Learn: business lending

A short-term business loan is one way to cover a cash-flow gap, but it is not the only way, and it is not always the cheapest. Before your company borrows, it is worth knowing the main alternatives so you can pick the right tool for the job. This is a neutral overview — none of these is universally better, and the right choice depends on your situation.

Business bank overdraft

An overdraft attached to your business bank account lets you spend beyond your balance up to an agreed limit, and you usually pay interest only on what you use. It is flexible and well suited to small, short, unpredictable gaps that you clear quickly.

The catches: arranged overdrafts can be harder to obtain than they once were, the bank can often reduce or withdraw the facility, and unarranged overdraft costs can be high. If you have one, it is frequently the cheaper option for a brief dip. We compare the two directly in bank overdraft vs short-term business loan.

Business credit card

A business credit card suits smaller, recurring purchases and can be cost-effective if you repay the balance in full each month, since many cards offer an interest-free window on purchases. Used that way, the credit can effectively be free.

The risk is carrying a balance: interest on revolving card debt mounts up, and it is easy to let a short-term convenience become a long-term cost. A card is a poor choice for a sum you cannot clear quickly.

Invoice finance

If your business is owed money by customers, invoice finance lets you raise cash against unpaid invoices rather than waiting for them to be paid. A provider advances a proportion of the invoice value up front and releases the rest, minus their charge, when the customer pays.

It can work well for businesses with reliable but slow-paying customers, turning money you are already owed into money you can use now. The cost depends on the provider and the arrangement. We look at it alongside short-term borrowing in invoice finance vs short-term loan.

Grants and government-backed schemes

Depending on your sector, location and stage, your business may be eligible for a grant or a government-backed scheme — money that, in the case of a true grant, you do not repay. These are competitive and come with eligibility conditions, but free or subsidised funding is always worth checking before you take on debt.

The reliable starting point is gov.uk, which lists business finance support, grants and the Start Up Loans scheme. Start with the official source rather than third-party sites, and be wary of anyone charging a fee to "find" you a grant.

Other routes worth a thought

Depending on the situation, you might also consider negotiating longer payment terms with suppliers, asking customers to pay sooner, a director's loan into the company if funds are genuinely available, or asking HMRC about a Time to Pay arrangement for tax owed. Each has trade-offs, but several cost little or nothing.

Where a short-term loan fits

Against this backdrop, a short-term business loan like ours is best seen as one tool among several — useful when the gap is genuinely short and defined, the money to repay is reliable, and the alternatives above do not fit or cannot move quickly enough. It is, honestly, more expensive than an overdraft or a card paid off in full, so it earns its place only when speed and certainty matter and a cheaper option is not available in time.

If, after weighing these up, a short-term loan is the right fit, you can see the amounts, terms and costs we currently offer on our business loans page. If a cheaper option fits better, use it — we would always rather you chose the right tool than simply the quickest one.

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"Bridging loan", "term loan" and "credit facility" are often used loosely, as if they were interchangeable. They are not. Each is built for a different kind of need, and choosing the wrong one can cost you money or leave a problem unsolved. Here is each in plain terms, and where our own products sit.

Term loan

A term loan is the most familiar shape of borrowing: you receive a lump sum up front, then repay it in instalments over a fixed period — the "term" — until it is cleared. The amount, the term and the repayment schedule are agreed at the outset, so you know from day one what you will pay and when.

Term loans suit a defined, one-off need with a known cost — buying a piece of equipment, funding a specific project — where you want predictable repayments over months or years. The defining feature is that once it is repaid, it is gone; to borrow again you take out a new loan.

Bridging loan

A bridging loan is short-term borrowing designed to "bridge" a temporary, well-defined gap — typically the gap between needing money now and having money arrive soon. It is meant to be repaid quickly, once the expected funds materialise, rather than carried over a long period.

