What are the current interest rates for unsecured business loans?

With more than two thirds of the small to medium businesses in the UK who took out finance stating they used it for cash flow reasons and the Bank of England’s base rate set at 5% as of October 2024, you may be wondering what the current interest rates are for unsecured business loans. 

We outline that and more in our latest blog.

What are the current interest rates for unsecured business loans?

Unsecured business loan interest rates generally fall between 6-15% APR for UK-based businesses.

The government’s Start Up Loan Scheme has a fixed interest rate of 6% and is suitable for businesses with less than 3 years’ trading history.

As mentioned, the BoE’s base rate is currently at 5%, which is similar to the rate it was at back in 2008.

What is an unsecured business loan?

An unsecured business loan is a loan taken out for business purposes (eg to cover working capital costs or purchase inventory) that does not use an asset as security for the loan.

The best way to think of it is like this – let’s say you take out a commercial mortgage. The property is used as collateral for the loan, meaning, if you miss too many payments, the lender will take the property. Or, let’s say, for example, you want to take out a loan to cover payroll and your lender proposes putting up some of your machinery as security to help secure a reduced interest rate. In this instance, even though the loan isn’t being used to purchase the machinery, the lender could still take possession of the machinery if you miss payments or default. That is what we call a secured business loan.

An unsecured loan is sort of like the opposite of that. Think of a business overdraft or a company credit card – the lender extends a line of credit without asking for a specific asset to be used as collateral. That might mean interest rates are higher or the loan amounts are lower (because the lender is possibly taking on more risk) but it also means these kinds of loans may be easier to access if you don’t have assets that you’re willing to put up as collateral.

Be aware that this doesn’t mean you aren’t at risk of losing your assets if you default on the loan, it just means the loan was extended without collateral required from the borrower.

What influences interest rates for business loans?

The interest rate you get for an unsecured business loan depends on a variety of factors. We’ve outlined some below.

Company history

Your history with credit, profitability, and how long you’ve been trading for can all have an impact on the interest rate you’re offered. For example, a bad history with taking out loans could impact you negatively in the eyes of lenders, making it harder to get reduced loan rates.

Loan amount

The amount you want to borrow has an impact on your rate, in particular with unsecured loans as it may be harder for the lender to retrieve lost funds.

The lender

The lender will have internal systems that influence what they charge. This would likely be based on a mixture of the BoE rate, what they need to charge to stay profitable, how much risk they’re willing and able to take on, among other things.

Creditworthiness

Your creditworthiness is a measure used by lenders to determine the likelihood of you repaying a loan. In general, the higher your perceived creditworthiness, the more favourable an interest rate you’ll receive.

Find an unsecured business loan

We help match eligible borrowers to our network of over 120 lenders offering between £1,000 and £20M. Finding out if you’re eligible only takes a few minutes and won’t impact your credit score. Just click the link below and submit your information to see if we can help you find an unsecured business loan.

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Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.