Business loan interest rates in the UK
Borrowing £25,000 over 3 years costs £2,995.60 in interest on a 7.5% Start Up Loan, about £3,280 at Barclays’ 8.5% representative APR, and about £19,778 at the rate iwoca shows in its own calculator example. Published high-street bank rates for small unsecured loans run from 8.5% to 14.9% APR; Bank of England Bank Rate is 3.75%.
The order matters more than the decimals. A cheap rate you cannot get is worth nothing, and the rate that applies to you is set by the lender after it sees your accounts. What this page gives you is the published starting point, the arithmetic, and the honest gap between the routes.
Every rate below is from the lender's own site, checked 1 November 2026. Bank Rate from the Bank of England; next decision 5 November 2026.
Business loan rates compared on £25,000 over 3 years
| Lender | Type | Rate used | Monthly | Total repaid | Cost of borrowing | Note |
|---|---|---|---|---|---|---|
| Start Up Loans | Government-backed | 7.5% fixed, no fees | £777.66 | £27,995.60 | £2,995.60 | Published table; trading under 60 months |
| Barclays | Bank | 8.5% APR representative | £785.55 | £28,279.93 | £3,279.93 | £25,000 band |
| HSBC | Bank | 8.6% APR representative | £786.63 | £28,318.52 | £3,318.52 | £25,000 band |
| Lloyds Bank | Bank | 11.2% APR representative | £814.49 | £29,321.47 | £4,321.47 | £25,000 band |
| Santander | Bank | 11.2% APR representative | £814.49 | £29,321.47 | £4,321.47 | £25,000 band |
| Santander (maximum APR) | Bank | 29.9% APR (maximum) | £1,013.22 | £36,476.06 | £11,476.06 | Worst case on its own page |
| NatWest | Bank | Not published at this amount | Not published | Not published | Not published | Quote only |
| iwoca (from rate) | Online lender | 1.5% per 30 days + 6% fee | £903.81 | £34,037.16 | £9,037.16 | Includes £1,500 fee |
| iwoca (49% APR example rate) | Online lender | 3.33% per 30 days + 6% fee | £1,202.17 | £44,778.13 | £19,778.13 | Includes £1,500 fee |
| YouLend (merchant cash advance) | Card-takings advance | Not published: no fee or factor rate on its own site | Not published | Not published | Not published | Cost your quote with the method below |
Bank rows apply each bank's representative APR for £25,000 to a 36-month capital and interest loan: monthly rate = (1 + APR)1/12 − 1, repayment = £25,000 × r ÷ (1 − (1 + r)−36). This method reproduces HSBC's and Lloyds' published examples to within a few pence. HSBC's and Barclays' small loans top out at £25,000. iwoca rows treat its 30-day rate as monthly and add its stated typical 6% fee for terms over 24 months; iwoca lends to limited companies and LLPs only. NatWest publishes one example (£10,000 over 22 months at 12.57% APR) and no rate for £25,000.
Where a merchant cash advance fits
A merchant cash advance has no interest rate. You pay a fixed fee, quoted as a factor rate, and repay through a share of your card takings, so the cost per year depends on how quickly you trade it back. YouLend does not publish its fee, factor rate or repayment share on its own site (checked 1 November 2026), so there is no published figure to put in the table. You can still cost a quote in three lines.
Costing your advance quote
Take A = the advance and F = the factor rate on your quote.
- Total repayable: T = A × F.
- Cost of the advance: C = T − A.
- Effective cost against a loan: C ÷ A, the cost per pound borrowed.
Compare that with the loans above, which cost this much per pound over 36 months on £25,000: Start Up Loan £2,995.60 ÷ £25,000 = 12.0%; Barclays £3,279.93 ÷ £25,000 = 13.1%; iwoca at its example rate £19,778.13 ÷ £25,000 = 79.1%.
Those loan figures buy the money for 36 months. An advance usually clears much faster, so ask the provider for N, the expected number of months to repay at your typical takings. To keep the same money working for 36 months you would need about 36 ÷ N advances in a row, so the like-for-like cost is (36 ÷ N) × C, set against the loan's interest in pounds.
Our verdict: for a three-year need, an advance is the wrong tool if a bank or Start Up Loan will lend to you. An advance earns its price when speed matters, when the bank has said no, or when takings are seasonal and fixed repayments would bite in quiet months. Read how a merchant cash advance works and when not to take one.
Where to find a low interest business loan
- Start Up Loans, 7.5% fixed. Up to £25,000 per person for businesses trading up to 60 months. The rate is the same for everyone accepted. See government-backed business loans.
- High-street banks, from 8.5% APR representative. Rates fall as the loan grows: Barclays charges 14.9% up to £5,000 and 8.5% from £15,001. Compared bank by bank in our bank business loans guide.
- Online lenders, faster and dearer. iwoca starts at 1.5% per 30 days and shows a 49% representative APR on its example; Funding Circle advertises from 6.9% a year on £10,000 to £750,000.
What sets the rate you are offered
Banks say the same thing in different words: your rate depends on the amount, the term and your credit status. NatWest adds that declared income must match what it sees going through your account, and Santander caps any offer at 29.9% APR against its 11.2% representative rate, which tells you how wide the spread can be. Loan size is the lever most people can pull: at Barclays, moving from £15,000 to £15,001 drops the representative rate from 11.2% to 8.5%.
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Frequently asked questions
What is a normal business loan interest rate in the UK?
On the banks' own pages, unsecured small business loans run from 8.5% APR representative (Barclays, £15,001 to £25,000) to 14.9% (Barclays, up to £5,000), with Lloyds and Santander at 11.2%. Bank of England Bank Rate is 3.75%, so even the cheapest bank rate sits several points above it.
Can I get an interest-free business loan?
Not from any lender on this page. The nearest thing was the Bounce Back Loan, where the government paid the first year's interest, and that scheme closed to new applications on 31 March 2021. A merchant cash advance charges no interest but a fixed fee instead, which is still a cost.
What is the lowest interest rate for a business loan?
For a new business, a Start Up Loan at 7.5% fixed with no fees. For an established one, the lowest published bank rate we found is 8.5% APR representative at Barclays between £15,001 and £25,000. Funding Circle advertises rates from 6.9% a year but does not publish a representative APR on its business loans page.
What is the difference between interest rate and APR on a business loan?
APR includes fees and compounding. Lloyds' example charges 10.65% fixed interest, which is 11.2% as an APR; NatWest's charges 11.9%, which is 12.57% APR. Compare APRs, or better, compare the total you repay in pounds.
How do I compare a factor rate with an APR?
Multiply the advance by the factor rate to get the total repayable, then divide (total repayable minus advance) by the advance. That is the cost per pound borrowed. Over 3 years, Barclays’ representative rate on £25,000 costs 13.1% of the amount borrowed. Ask the provider how many months the advance should take to clear: a fixed fee paid back in months costs far more per year than the same fee spread over years.