For a business, a classic use is bridging a cash-flow gap: you have invoices due to be paid, but you need to cover stock or a supplier before they land. A bridging loan covers the short interval and is then repaid. Because it is short-term and usually unsecured for smaller sums, it is expensive relative to a long-term facility — it is a tool for a short, specific gap, not for ongoing funding. If you are weighing it up, read when not to take a short-term business loan honestly first.

Credit facility

A credit facility — often a revolving or running-credit facility — works differently again. Rather than a single lump sum, you are given access to a pre-agreed limit you can draw on, repay, and draw on again as you need to, much like an overdraft. You typically pay for what you actually use.

The advantage is flexibility: a facility suits recurring or unpredictable short-term needs, where you do not want to apply for a fresh loan each time. The distinction between a one-off loan and a revolving facility is set out in running credit vs a one-time loan.

Where our products fit

Our live product is a short-term Business Bridging Loan: £50 to £500 over 14 to 84 days, repaid weekly or fortnightly. It is a bridging loan in the sense above — a small, short facility to cover a specific, temporary cash-flow gap for your company, repaid on a clear schedule. Every figure (amount, term, total amount payable, total cost of credit and a simple annualised rate) is on your Key Information Sheet (KIS) before you sign.

We are also introducing a running-credit facility as a second product. Think of it as the credit-facility model described above — a limit you can draw on and repay as you need — but it is being introduced rather than available to everyone today, so please do not assume it is open to you yet. For what is currently on offer, always check our business loans page, which shows the amounts, terms and costs we actually provide right now.

Choosing the right shape

Match the product to the problem. For a one-off purchase with a known cost over a longer period, a term loan fits. For a short, specific gap you expect to close soon, a bridging loan fits. For recurring, unpredictable short-term needs, a facility fits. Getting the shape right is as important as getting the price right — and for a short gap, our bridging loan is built for exactly that.

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When your company applies for credit, the lender will usually check its file with one or more business credit reference agencies. These agencies are different from the consumer ones that hold your personal credit history, and the distinction matters. Here is who the main agencies are, what they do, and how your company can check its own file.

What a business credit reference agency does

A business credit reference agency (CRA) collects information about companies and turns it into a credit file and a commercial credit score. Lenders and suppliers use that score to judge how risky it is to extend credit to the business. The file draws on public records — including Companies House filings such as accounts and director information — along with trade payment data, county court judgments, and other signals about how the business behaves. Many files also carry a suggested credit limit, which is the agency's view on how much credit the company can safely take on.

Lenders use these files to help decide whether to lend, how much, and on what terms. Suppliers use them to set trade-credit terms. A stronger file generally means easier access to credit on better terms.

The main UK business credit reference agencies

Three names come up most often for UK businesses:

• Experian Business — maintains commercial credit files and a commercial delinquency score, drawing on payment performance and public data.
• Creditsafe — widely used for company credit reports and scores, often by suppliers and credit teams checking who they trade with.
• Equifax Business — provides commercial credit reporting and scoring alongside its consumer arm.

These are the agencies we use when we run a business credit check on the company applying. Note that each agency holds its own data and uses its own model, so a company can score differently with each. There is no single universal business score.

How they differ from personal (consumer) CRAs

Personal, or consumer, credit reference agencies hold information about individuals — your personal borrowing, repayments and defaults. Business CRAs hold information about companies. The two are separate systems with separate files.

This matters for directors. When your company borrows from us, the borrowing is recorded against the company's credit picture, not your personal consumer file. We do run an identity and anti-money-laundering check on you as director, but the loan itself does not appear on your personal credit report. We set this out in will applying for a Credicorp loan affect my credit file.

One nuance is worth knowing. For very small businesses, some commercial scoring also looks at information about the directors, because a micro-company's risk is closely tied to the people running it. Even so, the company's own trading record is the heart of a business file.

How your company can check its own file

You can — and should — see what the agencies hold about your business. Each of the main UK business credit reference agencies offers a way for a company to access its own commercial credit report, sometimes free and sometimes via a paid or subscription service. Checking your own file does not harm your score.

