Interest rates. As a nation, we’re a little obsessed with them. Every time the Bank of England adjusts its bank rate – even by just a quarter of a percent – it makes headlines. And with around 8.5 million residential mortgages outstanding across the UK, that’s understandable. Homebuyers are, on average, spending 21% of their income on mortgage repayments.

But, as we’ve written about before, a 0.25% change in the base rate doesn’t always have the same scale of impact on SME lending as it does residential mortgages. Instead, businesses can often secure much lower interest rates by improving their financial reporting to demonstrate lower risk or by extending the loan term.

Despite this, business owners and CFOs often fixate on loan amounts and interest rates when considering funding. That’s not surprising, after all, these are the figures that dominate advertisements: Borrow up to £1,000,000! Rates from 6.9%!

Looking Beyond Interest Rates

Instead of solely comparing interest rates, we focus on the operational value a loan can provide. The key question isn’t just “How much will this cost?” but rather, “What will this enable my business to do?”

This is a crucial mindset shift. The true value of business funding isn’t just the amount borrowed, it’s what that funding allows an organisation to achieve.

A Real-World Example

A creative agency was struggling with cash flow due to rapid expansion and long invoicing periods. Several lenders offered them £250k term loans at competitive interest rates.

But their CFO wasn’t happy. A five-year term meant accumulating unnecessary interest, and fixed monthly repayments didn’t align with their short-term, cyclical cash flow fluctuations.

For them, flexibility was more valuable than just a low interest rate. They needed access to funds when required, with the ability to repay on their own terms – sometimes quickly, sometimes over a longer period – ensuring greater financial control and reduced stress.

By defining their goals upfront, they could assess funding options not just by cost but by how well each option met their business needs.

We secured a £500k revolving line of credit at 0.034% per day (equivalent to 8.3% per year) plus bank rate. Not only was the rate competitive, but interest was only charged on withdrawn funds and only for the duration they were in use. The CFO retained full control over repayment amounts and timing, allowing for more precise cash flow management.

Redefining What Matters in Business Funding

It’s easy to see interest rates as the key metric in business lending, but the quality of the loan matters just as much as the cost.

If you need a straightforward, no-frills facility, then a low interest rate is a priority. But in many cases, the real value of funding comes from flexibility, repayment terms, and the overall financial benefits it provides.

Interest rates aren’t just costs, they’re the price of a service. And in business, the right service can be worth far more than a fraction of a percentage point.nk

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