What are the typical interest rates and fees for restaurant business loans in the UK?

Short answer: typical UK restaurant finance costs at a glance

Typical interest rates for restaurant business loans in the UK vary widely by product, risk profile, and security. As a quick guide, unsecured term loans often range from about 8% to 30% APR, while secured loans can be closer to 5% to 15% APR. Merchant cash advances use a fixed “factor rate” (often 1.15 to 1.50) instead of APR, and asset finance tends to sit around 6% to 18% APR for equipment and fit‑out.

Most lenders charge an arrangement fee of 0% to 6% of the facility, with potential documentation, valuation, and legal fees for secured borrowing. Early repayment fees may apply, and revolving products can include non‑utilisation charges.

Every lender prices risk differently, so your trading history, margins, card turnover, credit profile, collateral, and loan purpose all influence the rate and fees. The ranges below are indicative, not a quote.

Product type	Typical cost	Common fees	Notes
Unsecured term loan	~8%–30% APR	Arrangement 0%–6%; early settlement possible	Fast decisions; PGs common; 6–60 months
Secured business loan	~5%–15% APR	Arrangement 1%–3%; legal/valuation fees	Lower rates with asset or property security
Merchant cash advance	Factor 1.15–1.50 (no APR)	Setup fee; card processing fees still apply	Repaid as % of card takings; flexible to seasonality
Asset finance (HP/lease)	~6%–18% APR	Doc fee £100–£250; option to purchase £10–£100	Secured on equipment; match term to asset life
Overdraft/revolving credit	~8%–24% APR equivalent	Arrangement 1%–2%; non‑utilisation 0.5%–1.5% p.a.	Pay interest on drawn balance; flexible use
Invoice finance (catering/B2B)	Base + ~2%–5% margin	Service fee 0.3%–3% of turnover	Less common for restaurants; useful for events/catering
Growth Guarantee Scheme (GGS)	Typically base + ~2%–8%	Arrangement fees; no borrower guarantee fee	Government‑backed to the lender; eligibility applies

Important: these are broad market ranges; offers depend on lender criteria and your profile. Best Business Loans is an introducer and does not supply loans directly.

What drives the rate a restaurant pays?

Your trading profile and risk

Lenders look for at least 12–24 months’ trading, stable revenues, and healthy gross margins after cost of goods and labour. Seasonal volatility is normal in hospitality, but predictable patterns and strong cash controls help. Newer sites, thin margins, or recent losses can push pricing higher.

Personal and business credit histories affect risk‑based pricing. County Court Judgments, arrears, or returned items generally increase cost or reduce choice.

Security lowers risk: assets, equipment, or property charges can reduce rates versus fully unsecured borrowing. Personal guarantees are common on SME loans.

Revenue mix and repayment method

High card turnover can suit a merchant cash advance, where repayments flex with takings. That flexibility can cost more in total than a standard loan. Cash‑heavy businesses may need traditional structures with fixed monthly repayments.

For equipment, matching the term to the asset’s life helps lenders and can lower the rate. Lenders like tangible collateral with resale value.

Purpose matters: fit‑outs, refurbishments, and new site openings are typically priced higher than straightforward working capital for an established venue. Documenting ROI assumptions helps underwriters.

Loan amount, term, and lender type

Smaller loans often carry higher APRs because fixed costs are spread over less capital. Longer terms can reduce monthly cost but increase total interest. Early settlement options differ; always confirm if interest is rebated on early repayment.

High‑street banks may offer sharper pricing for strong applicants but take longer and require more documentation. Specialist and fintech lenders move faster with broader criteria but usually price higher.

Government‑backed schemes like the Growth Guarantee Scheme can improve access, but lenders still set rates based on risk. The government guarantee supports the lender, not the borrower.

Product‑by‑product cost breakdown for restaurants

Unsecured term loans

Typical pricing runs from about 8% to 30% APR depending on credit strength, stability, and affordability. Terms are commonly 6–60 months with fixed monthly repayments. Arrangement fees range from 0% to 6% of the loan, and early settlement policies vary by lender.

