How lenders price a business loan

It starts with risk

Every price a lender quotes is, at heart, a read on how likely they are to be repaid. The stronger and steadier your trading, the lower the risk they carry, and the keener the rate they can offer. A patchy record, thin margins or a recent wobble pushes the other way. This is why two companies borrowing the same amount can be quoted very different prices — they're not buying the same risk. Strengthening the picture over time is the surest way to a better rate; see business credit score guide.

Term, size and security

Three structural levers move the price. A longer term spreads repayments but usually means more cost overall, because the money is out for longer. Size matters too — very small facilities can carry proportionally higher costs to cover fixed admin. And security lowers the lender's downside, which can bring the rate down. None of these is right or wrong; they're trade-offs you shape to fit the job the money is doing.

The lender's own costs

Part of your rate simply covers the lender's cost of doing business: the money they themselves borrow to lend on, the cost of assessing and servicing your account, and a margin. This is why rates drift with the wider market and why different lenders — a bank, a specialist, an alternative lender — land at different prices for the same borrower. Shopping around isn't just about the borrower's profile; it's about whose cost base fits your deal.

Don't stop at the headline rate

The advertised rate is only part of the price. Arrangement fees, drawdown charges and any early-settlement terms all feed the true cost, and a low rate wrapped in heavy fees can beat a higher one that's clean — or lose to it. Always compare the total repayable, not the rate alone. Read business finance fees explained, then put competing offers side by side with the true cost of borrowing calculator.

How to earn a better price

You can't change a lender's cost base, but you can improve how they read your risk: keep filings and accounts current, hold a modest cash buffer, borrow only what the numbers support, and avoid stacking multiple facilities at once. Match the term to the purpose rather than defaulting to the longest, and be ready to explain what the money is for. With Credicorp the loan sits on the company, not on you personally — start with the affordability calculator and read how to calculate affordability.