The cost of raising business funding in the UK in 2026 depends entirely on the route. Debt costs you interest, typically from around 6% to 8% APR for established businesses with clean credit, plus arrangement and broker fees. Equity costs you a share of your business plus platform or adviser fees of roughly 6% to 7% on funds raised. The headline fee is rarely the biggest number.
Here is the uncomfortable truth most cost guides skip. Founders fixate on the visible fee, the percentage a platform or adviser charges, and barely weigh the two costs that actually dominate: the equity you give away, which is permanent, and the cost of choosing the wrong route, which compounds for years. A 7% platform fee is easy to see and easy to obsess over. Handing 15% of a profitable company to investors when debt would have funded the same growth is far more expensive, and far more often overlooked.
This guide sets out what each route genuinely costs in 2026, using current public benchmarks rather than guesswork: debt interest and fees, government-backed schemes, equity crowdfunding, equity through advisers, and grants. It then covers the hidden costs that decide which route is actually cheapest. Figures move with the market, so treat the numbers as a current guide and confirm exact terms with any provider before you commit.
What does debt funding cost in 2026?
Debt funding costs you interest plus fees, and you keep all your equity. Interest is the headline number, and in 2026 it sits on top of a Bank of England base rate of 3.75% [1]. Established businesses with strong credit can access unsecured rates from roughly 6% to 8% APR, while businesses with shorter histories or weaker profiles may see 15% to 25% APR. Secured lending against property typically starts a few percentage points above the base rate [2].
The mistake is reading the interest rate as the whole cost. It is not. Arrangement fees commonly run at 1% to 3% of the loan amount, and there may be facility fees, valuation fees, and early repayment charges layered on top [2]. A low advertised rate paired with a high arrangement fee can cost more than a higher rate with no fee, which is why the total amount repayable, not the headline APR, is the figure to compare.
Broker costs are the part founders understand least. Many commercial finance brokers are paid a commission by the lender on completion rather than charging you directly, which is the model that firms such as Funding Options operate [3]. That means professional help accessing the debt market can come at no direct cost to your business, because the lender funds the introduction. At SGI, debt facilitation is provided at zero cost to the business for exactly this reason: the remuneration comes from the lender on completion, not from the founder. Always ask a broker how they are paid, because the answer ranges from nothing to a material client fee.
What do government-backed schemes cost?
Government-backed schemes are often the most transparent and affordable route for the businesses that qualify. The clearest example is the Start Up Loans scheme, delivered through the British Business Bank. From 6 April 2026, it charges a fixed interest rate of 7.5% per year, lends from £500 to £25,000 per person over one to five years, requires no security and no personal guarantee, and includes 12 months of free mentoring [4].
The value here is not just the rate but the structure. A fixed rate with no arrangement fees and no early repayment penalties removes most of the hidden costs that inflate the true price of commercial debt. For a newer business, the all-in cost of a Start Up Loan is unusually easy to calculate, which is rare in a market where the headline number so often understates the total.
The other government-backed route worth knowing is the Growth Guarantee Scheme, the successor to the Recovery Loan Scheme, which provides a partial government guarantee to lenders and is available to most UK businesses with turnover up to £45 million [2]. It does not make borrowing free, but the guarantee can enable lending to businesses that would not qualify on standard criteria, and the terms come from the accredited lender. For an eligible business, checking these schemes first often reveals the cheapest serviceable option on the table.
What does equity crowdfunding cost?
Equity crowdfunding carries a visible platform fee and a much larger invisible one. On the visible side, the major UK platforms publish their charges. Crowdcube applies no listing fee but takes a success fee of 7% on funds raised, plus a completion fee of roughly 0.75% to 1.5% [5]. Seedrs, now operating as Republic Europe, charges in a similar range, with a success fee of around 6% on funds raised plus a completion fee and a small payment processing charge [6]. On top of the platform fee sit legal costs and the cost of securing SEIS or EIS advance assurance, which together can add several thousand pounds.
