Business borrowing – should you wait for a further drop in interest rates?

When is the right time for a business to borrow? It is a question the Funding team at Kreston Reeves is regularly asked, and it is not always an easy question to answer.

Lenders report that demand for business lending has increased since the start of 2026 and combined with a recent reduction in base rate it looks like this demand will continue.

It leaves businesses asking whether they should borrow now or wait and see if the cost of borrowing falls further.

Borrowing for growth

Borrowing might at first be considered a high cost to the business, but considering borrowing through the lens of cost alone would be a mistake. Borrowing must be viewed through the lens of business opportunity.

Businesses should always ask why they are borrowing and what the cash injection will be used for.

The most compelling reason for borrowing now is to fund an opportunity for growth. Where a business has identified a strategic or tactical opportunity that might give it a competitive edge, borrowing might be the most sensible and practical way to unlock growth.

There is currently an oversupply of Lenders that are willing to lend to businesses with a strong business plan, that can demonstrate growth and opportunity.

Of course, the cost of borrowing needs to be factored into those plans, and those plans will need to consider the opportunity cost of acting now, against delaying in the hope of falling interest rates. Businesses should ask whether opportunity value outweighs the opportunity cost.

Businesses should also keep in mind the impact of borrowing on corporation tax – interest on borrowing is tax deductible, reducing the amount of corporation tax paid. The Government has said corporation tax rates will not change during the lifetime of this government, meaning business owners need to understand how borrowing may reduce corporation tax liabilities.

In addition, business owners and indeed lenders are still overlooking the option to borrow funds via the government backed Growth Guarantee Scheme. This scheme exists to support viable businesses that would not be able to borrow based against the lenders standard risk criteria. It now welcomes applications from businesses impacted by global tariff changes. In other words, the government guarantees 70% of the sum borrowed to the lender which provides security to the lender that might not be available from the borrower.

Finally, borrowing will help a business to build a positive credit score, which will make it potentially easier to access future borrowing should it be needed. Businesses with little or no credit scores can find it tough to access affordable borrowing.

Scenario planning

Businesses will not need reminding that the economy remains in a fragile state with widespread domestic and global uncertainty. Businesses will naturally remain cautious, not wanting to saddle themselves with unaffordable debt should trading conditions worsen.

Additionally, lenders may seek personal guarantees and founders and directors need to ask whether they are willing to put personal assets at risk.

To fully understand the lending landscape and the impact and opportunity borrowing might have, businesses should undertake detailed scenario planning exercises with a professional advisor, and it is here that the Kreston Reeves dedicated funding team can help.

We work with businesses of all shapes and sizes and can support those businesses in exploring different scenarios and the financial impact that they might have. We also work with a wide variety of lenders and can help businesses to unlock the right funding option for every opportunity.

If you would like to explore your options with the help of our dedicated funding team, please do get in touch.