How much does private credit cost a UK borrower?
Private credit at £3m to £15m is priced at a floating margin of 550 to 800 basis points over SONIA, an all-in coupon of roughly 9.25% to 11.75% before fees at today’s rates, against a bank term loan nearer 6.75%. On top of the coupon sits a fee stack a bank deal is lighter on: an arrangement fee of 1.5% to 3%, an original issue discount that funds you at 98 to 99, and call protection if you leave early. So private credit costs more, on every line, and the honest question is not whether it is dearer but whether the extra buys something a bank will not sell: more leverage, a faster and more certain answer, and a looser covenant package. This guide sets out the ranges and what moves the price within them, at August 2026 rates. It gives ranges and drivers, not a quote, and it names no lender.
Written for the borrower’s side of the table. This is general guidance, not advice on your specific facility. It deepens the shorter answers in our working guide.
A floating margin of 550 to 800 basis points over SONIA.
A private credit fund lends at a floating margin over SONIA, broadly 550 to 800 basis points in the UK mid-market at 2026 rates. SONIA sat at 3.73% on 2 July 2026 against a Bank Rate of 3.75%, held at the Bank of England’s June meeting. Bank of England, Bank Rate. Put the two together and the all-in coupon is roughly 9.25% to 11.75% before any fees, depending on leverage, sector and the quality of the credit. Deloitte Private Debt Deal Tracker. These are ranges, not a quote; where a given business sits in the band is the subject of the drivers below.
Because the margin sits on top of a floating reference, the coupon moves with the base rate rather than being fixed for the life of the loan. Most facilities also carry a margin ratchet, so the rate steps down as the business delevers and up if leverage climbs, which means the coupon you sign is not necessarily the coupon you carry throughout. What does not move is the shape of the pricing: a fund lends more expensive, patient capital against a credit it has underwritten on forward cash flow, and the spread over a bank is the price of that.
One framing to hold on to. The margin is the number the term sheet leads with, and it is not the number that decides which offer is cheapest, because the fee stack below it can be larger than a difference of a point on the coupon. The next section takes the fees apart.
An arrangement fee, an original issue discount, and call protection on the way out.
A fund deal carries three fees a borrower should count before comparing it with anything. The arrangement fee, paid on day one, is typically 1.5% to 3% of the facility on a private credit deal, against nearer 1% on a bank deal, and it is charged on the committed amount rather than on what you draw. Then comes the original issue discount, or OID: instead of, or as well as, a fee, the fund funds you at 98 to 99, so you draw 98 to 99 pence in the pound and repay the full 100. It is economically an extra upfront charge that hides from the margin, and a borrower comparing headline coupons alone will miss it.
The third fee bites on the way out. A fund prices its return over an expected hold, usually three to five years, and does not want the loan refinanced away the moment cheaper money appears, so it carries call protection: commonly a short non-call period followed by a prepayment premium that steps down, for instance 3% in year one falling to par by year three, and occasionally a make-whole that compensates the fund for interest it would have earned and can be expensive. A revolver alongside the facility also carries a commitment fee on the undrawn portion, by market convention around 35% of the applicable margin. Fee by fee, the full pricing stack is set out in our guide to private credit fees.
The point of counting the stack is that it changes the answer. A keen coupon with a 3% arrangement fee, a two-point discount and heavy call protection can cost more over a three-year hold than a higher coupon with none, and the only way to see that is to total every line. Read the fee stack as part of the price of the money, because that is exactly what it is.
Around two and a half to five points more on the coupon, and more again on fees.
On a clean, secured, sensibly geared deal a bank all-in rate is near 6.75% at today’s rates, a margin of about 3% over the reference. A private credit coupon of 9.25% to 11.75% is therefore roughly two and a half to five percentage points higher on the interest alone, before the heavier fee stack widens the gap further. These figures are illustrative at August 2026 rates rather than a quote for any business. The premium is real, and on a borrower who fits a bank’s credit policy it is money wasted, because the cheaper facility funds the same plan.
The comparison that settles the choice is not margin against margin. It is the whole all-in cost of each structure, coupon plus every fee, run to the exit you expect, on identical assumptions. A fund quote with a lower headline than a second fund can be the dearer deal once the discount and call protection are counted, and a bank offer that looks a point cheaper can be cheaper by far more once its lighter fees are in. Our guide to the all-in cost of raising debt totals two worked raises line by line.