Use cases include working capital, marketing, stock, and small refurbishments. Personal guarantees are frequently required for SMEs. Speed from application to payout can be days if documents are ready.

Pros: fast, simple, predictable payments. Cons: higher cost than secured options; PG exposure.

Secured business loans

Where charges are taken over property or business assets, rates often fall into the 5%–15% APR band. Expect arrangement fees around 1%–3%, plus legal and valuation costs. Terms can run longer than unsecured alternatives, improving affordability.

Security might include a debenture, fixed charges over equipment, or a second charge over commercial property. Legal due diligence can extend timelines. Early repayment fees can include a percentage of balance or months of interest.

Pros: lower rate potential and higher limits. Cons: added fees, slower completion, and asset‑at‑risk.

Asset finance (hire purchase and leasing)

For kitchen kit, extraction, refrigeration, furniture, and tech, expect roughly 6%–18% APR. Typical “doc fees” run £100–£250 with a small option to purchase fee at the end of HP. Deposits can reduce total cost and improve acceptance.

Lenders prefer assets with strong resale value and clear serialisation. Terms align with asset life, often 24–60 months. Some items (e.g., bespoke joinery) may need blended facilities or part unsecured funding.

Pros: preserves cash, ties cost to asset usage. Cons: fees and total interest rise with longer terms.

Merchant cash advance (MCA)

MCA is priced with a “factor rate”, not APR. A factor of 1.30 on a £50,000 advance means repaying £65,000 via a share of future card takings. Typical factors range from 1.15 to 1.50, influenced by card revenue, sector risk, and seasonality.

Providers may charge setup fees, and your usual card processing charges still apply. The daily or weekly repayment flexes with turnover, easing cash flow during quieter periods. Effective APR varies widely depending on how quickly you clear the balance.

Pros: repayment flexes with sales; no fixed monthly instalment. Cons: can be costlier than loans if repaid quickly; card‑only takings required.

Overdrafts and revolving credit facilities

These lines charge interest on the drawn balance, commonly equating to ~8%–24% APR. Arrangement fees of 1%–2% are typical, with possible non‑utilisation fees of 0.5%–1.5% per annum on undrawn limits. Review and renewal fees can apply annually.

They are useful for variable cash flow needs like stock purchases or short gaps between supplier payments and sales. Security and PGs may be requested. Bank overdrafts can be harder to secure than fintech lines for newer or thin‑file businesses.

Pros: flexible, pay interest only on what you use. Cons: fee layers and potential renewal risk.

Growth Guarantee Scheme (GGS) loans

These are offered by accredited lenders with a partial government guarantee to the lender. Rates are set by the lender and commonly expressed as base rate plus a margin, often around base + 2% to +8%. Arrangement fees apply; there is typically no separate borrower‑paid guarantee fee.

Eligibility varies by lender and may favour viable UK SMEs with clear use of funds. Security and PGs can still be requested at the lender’s discretion. Funds can support working capital, investment, or growth plans.

Pros: can unlock funding for borderline cases. Cons: still risk‑priced; documentation needs can be higher.

Fees explained and sample cost scenarios

Typical fees to expect

• Arrangement fee: 0%–6% of facility, often higher for complex or smaller loans.
• Broker fee: some charge up to ~5%; many introducers are paid by the lender instead.
• Legal and valuation fees: for secured loans; sometimes pass‑through at cost.
• Documentation fee: common on asset finance (£100–£250) and an option‑to‑purchase fee at term end.
• Non‑utilisation/renewal fees: on revolving lines and overdrafts.
• Early settlement/exit: could be a percentage of balance or months of interest; confirm if interest is rebated.
• Default/late fees: charged for missed payments; check lender tariffs.

Always request a full fee schedule and confirm if any third‑party costs are payable whether or not a loan completes. Ask if broker fees are payable only on drawdown. Ensure all fees are reflected in your total cost comparison.

For MCAs, note you repay the agreed total (advance × factor), not an interest rate. Compare against loan alternatives using the same expected repayment time to assess cost.

Representative, non‑binding examples

Example A (unsecured loan): Borrow £100,000 over 36 months at 16.9% APR with a 3% arrangement fee. Monthly repayment roughly £3,557; total repayable about £128,052 plus £3,000 fee. Early settlement terms vary; interest rebate policies differ by lender.

