What a business loan
actually costs
Not the headline rate, the money. Here is what the panel publishes, which fees turn up, and the four things that decide where in the range you land.
No credit check to enquire.
What you should expect to pay
- Two years and longer: 6.9% to 24.3% a year
A true annual rate on the reducing balance. £25,000 over 24 months costs between about £1,836 and £6,813 in interest depending where you fall in that range. Most businesses are nowhere near the bottom of it.
- Up to twelve months: 2% to 5.75% a month
Short money is quoted per month and compounds to roughly 27% to 96% a year. That sounds alarming and is simply what short-term lending costs. Over six weeks it is cheap; over twelve months it is not.
- The fees that actually appear
Arrangement fees of 1% to 5% are common on larger facilities, and a documentation fee of £100 to £500 turns up often. Several lenders on our panel charge neither. Early settlement charges are rare on business lending and some lenders publish none at all.
- What moves your price
Filed accounts, how long you have traded, how the bank account behaves, and whether a director will give a guarantee. Sector matters less than people expect; payment history matters more.
The same £25,000, at both ends of the range
Over 24 months, at the bottom and the top of the annual rates on our panel. The spread is the point: the same loan, the same term, nearly four times the interest.
Both ends are real rates from our panel rather than illustrations, but where you land is set by your filed accounts and your bank conduct, not by picking a column. Arrangement and documentation fees sit on top of all of this.
- Most businesses are nowhere near the bottom of the range. A page quoting you “from 6.9%” is quoting the best case on the whole panel, which is a floor and not a forecast.
- A monthly rate is a different unit. Short money is quoted at 2% to 5.75% a month, which compounds to roughly 27% to 96% a year — not comparable by eye with anything above. Why the two will not compare.
Put your own amount and term through it, then we will tell you where you would actually land.
Get my optionsCommon questions
What is a typical business loan interest rate?
There is no typical rate, which is why nobody credible publishes one. The honest answer is the range above, and that where you land is set by your accounts rather than by the lender’s mood. Anyone quoting you a single number before seeing your figures is guessing.
Why is short-term borrowing so much dearer?
The lender’s cost of underwriting is much the same whether the loan runs six months or six years, so it is recovered over a shorter period. It is only bad value if you borrow short money for a long need.
Does a longer term cost more or less?
The monthly payment falls and the total rises, because you pay interest for longer. The one exception is crossing the twelve-month line, where the pricing basis changes and a 24 month loan can cost less in total than a 12 month one. Why.
Do you charge me anything?
No. No fee to enquire, none if we place your case, none if we cannot help. The lender pays us commission on completion and our ranking ignores it. How that works.
See your actual numbers
Indicative costs in pounds, across every term, in about a minute.
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