SME loan interest rates edged up to 6.63% in August, according to the Bank of England. That is the average rate on new loans to small and medium-sized businesses. Over the same month, large businesses borrowed £3.2bn from banks, more than three times the £0.9bn small firms borrowed.
01What the Bank of England figures show
The Bank's Money and Credit release for August came out on 29 September. According to the Bank, UK businesses borrowed £4.1bn from banks and building societies in August, up from £1.9bn in July.
Large businesses took £3.2bn of that, up from £1.0bn. Small and medium-sized businesses borrowed £0.9bn, the same as in July.
Growth in SME borrowing over the year rose to 4.6%, from 4.1%. For large businesses it eased to 8.9%, from 9.4%.
02What SME loan interest rates are now
The effective rate on new loans to SMEs rose to 6.63%, from 6.61% in July. The effective rate is the average interest actually paid on loans drawn that month. It is not a quote, and your own rate may be higher or lower.
Across all businesses, the rate on new loans fell to 5.57%. So smaller firms paid about a point more than the average.
03Why do small firms pay more?
Lenders usually price for risk. A smaller firm often has less trading history, fewer assets to offer as security and a thinner cash buffer. Each of those can add to the rate.
These figures show how much was borrowed and at what price. They say nothing about how many applications were approved.
04How to narrow your own rate
You cannot change the market, but you can change how your application looks.
- Keep your plan current: a lender wants to see what the money is for and how it will be repaid.
- Build a cash-flow forecast: 12 months, month by month, with your assumptions written down.
- Match the product to the need: asset finance for equipment and vehicles, or a government-backed scheme where you qualify.
Our guide to SME loan rates explains how the rate is set. When you are ready, a broker can look at the deal across a wider range of lenders. We can help you compare growth finance options.