So the all-in visible cost of an equity crowdfunding raise is meaningfully higher than the headline success fee alone. A founder budgeting only for the 6% or 7% will be surprised by the completion fee, the legal bill, and the time the campaign consumes. None of that is hidden, but it is easy to under-count if you anchor on the single most-quoted number.
The far larger cost is the one the platform fee distracts from: dilution. Every pound raised through equity is bought with a share of your business, and that share is permanent. The platform fee is a one-off percentage of the cash raised. The equity is a perpetual percentage of everything the business ever becomes. Weighing a 7% fee while skating over a 15% or 20% stake handed to investors is the single most common costing error in equity raises, and it is the one with the longest tail.
What does raising equity through an adviser or VC cost?
Raising larger equity rounds through a corporate finance adviser or directly from venture capital follows a different cost structure. The typical model is a retainer plus a success fee, where the adviser charges a monthly fee during the raise and a percentage of the capital secured on completion. Success fees in this part of the market are not standardised and vary with deal size and complexity, commonly falling in the region of 3% to 7%, with smaller raises tending toward the higher end. Treat any single figure as indicative rather than a fixed market rate.
Beyond the adviser, an equity round carries its own transaction costs. Legal fees for the company and sometimes a contribution to the investor’s legal costs, due diligence expenses, and the management time absorbed by the process can run from several thousand pounds on a small round to substantially more on a larger one. These are real costs of the raise that sit entirely outside the adviser’s fee, and they are routinely underestimated at the budgeting stage.
As with crowdfunding, dilution dwarfs all of it. The defining cost of venture and growth equity is the ownership and control given up, not the fees paid to facilitate it. This is why a credible adviser earns their fee by helping you raise the right amount on the right terms rather than simply the most money available. At SGI, equity facilitation is provided on a success-only basis with an 18-month no-win, no-fee guarantee, so the facilitation cost is tied to the raise actually completing, but the dilution remains the number that deserves the hardest scrutiny.
What about grants? Is funding ever free?
Grants are the closest thing to free funding, and they carry a cost founders consistently underestimate. The capital itself is non-dilutive and does not require repayment, which makes grants genuinely the cheapest money available on paper. There is no interest, no equity given up, and no facility fee. For the right business and the right grant, nothing else competes on headline cost.
The real cost of grants is time and competition. A serious grant application is demanding to prepare, the success rates are low because demand far exceeds available funding, and many grants are restricted to specific sectors, regions, activities, or stages. Some founders also engage grant consultants, whose fees, whether fixed or success-based, add a cost to a route that otherwise had none. The money may be free, but the process rarely is.
The honest position is that grants are excellent when you genuinely fit the criteria and can absorb the preparation effort, and a poor use of time when you are stretching to fit a grant that was never designed for your business. The cost of a grant is mostly measured in hours and opportunity, not in pounds, and that cost is easy to ignore precisely because the headline number is zero.
The hidden costs that decide which route is cheapest
The route with the lowest visible fee is frequently not the cheapest once the full cost is counted. Three hidden costs decide the real answer, and they belong in every funding comparison.
- Dilution. For any equity route, the share of the business given up is almost always the largest cost by a wide margin, and it is permanent. A low fee on a heavily dilutive round is not a cheap raise.
- Personal guarantees and risk. Much unregulated business lending, particularly to limited companies, is supported by personal guarantees, which transfer risk onto the founder personally. That is a real cost even though it carries no percentage.
- Time and opportunity. Every raise consumes management attention. A cheaper route that takes six months may cost more in lost focus than a slightly more expensive route that completes in weeks.
Set these alongside the visible fees and the comparison often reverses. The discipline that saves money is comparing the total cost of each route, including dilution, risk, and time, rather than racing to the lowest advertised percentage.
The principle behind the real cost
The cost of raising funding is not the fee you can see. It is the fee plus the interest plus the dilution plus the risk plus the time, and the routes rank completely differently once all five are taken into account. Debt costs interest and fees but keeps your equity. Equity costs a permanent share that no platform fee comes close to matching. Grants cost time rather than money. The cheapest-looking route in the brochure is often the most expensive in reality.
