Business loan interest rates

Latest timeframe referenced: Q4 2024 to early 2024.

• The average interest rate on new bank loans to SMEs is around 7 percent as of late 2024. This rose from roughly 1.6 percent in 2020, with a peak near 7.6 percent in early 2024.
• Government backed Start Up Loans carry a fixed 6 percent annual interest rate for eligible new businesses, which sits below typical market rates.
• Rates vary by product. Secured loans such as asset finance tend to price lower than unsecured overdrafts. By late 2024 many SME overdraft interest rates were in high single to double digits, while personal overdrafts averaged about 22 percent APR for context.

SME loan approval and acceptance

Latest timeframe referenced: 2024 vs historic baselines.

• Fewer than half of SME bank loan applications were approved in 2024, down from about 67 percent in 2018 to 2019. Pre financial crisis approval rates were often 80 to 90 percent.
• Existing customers and asset finance applicants have much better outcomes. Approval success for leasing or hire purchase sits around 80 percent.
• First time applicants and those applying to their main bank face the lowest success rates.
• Only about 1 percent of all UK SMEs both apply for and obtain new finance in a given period, reflecting muted demand and caution.

Use of loan types and working capital tools

Latest timeframe referenced: Q4 2024, early 2024, and 2025 where noted.

Bank loans and overdrafts

• In Q4 2024 about 9 percent of SMEs were using a bank loan and 11 percent were using an overdraft.
• Overdraft approvals in early 2024 were up by over 50 percent year on year, and more than doubled in agriculture, as firms sought short term buffers.
• By 2025 overdraft demand began to cool again as many firms still had unused facility headroom and stayed cautious about interest costs.

Asset finance

• Total new asset finance lending in 2024 reached a record £39.7 billion across all business sizes, up 3 percent year on year.
• SMEs accounted for £23.5 billion of that asset finance volume in 2024.
• Asset finance now funds about one third of UK investment in vehicles, machinery, and equipment.
• 2024 was the first year since 2020 that bank loan growth outpaced asset finance, even as asset finance remained a large share of investment.

Invoice finance and asset based lending

• By Q3 2024 UK businesses had around £21.5 billion outstanding in invoice finance and asset based lending facilities, up roughly 6 percent year on year.
• The average SME client drew about £454,000 against invoices, up around 3.6 percent year on year.

Credit cards and other finance

• Around 16 percent of small firms used credit cards in late 2024. These are easy to obtain, but expensive if balances roll.
• Peer to peer loans and merchant cash advances remain a minority, though they continue to fill gaps for firms declined by banks.

Growth Guarantee Scheme uptake

Latest timeframe referenced: first year to July 2025, performance to March 2025, scheme horizon to March 2030.

• In its first year from July 2024, the Growth Guarantee Scheme enabled about £2.5 billion of lending to smaller businesses.
• 69 percent of GGS backed lending went to businesses outside London and the South East.
• The scheme supports term loans, overdrafts, asset finance, invoice finance, and asset based lending. The government offers a 70 percent guarantee on eligible facilities up to £2 million.
• By mid 2025 the scheme had supported over £368 million to manufacturing, £366 million to wholesale and retail, and £234 million to construction.
• Government has extended the scheme through at least March 2030.
• Under the prior Recovery Loan Scheme, an estimated 83 percent of loans would not have been provided without the guarantee. Early evidence suggests GGS is supporting similar cases near lenders’ risk thresholds.

Challenger banks vs big banks

Latest timeframe referenced: 2014 to 2024, with commentary to mid 2025.

• In 2014 the five largest banking groups provided around 63 percent of SME lending. By 2023 that had fallen to about 41 percent.
• As of 2024 challenger and specialist banks account for roughly 60 percent of annual gross SME lending.
• Over 60 new banking licences have been issued since 2014, including 36 geared to serving SMEs, alongside growth in non bank lenders.
• By mid 2025 challengers were offering some of the most competitive rates and niche products, increasing pressure on the big banks.

Business lending volumes and trends

Latest timeframe referenced: 2023, 2024, Q1 2024 and Q2 2025, plus December 2024 year on year.

• Gross bank lending to smaller businesses in 2023 was around £59 to £62 billion, about 15 percent lower in real terms than 2022.
• In nominal terms 2024 ticked up to about £62 billion, the first growth since the pandemic, though still roughly one third below 2019 levels.
• Net lending has been negative through most of 2022 to 2024. In December 2024 the annual growth rate of SME borrowing was −1.9 percent year on year.
• There are signs of a turn. Q1 2024 saw an 8 percent year on year rise in new loan drawdowns. In Q2 2025 gross lending by the main banks reached about £4.24 billion for the quarter, up 8 percent year on year.
• The number of loans to small businesses with under £2 million turnover rose by about 14 percent in the same period.
• Overdraft usage remains below pre 2020 levels despite approval spikes. Business current account balances in Q2 2025 were roughly 20 percent lower than 2021 peaks, but still above pre COVID norms.

Late payments and borrowing behaviour

Latest timeframe referenced: Q4 2023 and policy updates to 2025.

• By the end of 2023 about 65.8 percent of small firms reported being paid late, up from roughly 61 percent earlier that year.
• 34.9 percent said late payment problems were worsening in Q4 2023.
• Late payment is estimated to close around 50,000 small businesses each year and cost the economy about £2.5 billion annually.
• In Q4 2023 65 percent of SMEs said they were waiting longer for payments than 12 months earlier. Over half reported at least one supplier or customer insolvency in the prior six months.
• 30 percent suffered a bad debt write off in 2023, averaging about £17,500.
• 68 percent of firms reported slower customer payments, pushing some to use overdrafts, credit cards, or invoice finance to bridge gaps.
• Government has announced plans to crack down on late and poor payment practices to improve cash flow and reduce unnecessary borrowing.

Sector differences that stand out

Latest timeframe referenced: 2024 to mid 2025.

• Real estate, professional services, agriculture, and personal services showed year on year growth in new loan drawdowns in 2024, yet volumes still sat around 30 percent below 2019 levels.
• Manufacturing and transport struggled to access finance in 2023 to 2024 as costs rose and collateral was limited.
• Construction has some of the highest late payment and cash flow concern rates, with over 80 percent of SMEs reporting major worries, leading to heavier use of schemes and alternative finance.
• Younger firms under five years old have been significant beneficiaries of new guarantee backed finance. Export oriented SMEs remain cautious due to trade uncertainty.

Method notes

This page consolidates figures cited from official and trade sources including the Bank of England, UK Finance, the British Business Bank, the Finance and Leasing Association, the Federation of Small Businesses, and regulator research. Timeframes are stated alongside each group of statistics. Where market ranges are shown, they reflect the latest available publications up to early and mid 2025.