When you review it, look for: out-of-date company details, accounts that should have been filed, county court judgments (and whether any have been satisfied), and the payment-performance data suppliers have reported. If something is wrong, you can ask the agency to correct it. Keeping the file accurate and up to date is one of the most direct ways to support your company's score over time — we go into the practical steps in your business credit score: how it works and how to improve it.

Why this is worth your time

Your company's credit file affects more than loan decisions — it influences supplier terms, trade credit limits, asset leasing, and even some tender and contract awards. Because three different agencies may hold three slightly different pictures, it is worth checking each one rather than assuming they agree. A few minutes spotting an error or a missing filing can make a measurable difference to how your business is seen by everyone who extends it credit.

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If you have ever seen an eye-watering APR on a short-term loan and wondered whether it could really be that expensive, you have run into a genuine quirk of how APR works. APR is a useful tool for some products and a misleading one for others. Here is the difference between daily interest and APR, why APR overstates the cost of very short-term borrowing, and what we show instead.

What APR is meant to do

APR — the Annual Percentage Rate — is designed to let you compare the cost of credit on a single, standardised, yearly basis. It rolls interest and certain charges into one annualised figure. For products you hold for a year or more — a mortgage, a multi-year loan, a credit card balance carried over time — APR does its job well, because the product genuinely lasts around a year or longer.

Why APR overstates very short-term borrowing

The problem appears when you take a figure designed for a year and apply it to something that lasts a few weeks. APR annualises the cost — it projects what the borrowing would cost if it ran, and compounded, for a whole year. But a short-term bridging loan does not run for a year. It runs for days or weeks and is then repaid.

Consider the shape of it without quoting any rate: a modest amount of interest charged over, say, a few weeks is a small cash sum. Annualise that short period — compound it as if it repeated all year — and the percentage looks enormous, even though the actual pounds you pay are limited and known in advance. The high APR is an artefact of the maths, not a reflection of what leaves your bank account. For a product measured in weeks, an annual percentage is simply the wrong unit. We unpack the concept further in what APR means on your loan.

What we show instead

Because our Business Bridging Loan is short-term — £50 to £500 over 14 to 84 days — we do not quote a consumer APR, which would distort rather than clarify. Instead we show you the figures that actually tell you what the borrowing costs:

• the amount borrowed;
• the term (how many days, and how many repayments);
• the total amount payable — every pound you will repay in total;
• the total cost of credit — the difference between what you borrow and what you repay; and
• a simple annualised rate, for a like-for-like reference point, shown without the compounding distortion of APR.

All of this appears on your Key Information Sheet (KIS) and again in the Business Loan Agreement, alongside the full repayment schedule, before you sign anything. The most honest comparison for short-term borrowing is the total cash cost: look at the total amount payable and the total cost of credit, and you know exactly what you are paying.

This does not make the loan cheap

Showing the cost honestly is not the same as the cost being low. Short-term unsecured borrowing is expensive relative to a bank facility, and we will not dress that up. The point of showing total cost of credit rather than a distorted APR is so you can see the real number and make a clear-eyed decision — not so the loan looks cheaper than it is. To see how the figures are built up, read our worked example in how interest is calculated.

How to compare honestly

When you compare short-term options, compare the total cost in pounds over the actual period you will borrow, not the headline annual percentages. APR is the right tool for a year-long product and a misleading one for a two-week one. Ask any lender for the total amount payable and the total cost of credit for your exact amount and term — that is the figure that tells you the truth, and it is the figure we put in front of you before you commit.

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You can settle your loan early at any time, and doing so usually saves you money. When you settle early there may be an early-settlement charge — here is exactly what it is, when it applies, when we waive it, and why settling early is still worth it.

