SME Bank Borrowing Grows 5.3% a Year as Loan Rates Ease to 6.55%: Bank of England September 2026 Figures
Bank of England figures published on 29 October 2026 show bank borrowing by small and medium-sized businesses grew 5.3% in the year to September 2026, up from 4.7%, while the average rate on new SME loans fell to 6.55%.
By Entrepreneur Group · Published
Bank borrowing by small and medium-sized businesses grew 5.3% in the year to September 2026, up from 4.7% in August, according to the Bank of England's Money and Credit release published on 29 October 2026. The average interest rate on new bank loans to SMEs fell to 6.55% from 6.63%.
SMEs borrowed a net £1.0 billion from banks and building societies in September, the same as in August. Large businesses borrowed far more, at £8.2 billion.
The September figures
The Bank's figures for non-financial businesses show:
- Total net bank borrowing: £9.3 billion in September, up from £4.7 billion in August.
- Large businesses: £8.2 billion of net borrowing, with annual growth rising to 11.7% from 9.2%.
- SMEs: £1.0 billion of net borrowing, unchanged from August, with annual growth rising to 5.3% from 4.7%.
- Interest rates: the effective rate on new bank loans to SMEs fell to 6.55% from 6.63%, while the rate for all private non-financial companies fell 10 basis points to 5.47%.
Across all forms of finance, including bonds and other markets, private non-financial companies borrowed a net £3.1 billion, down from £8.5 billion in August.
Businesses also kept adding to their savings. Non-financial businesses deposited £8.9 billion in September, up from £7.3 billion in August, and the effective rate on new time deposits for companies rose 5 basis points to 3.52%.
How this compares with earlier in the year
The trend in SME borrowing has picked up through 2026. In the Bank's June 2026 release, annual SME borrowing growth was 4.1% and SMEs borrowed a net £0.6 billion in the month. Growth has since risen to 5.3%.
Borrowing costs have moved the other way over the same period. The effective rate on new SME loans was 6.36% in June, rose to 6.63% in August and eased to 6.55% in September. SMEs continue to pay more than a percentage point above the average for all companies.
The gap between large and small firms remains wide. Large business borrowing grew 10.5% a year in June and 11.7% in September, more than twice the pace of SME borrowing.
The interest rate backdrop
Bank Rate is 3.75%. At its September 2026 meeting, the Monetary Policy Committee voted 6 to 3 to hold it, with the three dissenting members voting to raise it to 4%. The next decision is due on 5 November 2026. Our September Bank Rate article covers that decision in more detail.
The Bank's figures do not say why businesses are borrowing more, and the monthly data can be volatile, so one month should not be read as a trend on its own.
What this means for founders looking for finance
This section is editorial guidance, not financial advice.
- Banks are lending to SMEs. Annual growth of 5.3% shows bank credit to smaller firms is expanding, not shrinking, so it is worth asking your bank and comparing lenders.
- Budget for rates around 6.5%. The average new SME loan rate of 6.55% is a useful starting point for modelling the cost of borrowing, although individual offers depend on risk, security and term.
- Watch 5 November. With three MPC members voting for a rise in September, a fixed rate may give more certainty than a variable one. Weigh this with your adviser.
- Look beyond banks. Government-backed schemes run through the British Business Bank, and alternative lenders, may suit businesses that banks turn down.
- Keep cash working. If you hold surplus cash, compare business savings and time deposit rates, as the average rate on new company time deposits rose to 3.52% in September.
Frequently asked questions
How much are UK small businesses borrowing from banks?
SMEs borrowed a net £1.0 billion from banks and building societies in September 2026, and SME bank borrowing was 5.3% higher than a year earlier, according to the Bank of England.
What is the average interest rate on a small business loan in the UK?
The Bank of England's effective interest rate on new bank loans to SMEs was 6.55% in September 2026, down from 6.63% in August.
When is the next Bank of England interest rate decision?
The next Bank Rate decision is due on 5 November 2026. Bank Rate was held at 3.75% in September 2026.
Sources
- Bank of England: Money and Credit, September 2026 (29 October 2026) (reviewed 31 October 2026)
- Bank of England: Money and Credit, June 2026 (29 July 2026) (reviewed 31 October 2026)
- Bank of England: Monetary Policy Summary, September 2026 (reviewed 31 October 2026)