Example B (MCA): Advance £60,000 at a 1.30 factor, repaid from 12% of card takings. Total repayable £78,000 plus any setup fee. If you clear in 10 months, the effective APR will be higher than if you clear in 18 months; MCAs do not quote APRs.

These illustrations are for information only and not offers. Actual terms depend on underwriting, eligibility, and lender policies.

Fair, clear, and not misleading

Finance is subject to approval, affordability checks, and lender criteria. Rates and fees can change and may differ from the examples here. Best Business Loans is an independent introducer; we do not offer loans directly and do not provide financial advice.

We aim to match you with lenders or brokers suited to your profile so you can compare options. We do not guarantee the lowest rate or acceptance. You remain in control of whether to proceed with any offer.

For a broader overview of funding routes beyond pricing alone, visit our page on restaurant business loans and finance options.

How to reduce costs, compare options, and take next steps

Practical steps to improve your rate

• Prepare up‑to‑date management accounts, 6–12 months’ bank statements, and last filed accounts.
• Share clear use of funds and ROI assumptions for fit‑outs or refurbishments.
• Offer security where practical (equipment, debenture), or a higher deposit on assets.
• Demonstrate stable card revenue and seasonality plans; MCAs price better with predictable volume.
• Consolidate expensive short‑term borrowing where suitable to reduce blended cost.
• Check your credit files and correct errors before applying.

Compare the total cost of credit, not just the headline rate. Include arrangement, legal, valuation, non‑utilisation, and settlement fees in your calculations.

Match product to purpose: use asset finance for equipment, a term loan for capex, a revolving line for working capital, and consider an MCA if card‑led seasonality drives your cash cycle.

Quick comparison checklist

• Is the rate fixed or variable (base + margin)?
• What are all fees, including third‑party costs and early settlement?
• What security and guarantees are required?
• What documents are needed, and how fast can it complete?
• Does the product match your cash flow pattern?

As a rule of thumb, secured solutions and asset‑backed facilities cost less than unsecured borrowing. Speed and flexibility usually increase price.

If you’re unsure which product fits, a no‑obligation eligibility check can save time. It can also reduce the risk of multiple hard searches.

Frequently asked questions

What is a “good” rate for a UK restaurant loan? For solid, established restaurants, unsecured rates in the low‑teens APR can be competitive, and secured rates can be single‑digit to low‑teens. Newer or higher‑risk profiles may see higher pricing.

Are GGS loans cheaper? Not automatically. Lenders still assess risk and set pricing, but GGS may broaden access or improve terms for viable applicants.

Are MCA costs higher than loans? They can be, especially if repaid quickly, but the flexibility can suit seasonal venues. Compare total repayable on your expected payoff timeline.

Can I repay early without penalty? Policies vary. Some lenders rebate interest, others charge a fee or months of interest. Always confirm in writing.

Will I need a personal guarantee? Often yes for SME borrowing, especially unsecured. PG insurance may be available but adds cost.

Key takeaways

• Unsecured restaurant loans typically sit around 8%–30% APR; secured options often price 5%–15% APR.
• MCA uses a factor rate (about 1.15–1.50), repaid from card takings rather than a quoted APR.
• Expect arrangement fees of 0%–6% plus possible legal, valuation, and documentation charges.
• Your rate is driven by risk, security, trading stability, and product fit.
• Compare total cost of credit and eligibility across multiple lenders before you decide.

Ready to explore indicative terms with lenders active in hospitality? Submit a Quick Quote to get matched with suitable providers for your profile. There’s no obligation to proceed.

Important information and compliance: This content is for information only and is not financial advice. Finance is subject to status, affordability, and lender terms. Best Business Loans (BestBusinessLoans.ai) is an independent introducer that connects businesses with lenders and brokers; we do not offer loans directly. We aim to keep information fair, clear, and not misleading, but pricing can change and varies by applicant.

Check your eligibility now and compare options with confidence. Our AI‑assisted matching helps you reach relevant providers faster, so you can focus on running your restaurant.