The plain meaning

If your company chooses to repay the loan ahead of schedule, an early-settlement charge of up to 28 days' interest may apply. It is calculated from your own loan's figures — never invented — and it is the only charge for settling early. The exact amount, if any, is always shown in your settlement figure before you confirm, so you decide with the number in front of you.

When we waive it

We waive the early-settlement charge automatically in many cases. You will not pay it if your company is in financial difficulty, if settling early would not actually leave you better off, or in recognition of a consistent record of good standing. Because the decision is made from your own circumstances and recorded, the figure you see in your settlement quote already reflects any waiver — there is nothing to claim or ask for.

Why early repayment still saves you money

On our loan, interest accrues over the time you actually hold the money. The total amount payable shown on your Key Information Sheet (KIS) assumes you run the loan for the full term. If you settle sooner, you stop the remaining interest from accruing — so even after any early-settlement charge of up to 28 days' interest, you usually pay less than the original total. The earlier you settle, the more of the remaining interest you save. Our detailed walk-through is in early repayment: how and what you save.

How it works, in practice

Suppose a company takes a short-term loan over the full term but finds it can clear the balance partway through, when an expected payment arrives early. It asks for a settlement figure, which shows the balance, the interest accrued to the settlement date, and any early-settlement charge — already reduced or waived where that applies. The company pays that figure, the loan closes, and it has stopped the interest it would otherwise have paid over the rest of the term.

This is an illustration of the principle, not a quote — your figures are on your KIS and in your settlement quote, and the exact amounts depend on your loan and when you settle.

Getting a settlement figure

To repay early, you ask us for a settlement figure: the exact amount needed to clear the loan in full as at a given date, with any early-settlement charge (or waiver) already applied. Because interest stops accruing once the loan is settled, the figure is tied to the date you pay. The process is set out in how do I get a settlement figure. Always settle against an up-to-date figure rather than guessing, so the loan is cleared cleanly.

What it does not mean

To be clear about the limits: an early-settlement charge does not mean the borrowing is free, and settling does not erase interest that has already accrued for the time you have held the money. You still pay back what you borrowed plus interest up to settlement, plus any early-settlement charge that applies. What settling early does is stop the future interest — which, for most loans, is the larger number.

The takeaway

Settling early is still a borrower-friendly move: if the company can clear the loan early, it usually should, because it stops the remaining interest, and the early-settlement charge is capped at 28 days' interest and waived in many cases. If you think you may be able to settle ahead of schedule, ask us for a settlement figure — the exact cost, including any charge, is in front of you before you commit.

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Before your company signs a loan agreement with us, we give you a Key Information Sheet (KIS) — a plain-English summary of the borrowing so you can see exactly what you are agreeing to. It is the single most useful document to read carefully before you commit. Here is a walk through its sections and what to check in each.

What the KIS is for

The KIS is the pre-contract summary: it sets out the key terms and costs of your loan in clear language, before you sign the binding Business Loan Agreement. Its purpose is to let you make an informed decision with the important numbers in front of you, rather than buried in contract clauses. For a broader overview of what it covers, see what the Key Information Sheet covers.

Read it in full, not just the headline figure. The whole point is that everything you need is on one sheet.

Who is borrowing, and from whom

Check the parties first. The borrower should be your company — the limited company or LLP — with its correct name and company number, because we lend to the business as a body corporate, not to you personally. Confirm the lender's details are right too. Getting the parties correct matters: the company is the one taking on the debt.

The core financial figures

This is the heart of the sheet. Look for, and check, each of these:

• Amount borrowed — the sum advanced to the company. Confirm it is the amount you actually need and asked for.
• Term — how long you have to repay (ours fall within 14 to 84 days), and how many repayments there are.
• Total amount payable — every pound you will repay in total, principal plus interest. This is the number that tells you the full size of the commitment.
• Total cost of credit — the difference between what you borrow and what you repay; in other words, what the borrowing costs you in cash terms.
• Simple annualised rate — a reference rate shown without the compounding distortion of a consumer APR.