Across more than £250M facilitated and over 2,000 businesses advised, the founders who raised cost-effectively were the ones who compared total cost rather than headline fees, and who treated dilution as the expensive decision it is. Count every cost, not just the visible one. The quoted number is almost never the amount you actually pay.
Work out the true cost of your raise
Before you commit to any route, get a clear view of what it will genuinely cost your business, fees, dilution, and all. Book a free 45-minute Funding Readiness Assessment, and we will weigh debt against equity for your situation and set out the real cost of each. To compare the routes themselves, read why whole-of-market reach beats going direct to your bank, and if you are an established business weighing dilution, see our guide to growth capital for established SMEs.
Frequently Asked Questions
How much does it cost to raise business funding in the UK?
It depends on the route. Debt costs interest, often from around 6% to 8% APR for established businesses with clean credit, plus arrangement fees of 1% to 3%. Equity costs a permanent share of your business plus platform or adviser fees of roughly 6% to 7% on funds raised. The largest cost in any equity raise is usually the dilution, not the fee.
Is it cheaper to use debt or equity?
On headline cost, debt is usually cheaper because you keep all your equity and pay only interest and fees, provided the business can service the repayments. Equity has no repayments but costs a permanent ownership stake that almost always exceeds the fees involved. The right choice depends on serviceability and the scale of capital needed, not on fees alone.
Do I have to pay a funding broker directly?
Often not. Many commercial finance brokers are paid a commission by the lender on completion rather than charging your business directly, which means accessing the debt market through a broker can come at no direct cost to you. Always ask how a broker is paid, because some do charge a client fee on top of any lender commission.
What is the cheapest way to fund a new business?
For newer businesses, the government-backed Start Up Loans scheme is often the most transparent and affordable option, with a fixed rate of 7.5% per year from 6 April 2026, no arrangement fees, no personal guarantee, and free mentoring. Grants can be cheaper still where you fit the criteria, though they cost significant time to apply for and are highly competitive.
Are there hidden costs when raising funding?
Yes, and they often outweigh the visible fees. The main ones are dilution on any equity route, personal guarantees that transfer risk onto you for much business lending, and the management time a raise consumes. The route with the lowest advertised fee is frequently not the cheapest once these are counted, which is why total cost matters more than headline percentage.
How much equity should I expect to give away?
There is no fixed figure, but dilution is the cost to scrutinise hardest, because it is permanent. Giving away a large stake to fund growth that debt could have financed is one of the most expensive decisions a founder can make. The aim is to raise the right amount on the right terms, not the most money available, so that dilution stays proportionate to genuine need.
References
- Bank of England, base rate (3.75% in 2026). https://www.bankofengland.co.uk/
- Capitalise / Spark Finance, UK business loan interest rates and fees overview, 2026 (indicative market ranges: arrangement fees 1% to 3%; Growth Guarantee Scheme, turnover up to £45m). https://capitalise.com/gb/insights/business-loans/business-loan-interest-rates-and-fees-comparison
- Funding Options, commercial finance broker model (lender-paid commission). https://www.fundingoptions.com/
- British Business Bank, Start Up Loans scheme terms (fixed 7.5% from 6 April 2026; £500 to £25,000; one to five years). https://www.startuploans.co.uk/
- Crowdcube, published business fees (7% success fee on funds raised; 0.75% to 1.5% completion fee). https://www.crowdcube.com/
- Seedrs / Republic Europe, published business fees (approximately 6% success fee plus completion and processing fees). https://www.republic.com/
Related Posts
Kurt Graver is the founder and CEO of SGI Consultants, a business consultancy that has helped over 2,000 entrepreneurs establish successful startups using systematic business development methodologies. An accountant with an MBA and 25 years of commerce and consultancy experience, Kurt specialises in strategic planning, market analysis, and sustainable business growth