What are typical interest rates or costs for farm finance?

Short answer: what UK farms usually pay for finance in 2025

Typical farm finance costs vary by product, security, and risk profile, but you’ll commonly see variable rates quoted as a margin over the Bank of England Base Rate or SONIA. As a broad guide, secured agricultural loans and mortgages often sit around Base Rate + 1.5% to +4.5%, asset finance for machinery and equipment can equate to roughly 7% to 16% APR, and unsecured working capital can range from about 9% to 24% APR. Invoice finance usually has a discount margin (often Base + 2.5% to +5%) plus a service fee of around 0.2% to 3.0% of invoice value per month.

These ranges are indicative only and depend on credit strength, collateral, loan size and term, sector performance, and lender appetite. Fees such as arrangement, documentation, valuation, and legal costs can add 1% to 3% of the facility amount to your total cost, so it’s wise to look at the full cost of funds, not just the headline rate.

Typical UK farm finance rates and fees by product

Every lender prices differently, and seasons, commodity markets, and policy shifts can change margins. Use these ballpark ranges to frame expectations before you compare options.

Finance type	Typical rate or cost	Common fees	Notes
Agricultural mortgage / land loan	Variable at Base + 1.5% to +4.5% (sometimes fixed periods available)	Arrangement 1%–2%; valuation and legal at cost	Long terms (5–25 years). LTV and affordability drive pricing.
Secured term loan (farm investment)	Base + 2% to +6% (or fixed equivalents)	Arrangement 1%–3%; documentation £150–£395	Short–mid terms (2–7 years). May allow seasonal or interest-only periods.
Asset finance (HP/lease) for tractors, kit	Often quoted as flat 4%–9% p.a. (roughly 7%–16% APR equivalent)	Doc/option-to-purchase £10–£250; arrangement up to 2%	Deposits 5%–20% typical. Balloon/residual options can lower rentals.
Livestock, crop, seasonal working capital	Base + 3% to +8% or 10%–22% APR unsecured	Arrangement up to 3%; renewal/line fees vary	Revolving lines and tailored repayment schedules are common.
Overdrafts and revolving facilities	Base + 3% to +10% (plus annual line fee in some cases)	Annual renewal fees; security fees where applicable	Flexible use for cash flow; rates depend on security and track record.
Invoice finance (dairy, arable, horticulture)	Discount margin Base + 2.5% to +5% plus service fee 0.2%–3% per month	Setup fee; audit fees on recourse facilities	Effective cost depends on debtor quality, concentration, and usage.
Commercial vehicle and fleet finance	Similar to asset finance: flat 4%–9% p.a. (APR 7%–16%)	Doc/arrangement fees; vehicle inspection fees	Manufacturer-supported deals may be cheaper on new stock.
Bridging for land/barn purchase	0.6%–1.3% per month (roughly 7%–16% p.a.), often plus fees	Arrangement 1%–2%; legal/valuation; exit fee sometimes	Short-term only; plan your refinance or sale up-front.

Indicative only; subject to status, security, affordability, and provider criteria. Rates and fees can move with market conditions and policy changes.

What this means in practice

If your farm offers strong security, solid financials, and a sensible loan-to-value, you can often access pricing nearer the lower end of the ranges. Higher-risk profiles, heavy gearing, older assets, or volatile cash flows tend to push rates upward. Lender appetite for specific sub-sectors (e.g., dairy, poultry, horticulture, renewables) also impacts pricing.

Repayment profiles matter

Seasonal or stepped structures can cost slightly more than straight-line monthly schedules, but they can be cash-flow friendly when income is uneven. Interest-only windows during establishment phases may be available at a premium. Always model the total cost over the life of the facility.

What drives the interest rate and total cost for farm finance?

Lenders price risk, and risk is shaped by what you pledge, how your business performs, and how predictable your income is. The following factors commonly influence the rate and fees you’re quoted.

Security, LTV, and asset quality

Real estate or land as security typically attracts lower margins than unsecured loans. A lower loan-to-value (e.g., under 60% LTV) usually prices better than higher LTVs. In asset finance, newer, liquid, and brand-leading machinery tends to be cheaper to fund than older or very specialised kit.

Financial performance and credit

Recent accounts, management information, and bank statements help lenders assess profitability, leverage, and headroom. Clean credit files, timely HMRC compliance, and stable debtor days support stronger pricing. Historic issues aren’t always a deal-breaker if there’s clear recovery and credible projections.

Sector, seasonality, and diversification

Some sub-sectors have different risk profiles, depending on commodity price cycles, disease risks, and supply chain contracts. Diversified income (e.g., farm shop, holiday lets, biomass, solar, AD) can stabilise cash flow and reduce perceived risk. Seasonal repayment plans can align debt service with harvest or milk cheque cycles and lower default risk.

Purpose, term, and structure

Working capital support often costs more than funding for long-lived assets due to repayment risk and collateral. Longer terms can increase total interest, even if the margin is tight, because interest accrues over more years. Fixed-rate periods add certainty but may carry a premium over fully variable pricing.

Market benchmarks and scheme availability

Many facilities are priced against Base Rate or SONIA, so changes in monetary policy flow through to your cost. Where eligible, the British Business Bank’s Growth Guarantee Scheme can help participating lenders price more competitively. Availability and criteria change, so ask your introducer if it’s relevant for your case.

Beyond the headline: fees and how to compare like-for-like

Interest is only part of the picture, because fees and repayment profile change your real cost. A fair comparison means standardising on the same term, deposit, and repayment structure, and including all fees.