We deliberately show the total cost of credit rather than a consumer APR, because APR overstates the cost of very short-term borrowing — the reasoning is in daily interest vs APR. The honest comparison is the total cash cost, so anchor on the total amount payable and the total cost of credit.

The repayment schedule

The KIS sets out your repayment schedule: how much each repayment is, how often (weekly or fortnightly), and on what dates. Check that the amounts and dates are ones the company can genuinely meet, alongside its other commitments. If the dates clash with when money comes in, that is something to address before you sign, not after.

To understand how the interest behind these figures is built up, our worked example in how interest is calculated walks through an illustrative case step by step.

Costs, rights and what happens if things change

The sheet will also cover the practical terms: how repayments are collected, what happens if a payment is missed, and your rights — including that you can repay early and save interest. An early-settlement charge of up to 28 days' interest may apply if you settle early, though we waive it in many cases, and the exact amount is shown in your settlement figure before you confirm. It is worth checking how a missed payment is handled so there are no surprises, and noting that settling early still reduces what you pay.

Before you sign

Treat the KIS as your decision document. Read every section, make sure the parties and amounts are correct, confirm the total amount payable is one the company can afford, and check the repayment dates against your cash flow. If anything is unclear or looks wrong, ask us before signing — never sign a document you do not fully understand. Once you are satisfied, the Business Loan Agreement will carry the same figures through into the binding contract. To see what we currently offer before you even get to a KIS, visit our business loans page.

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"Regulated" and "unregulated" are among the most consequential words in business lending, and among the least explained. Whether a loan is regulated decides which legal protections you get if something goes wrong. Here is the dividing line, what protections apply on each side, and why we publish our terms openly even though our lending is not regulated as consumer credit.

The dividing line

Most UK consumer-credit regulation exists to protect individuals. The key test is in Article 60B (read with the definitions in Article 60L) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (FSMA RAO 2001). In broad terms, a credit agreement is regulated when it is made with an individual or a "relevant recipient of credit".

A limited company or LLP is not an individual — it is a body corporate, a separate legal person. So a loan made to a company for business purposes generally falls outside that consumer-credit regime. This is not a "Consumer Credit Act exemption" — that statute governs consumer credit, which a loan to a company is not. The point is simpler: a company is not the kind of borrower the consumer rules are designed to protect.

It is not just about the borrower

Being a company is necessary, but the purpose of the borrowing matters too. The lending sits outside the consumer regime where it is for a wholly or predominantly business purpose. That is why you sign a declaration confirming the loan is for the business. A company borrowing for a director's personal spending would not fit the picture — and we would not lend for that.

What protections apply — and what don't

On a regulated consumer-credit agreement, an individual borrower gets a suite of statutory protections and, importantly, access to the Financial Ombudsman Service (FOS) if they have an unresolved complaint, plus certain Financial Services Compensation Scheme (FSCS) protections in defined circumstances.

On an unregulated business loan like ours, those consumer protections do not apply. This product is not covered by the FOS, the FSCS, or the Business Banking Resolution Service (BBRS). If you have a complaint, it goes through our internal complaints process; if it cannot be resolved that way, the final escalation is the courts, not an ombudsman. We explain exactly what those bodies are, and why business loans usually fall outside them, in what FOS and FSCS cover.

We say this plainly because you deserve to know what is and is not behind the borrowing. The absence of the consumer safety net is a real difference between an unregulated business loan and a personal loan.

Why we publish transparency anyway

Not being regulated as consumer credit does not mean operating in the dark. We take the view that fewer external protections make our own transparency more important, not less. So we voluntarily set out our terms, our costs and how we treat customers in difficulty, and we show every figure — amount borrowed, term, total amount payable, total cost of credit, a simple annualised rate and the full repayment schedule — on your Key Information Sheet (KIS) before you sign. You can see how we approach this on our transparency page.