So the bank number is the anchor, not the verdict. Whether the private credit premium is worth paying turns on what it buys and what your plan needs, which is the subject of the last two sections; the straight bank-versus-fund read for your own situation is in our guide to bank versus private credit.
Leverage, cash quality, sector, security and cyclicality move the margin.
Five things move a private credit price within the 550 to 800 basis point band, and the first is leverage. A bank lends around 2.5 to 3.5 times EBITDA on senior cash-flow terms; a fund will usually stretch to 4 to 4.5 times, occasionally toward five for a strong credit, and the further up that range you borrow the wider the margin, because each extra turn of debt sits closer to the point where the cash flow struggles to service it. The second is the quality of the cash the business generates: how clean the EBITDA is once add-backs are scrutinised, and how much of it converts to cash after working capital and capital spending. A fund prices a well-converting, predictable earnings stream tighter than a headline number it does not trust.
Sector and security do the rest. A borrower in a cyclical or structurally challenged sector prices at the wider end and carries tighter terms, because the lender is pricing the downside as well as the plan; a business with stable, recurring, contracted revenue prices tighter. Security matters because a fund lending against forward cash flow with thin asset cover takes more risk than one lending against a solid asset base, and prices for it; where the balance sheet is asset-heavy, an asset-based lender advancing against a borrowing base can price differently again, as our guide to asset-based lending sets out. Cyclicality runs through all of it: exposure to the economic cycle widens the margin and tightens the covenant package, whatever else is true of the credit.
None of these is a lever the borrower pulls at the eleventh hour, but several respond to preparation. Clean, current numbers and a defensible EBITDA definition move the leverage the credit supports and the margin it attracts, and how much you can borrow against those earnings is worked through in our guide to how much your business can borrow.
Because the premium buys leverage, speed, certainty and covenant room a bank will not give.
A borrower pays the private credit premium to buy four things a bank cannot, or will not, sell, and the first is leverage. Where a bank stops at 2.5 to 3.5 times EBITDA, a fund will lend 4 to 4.5 times, occasionally toward five, and that extra turn or turn-and-a-half is often the whole reason for the choice: it is buying debt the bank will not extend, not the same debt dearer. The second is speed. A fund holds the entire position and makes a single credit decision, so it can deliver a firm, committed answer in weeks and hold it, which matters most on an acquisition against a signed agreement or an auction with a fixed timetable.
The third is certainty, which is close cousin to speed but not the same thing. Because the fund holds the whole ticket rather than syndicating it, there is no chain of committees and no risk that terms move between the term sheet and the money. The fourth is covenant flexibility. Fund packages often run leaner than a bank’s maintenance covenants, a single leverage test or a covenant-loose structure whose financial covenant only springs when a revolver is drawn past a threshold, which gives a business running a plan with some volatility in it more room before a soft quarter becomes a technical breach. How that trade compares in full is set out in our guide to unitranche and bank senior debt.
None of this makes private credit the better product, and it is a trade-off, not a virtue. The premium is worth paying only when it funds something the cheaper facility cannot: the leverage, the deadline, the structure or the operating room. Where a bank can fund the plan, the premium is simply a higher bill for the same outcome, and an adviser paid by the borrower should say so.
The asset-class numbers are pitched at larger deals than yours.
Most of the private credit pricing you find online describes institutional deals of roughly £30m to £250m, written for investors weighing the asset class rather than for a company raising £3m to £15m. The same instrument exists at your size, but the numbers do not map straight across. A smaller facility usually sits toward the wider end of the 550 to 800 basis point band, the leverage stretch is more modest than the marquee sponsor deals imply, and the fixed costs of arranging and diligencing the loan weigh more heavily as a percentage of a smaller sum. Read the headline institutional spread as a floor, not as your quote.
The practical consequence is that the market you price against is wider than the two words “private credit” suggest. Between a clearing bank and a private credit fund sit challenger and specialist banks that will underwrite a story the high street will not, and asset-based houses that lend against a borrowing base rather than cash flow, each at its own price. The only way to know which point on that range is cheapest for a given business is to run several in parallel and compare firm, all-in terms rather than headline spreads.
We will price your plan across the market, bank and fund.
If you are weighing a private credit quote, or you are not sure whether your plan needs the leverage a fund buys, a first conversation is confidential and costs nothing. We build the model, take the coupon and the fee stack apart against your own numbers, run banks and funds in parallel, and tell you plainly where the premium is worth paying and where a bank’s cheaper offer is the right one. See how a mandate runs in how we work, or the full range of what we advise on in our services.