

✔ Manage Loan Size & Term

Shorter terms often have lower overall costs, though monthly payments may be higher.

Risks & Costs Beyond Interest Rates

Keep in mind that fees — such as arrangement fees, early repayment charges, and monthly servicing costs — can significantly impact the overall cost of borrowing. Always request a full cost schedule before committing.

Also, some very quick or alternative lenders might advertise low headline rates but include high overall charges — compare APRs carefully.

Final Thoughts: 2026 Lending Landscape for UK SMEs

Interest rates on small business loans in the UK are becoming more competitive in 2026, partly due to easing Bank of England policy and growing lender appetite after a period of tight credit. AP News

From government-linked fixed rates as low as ~6% APR to traditional bank loans in the mid-teens, and flexible online options with a wider APR spread, it’s crucial to match a lender’s terms to your business needs.

By comparing interest rates, understanding loan types, and choosing the right structure — fixed vs variable, secured vs unsecured — small business owners can find affordable financing that supports growth while managing cost.