We also follow fair processes for customers who fall into difficulty, signpost free independent debt advice, and let you verify the company itself on the public register. None of that is required of an unregulated lender; we do it because it is the right way to lend.

What to do with this

If your company is considering a business loan, check whether it is regulated, and if it is not, understand which protections you are giving up. Then judge the lender on how openly it behaves anyway: are the full costs shown before you sign, is there a clear complaints route, and are customers in difficulty treated fairly? Regulation is one safeguard; a lender's conduct is another, and on an unregulated loan the second matters all the more.

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When you compare business loans, one of the first distinctions you will meet is "secured" versus "unsecured". It sounds technical, but it comes down to a single question: if the loan is not repaid, what can the lender take? The answer shapes how much you can borrow, how much it costs, and how much is at risk. Here is what each means, and where our own lending sits.

What "secured" means

A secured business loan is backed by collateral — an asset the lender can take and sell if the loan is not repaid. The asset might be commercial property, vehicles, machinery, or another item of value the business owns. Because the lender has something to fall back on, secured loans usually allow larger sums, longer terms and lower interest rates.

The trade-off is risk. If the business cannot repay, the lender can enforce against the asset. For property-backed lending, that can mean losing premises the business depends on. Secured lending suits larger, longer-term borrowing where the business has assets it is comfortable pledging.

What "unsecured" means

An unsecured business loan is not tied to a specific asset. There is no collateral for the lender to seize, so the lender relies on its assessment of the business's ability to repay. Because the lender carries more risk, unsecured loans tend to be smaller, shorter, and priced higher than equivalent secured borrowing.

That higher price is the honest cost of not pledging an asset. It is worth weighing against the alternatives before you borrow — our overview of alternatives to short-term lending sets out options such as overdrafts, cards and invoice finance.

Where the personal guarantee comes in

Here is the part many directors miss. An unsecured business loan is not automatically risk-free for the people behind the company. Many lenders that offer "unsecured" loans still require a personal guarantee from one or more directors. A personal guarantee is a separate promise: if the company cannot repay, the director becomes personally liable, and the lender can pursue their personal assets — potentially including their home.

So an "unsecured" loan with a personal guarantee can still put your personal finances on the line. When you compare lenders, always check not just whether collateral is required, but whether a personal guarantee is.

Where our loan sits

Our Business Bridging Loan is unsecured, and we do not take a personal guarantee. We lend to your company as a separate legal person, and the debt stays with the company. We do not ask you to pledge an asset, and we do not ask you to sign a personal promise to repay if the company cannot. If the company defaults, we pursue the company — not your house, and not your personal savings.

That structure does not make the loan cheap. Unsecured short-term credit is expensive compared with a bank facility, and we say so plainly. What it does mean is that the risk is contained to the business that took the borrowing. You can see the amounts, terms and costs we currently offer on our business loans page, with every figure repeated on your Key Information Sheet (KIS) before you sign.

Choosing between them

If you need a large sum over a long period and you have an asset you are willing to pledge, a secured loan will usually be cheaper. If you need a smaller amount over a short period and you do not want to risk an asset, unsecured borrowing may suit — but read the small print for a personal guarantee, and make sure the company can afford the repayments. The right answer is whichever genuinely fits the size, length and purpose of your need, at a cost the business can comfortably carry.

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When your company borrows from us, you confirm that the loan is for a "wholly or predominantly business" purpose. It is a short phrase that carries real weight: it is part of what keeps the lending outside the consumer-credit regime, and it defines what the money can and cannot be used for. Here is the test, with examples, and the declaration you sign.

What the test means

"Wholly or predominantly business" means the borrowing must be entirely, or mostly, for the purposes of your business — not for personal or household spending. "Wholly" is straightforward: the whole loan is for the business. "Predominantly" recognises that life is not always tidy: if the main purpose is genuinely business, an incidental personal element does not automatically take it out of scope. But the centre of gravity must clearly be the business.

