Are Borrowing Costs About to Drop? What SMEs Should Know After the Budget

A question many businesses are asking is whether borrowing costs will now begin to fall. Labour argues that their Budget sets the groundwork for a more stable economy that will allow interest rates to gradually ease. The Conservatives dispute this, saying the Budget does not address inflation strongly enough. Kemi Badenoch stated that SMEs should not expect any quick reductions in costs until productivity genuinely rises.

Commercial lenders are reflecting this split. While some funders have already reduced margins by a fraction, others insist their rates will not change until the Bank of England makes a clearer shift.

To illustrate, a commercial cleaning company recently refinanced an older loan. Their lender applied a slightly lower rate because they felt the market was stabilising. Meanwhile, a distribution business attempted to refinance vehicle finance and was told it was too early to expect cheaper borrowing.

There are also comparisons to be made with the economic climate in 2021. At that time, low interest rates created abundant lending opportunities. The current environment is more cautious. Lenders are more focused on affordability, cashflow resilience and sector performance.

In short, the Budget may influence borrowing costs over time, but businesses should not assume immediate or dramatic reductions.

If you need help assessing whether now is the right time to refinance, email pa@otiumpartners.com.