Bank of England interest rate cut – what it means for your small business

Today, 06/02/25 the Bank of England cut its base interest rate from 4.75% to 4.5%, the lowest since 2023. Why? To give the economy a much-needed boost after sluggish growth forecasts for 2025. But what does this mean for small businesses like yours? Let’s break it down.

Lower borrowing costs = cheaper loans

If you’ve been considering a business loan for expansion, equipment, or just keeping cash flow steady, this rate cut is good news. Borrowing is now cheaper, meaning you could save thousands on interest payments. It’s a great time to reassess your financing options and potentially refinance existing debts at better rates.

More money in customers’ pockets = more sales

Lower interest rates often mean cheaper mortgages, loans, and credit cards for consumers. More disposable income could mean more spending on your products or services. Retailers, hospitality, and service-based businesses – get ready for a potential boost!

Better cash flow = less stress

High interest rates have been a cash flow killer for many small businesses. With this cut, businesses can breathe a little easier as loan repayments become more manageable, leaving more room for growth, hiring, or even just a safety net for unexpected expenses.

What should you do now?

Check your loan rates – Can you refinance at a better deal? Now’s the time to find out.

Plan for growth – If expansion was on hold due to high borrowing costs, things just got a little easier.

Stay alert – More rate cuts could be coming. Keep an eye on future Bank of England announcements.

This isn’t a magic fix, and challenges remain, but for small businesses, it’s a step in the right direction. Play your cards right, and this rate cut could work in your favour.

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