This is not a box-ticking formality. The business-purpose test, together with the borrower being a company, is what places the lending outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001. We explain that framework in regulated vs unregulated business loans. The test exists precisely because consumer protections are for personal borrowing, and this is not personal borrowing.

Examples of a business purpose

Borrowing that would normally count as wholly or predominantly business includes:

• buying stock or raw materials for the business to sell or use;
• covering a short cash-flow gap before customer invoices are paid;
• paying suppliers, business rent, or business bills;
• repairing or replacing equipment, tools or vehicles the business uses;
• funding a specific, time-limited business opportunity.

The common thread is that the money serves the trading needs of the company.

Examples that would not qualify

Borrowing that is really for personal or household use does not fit, even if a company technically takes it out. That would include funding a director's personal spending, a family holiday, personal debts unrelated to the business, or household costs. If the true purpose is personal, dressing it up as a company loan does not change its nature — and we would not lend for it.

The borrower also has to be the right kind of entity. Our lending is to a company or LLP — a body corporate — borrowing for its own business. The purpose test and the borrower test work together.

The declaration you sign

Because the purpose is so central, we ask you to confirm it explicitly. As part of taking out the loan, you sign a business-purpose declaration — a statement that the borrowing is wholly or predominantly for the purposes of your business. You can read about it in business purpose declaration.

This is a meaningful statement, not a rubber stamp. By signing, you are confirming the loan is for the business, which is one of the foundations on which the agreement rests. You should only sign if it is true. If you are unsure whether your intended use counts, the honest course is to ask before you sign, or to choose a product designed for personal borrowing instead — but note that we lend only to businesses.

Why this protects you too

It can feel like extra paperwork, but the purpose test is not only about us. It keeps the product honest: it ensures our short-term business facility is used for business cash flow, the thing it is built for, rather than for personal spending where a different kind of product — and different protections — would be more appropriate. If your need is genuinely a business need, you are in the right place. If it is personal, a business loan is the wrong tool, regardless of who signs the form.

To see what we currently offer, and to check the amounts, terms and costs, visit our business loans page.

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The Financial Ombudsman Service and the Financial Services Compensation Scheme are two pillars of consumer financial protection in the UK. Many people assume they cover all financial products. They do not. Here is what each one is, who they protect, and why a business loan to a company usually falls outside both.

What the FOS is

The Financial Ombudsman Service (FOS) is a free, independent service that resolves disputes between financial firms and their customers. If a customer has complained to a firm and is not satisfied with the outcome, eligible customers can ask the FOS to review the complaint. The FOS can direct a firm to put things right, and its decisions are binding on the firm if the customer accepts them.

The key word is eligible. The FOS covers regulated financial activities and a defined set of customers — principally consumers and certain small businesses, micro-enterprises and other defined groups, in relation to activities that fall within its jurisdiction. It is not an open door for every financial dispute.

What the FSCS is

The Financial Services Compensation Scheme (FSCS) is the UK's statutory "lifeboat". It pays compensation, up to set limits, when an authorised financial firm fails and cannot meet claims against it — for example, protecting deposits in a failed bank up to a cap. Like the FOS, the FSCS covers specific regulated activities and specific categories of claimant; it is not blanket cover for any money you might lose.

Why business loans usually fall outside both

Both schemes are built around regulated activity and, largely, around protecting individuals and certain small enterprises in defined circumstances. A loan made to a limited company or LLP for business purposes is generally not a regulated consumer-credit agreement at all, because a company is a body corporate rather than an individual, under Article 60B FSMA RAO 2001. We explain that line in full in regulated vs unregulated business loans.

Because the lending sits outside the consumer-credit regime, the consumer safety net built on top of it does not apply. To be clear about our own product: a Credicorp business loan is not covered by the FOS, is not covered by the FSCS, and is not covered by the Business Banking Resolution Service (BBRS). We are not FCA-authorised for consumer-credit lending, and we do not imply that any of these schemes stand behind this borrowing.