Common fees to expect

• Arrangement fee: usually 1% to 3% of facility amount on loans and mortgages.
• Documentation and admin: often £150 to £395 for asset finance; more for complex lending.
• Valuation and legal: lender’s costs are commonly borne by the borrower on property-backed deals.
• Broker or introducer fees: may apply depending on the provider; always ask up-front.
• Early settlement/exit: in asset finance, statutory settlement applies; mortgages may have ERCs.
• Option-to-purchase (HP): typically £10 to £250 at the end of term.

APR, flat rate, and “margin over Base” explained

Asset finance often quotes a flat rate per annum, which can look low but doesn’t reflect the reducing balance; the equivalent APR is higher. Loans and mortgages often quote a variable margin over Base Rate or SONIA, which will move as the benchmark moves. For apples-to-apples, ask for the total amount payable and the effective APR, including all compulsory fees.

Worked example: tractor on HP

Assume £120,000 cash price, 10% deposit, 60-month term, flat rate 6.0% p.a., doc fee £200, option-to-purchase £100. The total interest on a 6.0% flat across five years is roughly £32,400, making total payable around £140,700 plus fees. The effective APR is likely in the 11%–12% region, depending on the exact schedule and fees.

When a slightly higher rate can still be “cheaper”

A lower monthly payment with a balloon, residual, or extended term might suit cash flow but increase total interest. Conversely, a slightly higher rate with a shorter term could reduce total cost materially. Use realistic cash flow forecasts and stress-test for Base Rate movements.

How to secure better-value farm finance

You can’t control market benchmarks, but you can present a stronger, lower-risk proposal. Small improvements in perceived risk can shave meaningful basis points off your rate or increase acceptance odds.

Practical steps to improve pricing

• Offer a sensible deposit or lower LTV by pledging additional security where appropriate.
• Provide up-to-date management information, budgets, and seasonal cash flow forecasts.
• Show diversified or contracted income streams that stabilise repayment capacity.
• Choose assets that hold value and are easily remarketed to support stronger residuals.
• Consider fixed-rate periods if you value certainty and can accept potential break costs.
• Ask about seasonal or deferred profiles that align with farm receipts to avoid arrears.

Where Best Business Loans fits in

BestBusinessLoans.ai is an independent introducer. We don’t lend money or offer financial advice, but we help UK farms and agri-businesses connect with relevant lenders and brokers who understand the sector.

Our AI-led matching looks at your purpose, assets, sector, and timeline to point you towards suitable providers. It’s free to submit a Quick Quote, and there’s no obligation to proceed.

If you want a deeper overview of options by sector, explore our page on farming loans and funding approaches for agriculture.

Fast next steps

• Tell us what you want to fund, how much, and your preferred term.
• Upload recent accounts and bank statements if you have them to hand.
• We’ll introduce you to lenders or brokers who may help, so you can compare offers.

FAQs about farm finance costs

What’s cheaper: fixed or variable?

Variable pricing can start lower, but it moves with Base Rate, so your cost may rise or fall. Fixed-rate periods add payment certainty and simplify budgeting, often at a small premium. The best choice depends on your risk tolerance and rate outlook.

Do government-backed schemes lower the rate?

Schemes like the British Business Bank’s Growth Guarantee Scheme can improve lender appetite and pricing for eligible borrowers. Availability, criteria, and pricing benefits vary by provider. Ask whether your use case and turnover fit current scheme rules.

Are unsecured loans always more expensive?

Generally yes, because there’s no collateral to offset lender risk. If you can provide security or choose asset-backed funding for machinery, you may access lower margins. Consider the balance between speed, flexibility, and cost.

How do invoice finance costs work for farms?

There’s a discount rate applied to drawn funds (often Base + a margin), plus a service fee based on invoice value or turnover. Overall cost depends on debtor quality, concentration, dispute levels, and how much of your facility you actually use. It can be highly cost-effective for B2B supply chains with long payment terms.

What extra costs should I expect on property-backed loans?

Professional valuation, land registry, searches, and legal fees typically apply, alongside an arrangement fee. Lenders may also charge commitment or non-utilisation fees on undrawn lines. Clarify all fees in writing before you proceed.

Can I get seasonal or interest-only periods?

Many agricultural lenders offer seasonal schedules to fit harvest or milk cycles. Interest-only windows are sometimes available during establishment or conversion phases. Expect pricing to reflect the increased risk and cash flow profile.

Key takeaways

• Secured farm finance can price from Base + 1.5% to +4.5%, while asset finance often equates to roughly 7%–16% APR.
• Working capital and overdrafts tend to cost more; invoice finance has both a discount margin and a service fee.
• Fees and structure matter: compare total amount payable, not just the headline rate.
• Security, financial strength, and sector stability drive pricing more than anything else.
• A strong proposal and the right lender shortlist can save both time and money.

Important information, fairness and compliance

Best Business Loans is an independent introducer. We do not provide loans or financial advice; we help connect UK businesses with lenders or brokers that may be able to assist.

Rates and fees in this article are indicative only, for information and education. Any offer will depend on provider criteria, credit status, affordability, security, and market conditions.

All financial promotions should be clear, fair and not misleading. Always review provider documentation for full costs, terms, risks, and eligibility before making a decision.

Eligibility notes: Our network typically supports established UK limited companies and LLPs rather than start-ups or sole traders, and we do not support property development finance or commercial mortgages directly. If you’re unsure what applies to your business, submit a Quick Quote and we’ll guide you to suitable next steps.

Next step: Ready to explore pricing for your farm or agri-business? Complete a Quick Quote to check likely eligibility and be introduced to suitable providers. It’s fast, secure, and there’s no obligation to proceed.

Updated October 2025