Business loan interest rates are set by each lender, based on the risk it sees: your creditworthiness, the size and purpose of the loan, the security offered and the type of business. The Bank of England base rate influences pricing, but it is only one input, so two lenders can quote different rates for the same business.
At a glance
- Who sets the rate
- Each lender, case by case
- Bank Rate (as of October 2026)
- 3.75%, held on 17 September 2026
- Next Bank Rate decision
- 5 November 2026
- Rate types
- Fixed, variable and, rarely, hybrid
- Secured lending
- Generally seen as lower risk, often with more favourable rates
- Larger loans
- Tend to attract higher rates, according to the British Business Bank
What are business loan interest rates?
Business loan interest rates are the cost of borrowing, shown as a percentage of the amount you borrow. The British Business Bank describes the business loan rate as a percentage of the total borrowed, and notes that each loan comes with its own specific rate.
That wording matters. A lender does not look up your rate in a public table. It works out a price for your business, on that loan, on that day. Two businesses in the same street can be quoted different rates for the same amount, and the same business can be quoted different rates by two lenders.
This article explains the pricing logic. It deliberately gives no typical rates, because any figure we printed would be out of date quickly and would not be your rate.
What decides the rate a lender offers you?
Lenders set the rate by judging how risky the loan looks, and the British Business Bank lists the main things a lender weighs. Each lender follows its own policies, so the weight given to each factor differs.
| Factor | How it tends to move the rate |
|---|---|
| Creditworthiness | A strong credit history and financial position usually earns a lower rate. Poor scores or missed payments can bring a higher one. |
| Type of business | Businesses seen as higher risk, such as newly established start-ups, are typically charged more. |
| Size of the loan | Larger loans tend to attract higher rates, because lenders see more risk in them. |
| Security offered | Assets pledged as security reduce the lender’s risk, which can mean a better rate. |
| Repayment period | The British Business Bank says the rate depends on the repayment period as well as any collateral. |
| Purpose | What the money is for plays a part in how the lender prices it. |
Some lenders also run programmes for particular kinds of business. That is another reason to look at how to compare business loan lenders rather than accept the first offer.
Does offering security lower the rate?
Often, yes. The British Business Bank describes secured loans as generally lower risk for lenders, which often means larger amounts and more favourable interest rates, while unsecured loans usually have higher rates.
The trade-off is what you put at risk. With a secured loan, a missed repayment can cost you the asset. With an unsecured loan, lenders typically ask for a personal guarantee instead, which makes a director personally liable if the business cannot pay. Our guides to secured and unsecured loans and to personal guarantees set out the detail.
A lower rate is therefore not automatically the better deal. It is the price of taking on a different kind of risk. Weigh what you could lose against what you would save, and ask the lender to show the total repayable under each option so the comparison is like for like.
Is a fixed or variable rate better?
Neither is better in every case: a fixed rate gives certainty and a variable rate gives flexibility with risk attached. The British Business Bank describes three types of business loan rate.
| Rate type | How it works | Worth weighing |
|---|---|---|
| Fixed | The rate is agreed when you confirm the terms and stays the same for the whole loan. | You can calculate the exact interest in advance. It will not fall if market rates do. |
| Variable | The rate can rise or fall during the loan, based on market conditions. | It may start lower than a fixed rate, but your payments can change. |
| Hybrid | A blend of fixed and variable. The British Business Bank calls it quite rare. | Some protection against rises, with some benefit from falls. |
If a repayment rise would strain your cash flow, certainty is worth something. If you are likely to repay early, ask the lender what that costs, because early repayment terms vary.
How does the Bank of England base rate affect business loan rates?
The Bank of England base rate, called Bank Rate, influences the rates banks and lenders charge, but it does not set them. The British Business Bank calls it the most important interest rate in the UK, and adds that other factors also matter, so lending rates may not move in step with it.
As of October 2026, Bank Rate is 3.75%. The Bank of England held it at that level on 17 September 2026, and its next decision is due on 5 November 2026. That is context, not a loan rate: your offer will sit on top of lender costs, risk and margin.
Bank Rate matters most if you take a variable rate, because the British Business Bank notes that a lender may adjust your rate to follow Bank of England changes. On a fixed rate, later moves do not change what you pay.
Is the interest rate the whole cost of the loan?
No. The interest rate is one part of what a loan costs, so compare the total amount you will repay and not just the headline rate. Arrangement costs, valuation and legal fees on secured lending, and the repayment term all change the real price.
The British Business Bank points out that when a property is used as security, valuation and legal costs may apply, and that valuation costs still have to be paid if the application is rejected or the amount approved is lower than you asked for. Our guide to APR explains the measure lenders use to show the yearly cost.
| Item | Loan A | Loan B |
|---|---|---|
| Amount borrowed | £10,000 | £10,000 |
| Interest over the loan | £1,000 | £800 |
| Arrangement fee | £0 | £400 |
| Total cost of borrowing | £1,000 | £1,200 |
These figures are invented to show the arithmetic. They are not real rates, fees or offers. Loan B has the lower interest but costs more overall because of its fee.
How can you improve the rate you are offered?
You can improve the rate by improving the things lenders price: your credit record, the quality of your financial information and the fit between the loan and your need. The British Business Bank says a business credit score reflects several habits you control.
- Pay suppliers and other creditors on time.
- Stay within overdraft limits.
- File your accounts on time, if they must be filed.
- Be selective with credit applications, because the number of times you have applied for credit is one of the factors that affects a business credit score.
- Read your business credit score and fix errors before you apply.
Borrow what you need and no more, and ask more than one lender. If your record is weak, our guide to business loans with bad credit explains what to expect.
Where does Capzy fit in?
Capzy is a credit broker, not a lender, and is paid by the lender. We do not set your rate and cannot promise one. We introduce businesses to lenders, including those in our directory of business lenders, and set out what comes back so you can compare offers on total cost.
You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and every offer is subject to status and lender criteria. This article is general information, not financial advice.
Sources
- How Interest rates impact businesses, British Business Bank
- What are the different types of business loan?, British Business Bank
- What is a business credit score?, British Business Bank
- Interest rates and Bank Rate: our latest decision, Bank of England
Capzy is a credit broker, not a lender. We get paid by the lender. This page is general information, not financial, tax or legal advice. Finance is subject to status, lender criteria and affordability; rates and terms depend on your circumstances.