Commercial Lending Rates Explained: What UK Businesses Need to Know in 2026
The cost of borrowing has become one of the biggest talking points for UK businesses. With interest rates, inflation, and market confidence all shifting rapidly, commercial lending can feel like a moving target. At FundingRound, we sit in the middle of this every day. We see how economic changes filter into real business decisions, repayment pressures, and lender appetite. This guide breaks down the key trends shaping commercial lending rates right now, and what they mean for your next move.
Interest Rates: The Core Driver of Borrowing Costs
Interest rates sit at the heart of every commercial lending decision. When the Bank of England adjusts its base rate, lenders react quickly. Even a small movement makes a difference. For example, a half-% rise on a £100,000 facility can add hundreds of pounds to monthly repayments. We’ve supported businesses whose variable-rate loans jumped from around 4.5 % to more than 8 % within two years. Nothing changed internally. The cost of borrowing simply escalated as the rate environment shifted. This is why it’s vital to understand how your rate type behaves.
Variable vs Fixed Rates: Understanding the Trade-Off
Variable rates react fast. Changes in the base rate usually feed through within 30 to 60 days. Fixed rates offer stability. Repayments stay the same regardless of market movements. During uncertain periods, many businesses choose the predictability of a fixed term even if the initial cost is slightly higher. A good finance strategy often compares both options early, not once you’re already deep into lender conversations.
Inflation: The Often-Overlooked Factor Behind Higher Rates
Inflation reduces the future value of money, which means lenders need to price higher to protect the value of their capital. This played out clearly between 2022 and 2023. Products quoted at around 7 % in spring were being priced at 10 % or more by autumn. Nothing about the business changed, but everything about the economic backdrop did. A whole-of-market broker becomes especially valuable in this environment because pricing and appetite vary significantly between lenders.
Lender Behaviour in Uncertain Markets
Rising rates are only part of the story. When economic confidence weakens, lenders often tighten their criteria. We regularly see:
- requests for more financial detail
- higher security or deposit requirements
- stricter affordability assessments
- reduced maximum loan sizes
We’ve watched strong, well-run businesses pause growth simply because lenders became more cautious. That’s why breadth matters. When one lender steps back, another is often stepping forward.
The Whole-of-Market Advantage with FundingRound
Commercial finance isn’t simply about finding the lowest rate. It’s about navigating a constantly shifting landscape.
Because we work with lenders across the full market, we can:
• spot pricing changes earlier
• identify lenders increasing their appetite
• avoid those temporarily tightening their criteria
• secure alternative solutions when the first option closes
This flexibility often makes the difference between a deal progressing or stalling.
What Business Owners Should Do Right Now
- Build flexibility into forecasts
Model different interest rate scenarios before committing to major investment.
- Consider fixing part or all of your borrowing
Peace of mind has value, particularly when the market is unpredictable.
- Don’t freeze important decisions waiting for perfect timing
Many businesses postpone too long, only to find that rates didn’t fall or lender appetite worsened.
- Get advice early
The earlier you engage, the more options you have. The best outcomes usually come from planning, not reacting.
Moving Forward with Confidence
Economic trends will continue shifting, but your business still needs to move forward. Understanding how lending conditions impact your plans is key to making confident decisions. If you want clarity on your next funding step, our team at FundingRound is here to help. Whether you’re exploring property finance, asset funding, working capital or refinancing, we can guide you through what the market really looks like today.