How much does private credit cost a UK borrower?
In short
What private credit costs a UK lower-mid-market borrower, in ranges. A private credit fund lends at a floating margin of 550 to 800 basis points over SONIA, a coupon of roughly 9.25% to 11.75% before fees against a bank term loan nearer 6.75%, with an arrangement fee of 1.5 to 3%, an original issue discount that funds you at 98 to 99, and call protection on an early exit. Leverage, cash-flow quality, sector, security and cyclicality move the price within that band. A borrower pays the premium for the leverage, speed, certainty and covenant flexibility a bank will not give.
Written by Gregory Elgunov, Managing Director · Last reviewed 27 September 2026
Private credit is priced at a floating margin over SONIA. The published range is 550 to 800 basis points, a coupon of roughly 9.25% to 11.75% before fees at today’s rates against a bank coupon near 6.75%, and a borrower raising £3m to £15m should expect the upper part of that range or above. The fee stack is heavier too, with 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. The useful question is whether the extra buys more leverage, a faster and more certain answer, or a looser covenant package. This guide gives ranges and drivers at September 2026 rates and 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. Deloitte Private Debt Deal Tracker. SONIA sat at 3.73% on 22 September 2026 against a Bank Rate of 3.75%, held at the Bank of England’s September meeting. Bank of England, Bank Rate. Put the two together and the coupon is roughly 9.25% to 11.75% before any fees, depending on leverage, sector and the quality of the credit. 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 a floating reference, the coupon moves with the base rate, and many facilities carry a margin ratchet that steps it down as the business delevers and up if leverage climbs, so the coupon you sign is not necessarily the one you carry. The margin leads the term sheet, but the fee stack below it can be worth more than a point on the coupon.
An arrangement fee, an original issue discount, and call protection on the way out.
A fund deal carries three fees to count before comparing it with anything. The arrangement fee, paid on day one, is typically 1.5% to 3% of the facility against nearer 1% on a bank deal, charged on the committed amount rather than on what you draw. The original issue discount, instead of or as well as a fee, funds you at 98 to 99, so you draw 98 to 99 pence in the pound and repay the full 100, an extra upfront charge that hides from the margin.
The third applies if you leave early. A fund prices its return over an expected hold, usually three to five years, so it carries call protection, commonly a short non-call period and then a prepayment premium that steps down, for instance 3% in year one, 2% in year two and 1% in year three, then par, and occasionally a make-whole that 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 stack is set out in our guide to private credit fees.
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’s coupon is near 6.75% at today’s rates, a margin of about 3% over the reference, or about 7% a year once its 1% fee is spread over three years (Fig. 01). A private credit coupon of 9.25% to 11.75% is roughly two and a half to five percentage points higher on the interest alone, and Fig. 01 adds the heavier fees on the same basis.
What a bank and a fund cost a year, arrangement fee and discount included.
| Lender | SONIA, 3.73% | Margin | Arrangement fee and discount, spread over three years | Total |
|---|---|---|---|---|
| Bank | 3.73% | 3.00% | 0.33% | 7.06% |
| Fund, low end | 3.73% | 5.50% | 0.83% | 10.06% |
| Fund, high end | 3.73% | 8.00% | 1.67% | 13.40% |
- SONIA, 3.73%
- Margin
- Arrangement fee and discount, spread over three years
Illustrative: SONIA at 3.73% throughout, and every loan repaid at the third anniversary, when call protection has stepped down to par. The bank at a 3% margin with a 1% arrangement fee and no discount; the fund at the low end of each range in this guide (550 basis points, a 1.5% fee, funded at 99) and at the high end (800 basis points, 3%, funded at 98), with the upfront costs spread over the three years. Pairing the top of every range gives the dearest case, not a typical deal.
On a borrower who fits a bank’s credit policy the premium is money wasted, because the cheaper facility funds the same plan; whether it is worth paying otherwise turns on what it buys, the subject of section 06. To compare real offers on their whole cost to the exit you expect, use the calculator in our guide to private credit fees. Our guides to the all-in cost of raising debt and to bank versus private credit take the comparison further.
