Small Businesses: Loans
The question
To ask the Chancellor of the Exchequer, what information her Department holds on the highest rate of short-term lending to small and medium sized businesses in the UK.
Answered by Lucy Rigby
Interest rates are a commercial matter decided by lenders, reflecting the base rate, the risk of the applicant, and a margin to make the loan commercially viable given the cost of underwriting and broader funding costs. Rates vary across the market and even significantly within the SME sector – dependent on the trading history, credit position, security, and other factors of the individual business applicant.
The UK also benefits from a broad lending market, enabling a diverse range of finance providers to facilitate access to finance for a wide range of SMEs. SMEs should shop around to find the product that best suits their needs when choosing finance.
The Bank of England’s ‘bankstats’ data provides insights into business and household credit, including the effective interest rates for SMEs on new and outstanding loans. The monthly average of UK resident banks’ sterling weighted loans for new advances to SMEs now stands at 6.35%, as of 31st August 2025, a figure that has tracked down as the base rate has fallen.
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