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Guide

Business loan interest rates in the UK

Commercial lending is not priced like a mortgage. The same company can be quoted three very different-looking numbers for three products that cost roughly the same. This page explains how the quoting works so you can compare properly.

The three ways UK lenders quote

  • Annual interest rate — accrues on the reducing balance. Standard on amortising term loans.
  • Monthly interest rate — common on short-term and bridging facilities. Multiply carefully: 1.5% a month is not 1.5% a year.
  • Flat factor — a single multiple applied to the amount advanced. Repaying early usually does not reduce it unless the agreement says so.

What moves the price

  • Security — a charge over property or equipment prices lower than nothing at all.
  • Trading history — longer and steadier generally prices better.
  • Credit profile — company and director, including recent searches and declines.
  • Term — shorter terms can carry higher rates but less total interest.
  • Product — an asset finance agreement, an invoice facility and an unsecured loan are priced on completely different logic.

Comparing two offers properly

Put both into the same shape: total repayable in pounds, divided by what actually landed in the bank account, over the same number of months. Include the arrangement fee, any broker fee and the early settlement position. The business loan calculator does the arithmetic for both an amortising and an interest-only structure.

How security can affect pricing

Security, asset quality and receivables can affect how a provider assesses risk and sets pricing. Different structures are not directly comparable, and a lower headline rate may come with different fees, security or contractual obligations. General information on asset finance , invoice finance and an unsecured loan explains how those structures differ without recommending one.

Common questions

What interest rate will my company be offered?
Nobody can tell you that in advance. Commercial pricing is set per company and per product, based on trading history, credit profile, security and term. Treat any rate you see advertised as a starting point, not an offer.
What is the difference between an annual rate and a flat factor?
An annual rate accrues on the balance you still owe, so it falls as you repay. A flat factor multiplies the amount borrowed once, regardless of how fast you repay. A factor of 1.2 on £50,000 means £60,000 repayable, whatever the term.
Are fees part of the rate?
Usually not. Arrangement fees, broker fees, documentation fees and early settlement terms sit outside the quoted rate but very much inside the cost. Always ask for the total repayable in pounds.
Why is unsecured lending priced higher?
Because there is no asset the lender can realise if the loan is not repaid. Secured and asset-backed facilities typically price lower for the same company.
Does Backed set the rate?
No. Backed is an independent introducer and does not lend, price or approve anything. The funding partner sets its own terms.

Tell us what your company needs to fund

Backed may introduce your company to one or more funding partners whose criteria may fit. Providers determine eligibility, approval, pricing and terms.

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