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. Leverage comes first. A bank lends around 2.5 to 3.5 times EBITDA on senior cash-flow terms and a fund will usually stretch to 4 to 4.5 times, occasionally toward five for a strong credit, and each extra turn sits closer to the point where the cash flow struggles to service it. The lender prices the downside as well as the plan, and Fig. 02 sets out all five drivers.
What widens a fund’s margin, and what tightens it.
| Driver | Prices wider | Prices tighter |
|---|---|---|
| Leverage | Borrowing toward the top of the fund’s 4 to 4.5 times EBITDA, or toward five | Borrowing lower in the range |
| Cash quality | A headline EBITDA the fund does not trust once add-backs are scrutinised, or weak conversion to cash after working capital and capital spending | A well-converting, predictable earnings stream |
| Sector | Structurally challenged, which also brings tighter terms | Stable, recurring, contracted revenue |
| Security | Lending against forward cash flow with thin asset cover | A solid asset base |
| Cyclicality | Exposure to the economic cycle, which also tightens the covenant package | Less exposure to the cycle |
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. None of the drivers is a lever to pull 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, as our guide to how much your business can borrow works through.
Because the premium buys leverage, speed, certainty and covenant room a bank will not give.
A borrower pays the premium for four things a bank cannot, or will not, sell. 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 is often the whole reason for the choice. The second is speed. A fund holds the entire position and makes a single credit decision, so it can give a committed answer in weeks, which matters most against a signed agreement or an auction timetable.
The third is certainty. With none of the ticket syndicated there is no chain of committees, so terms are less likely to move between the term sheet and the money, though a fund can still re-trade after its diligence. The fourth is covenant flexibility. A single leverage test, or a test that springs only when a revolver is drawn past a threshold, gives a plan with some volatility more room before a soft quarter becomes a breach. The trade is set out in full in our guide to unitranche and bank senior debt.
The premium is worth paying only when it funds something the cheaper facility cannot, such as the leverage, the deadline, the structure or the operating room. Where a bank can fund the plan, it is a higher bill for the same outcome.
The asset-class numbers are pitched at larger deals than yours.
The 550 to 800 basis point range is the published one, and most of the private credit pricing you find online describes institutional deals of roughly £30m to £250m, written for investors in the asset class. At £3m to £15m expect the upper part of that range or above. The leverage stretch is more modest than the largest sponsor-backed deals imply, and the fixed costs of arranging and diligencing the loan weigh more heavily on a smaller sum.
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, each at its own price. The only way to know which is cheapest for a given business is to run several in parallel and compare their firm, all-in terms.
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.
The terms in this guide
Each is defined in full in the library, with the levels and conventions that apply at £3-15m.
- Arrangement fee
The arrangement fee is what a lender charges for putting the facility in place. It is taken at drawdown, so it never reaches your account, and it varies by lender type more than by deal size.
- Direct lender
A direct lender is a fund that lends its own capital without syndicating to banks. It is one of four categories serving UK lower-mid-market borrowers, and each lends against something different.
- Margin ratchet
A margin ratchet moves your interest margin with performance, usually leverage. It is the one part of the pricing that can improve after signing, and the conditions attached to it decide whether it ever does.
- Original issue discount (OID)
Original issue discount means the lender advances less than the face amount of the loan. You receive 98 or 99 pence in the pound and repay the whole pound, so the discount is interest collected at the front.
- PIK (payment in kind)
PIK interest is not paid in cash. It is added to the principal and repaid at the end, which protects cash flow today and enlarges the debt you have to refinance later.
- SONIA
SONIA is the sterling reference rate almost every floating UK business loan is priced over. Your margin is fixed at signing; SONIA is not, and it moves your interest bill without anyone renegotiating anything.
- Unitranche
Unitranche is a single blended facility from one fund, replacing the senior and junior layers a bank structure would use. It buys leverage, speed and a bullet repayment, and it charges for all three.