So what is your route if something goes wrong?

You are not without recourse — the route is just different. If you have a problem, you raise it through our internal complaints process. We take complaints seriously, investigate them, and aim to put things right where we have got something wrong. You can see how to do that on our feedback and complaints page, and the step-by-step is in making a complaint: options and process.

If a complaint cannot be resolved through our internal process, the final escalation is the courts, rather than an ombudsman. That is a genuine difference from a regulated consumer loan, and we would rather you knew it up front than discovered it later.

Free help is still available

Separately from any complaint, if your business is struggling with repayments there is free, independent help. For the business, you can contact Business Debtline (businessdebtline.org), the Federation of Small Businesses (fsb.org.uk), or explore HMRC Time to Pay arrangements at gov.uk. If you, as a director, are struggling personally, free services such as StepChange (stepchange.org) and Citizens Advice (citizensadvice.org.uk) can help.

The bottom line

The FOS and the FSCS are valuable, but they are tied to regulated activity and defined claimants. A business loan to a company usually falls outside both. Knowing that lets you weigh the protections you do and do not have, and reminds you to choose a lender on how transparently and fairly it behaves — because on an unregulated loan, that is what you are relying on.

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You will see the phrase "body corporate" in our agreements and across this site, and it is not just legal decoration. Whether the borrower is a body corporate or an individual decides which rules apply to the loan — including whether consumer-credit protections are in play. Here is what a body corporate is, and why the distinction shapes how we can lend.

What is a body corporate under UK law

A body corporate is an organisation that the law treats as a separate legal person, distinct from the people who own or run it. In practice, for our purposes, that means a limited company (registered at Companies House) or a limited liability partnership (LLP).

Because it is a separate legal person, a body corporate can do things in its own name: it can own property, enter contracts, sue and be sued, and — importantly here — borrow money. The debts of the company are the company's debts, not automatically the personal debts of its directors or members. That principle of separate legal personality is the cornerstone of how limited liability works.

Body corporate vs the individual behind it

Contrast this with a sole trader. A sole trader is not a separate legal person from the human running the business; in law, they are the same. So a loan to a sole trader is, legally, a loan to an individual.

A loan to a limited company or LLP is a loan to the body corporate. The director who signs does so on behalf of the company, not as the borrower. This is exactly why our product is built the way it is: we lend to the company, the company is liable, and we do not take a personal guarantee from the director. The borrowing belongs to the business.

Why it matters for regulation

Here is the part with real consequences. Most consumer-credit protection in the UK is built around lending to individuals. Under Article 60B (read with the definitions in Article 60L) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (FSMA RAO 2001), regulated credit agreements are essentially those made with an individual or a "relevant recipient of credit".

A body corporate is not an individual. So lending to a limited company or LLP for business purposes generally falls outside FCA consumer-credit regulation. This is not a "Consumer Credit Act exemption" — that statute governs consumer credit, which a loan to a company is not. The cleaner way to put it is that a company simply is not the kind of borrower the consumer regime is designed to protect. We explain the wider picture in regulated vs unregulated business loans.

The conditions still apply

Being a body corporate is necessary but not the whole story. The borrowing also has to be for a genuine business purpose. The lending sits outside the consumer regime only where it is for a wholly or predominantly business purpose, which is why you sign a declaration to that effect. A company borrowing for, say, a director's personal spending would not fit, and we would not lend for that.

What this means for you

If your business is a limited company or an LLP, it is a body corporate, and it can borrow in its own name. The upside is that the debt stays with the company and we take no personal guarantee. The trade-off is that the consumer-credit safety net — including the Financial Ombudsman Service and the FSCS — does not apply to this borrowing. We think that makes transparency more important, not less, which is why we publish our terms and costs openly and show every figure on your Key Information Sheet (KIS) before you sign. You can verify the company itself on the Companies House register (company number 16093826).

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A business loan is money borrowed by a business, and repaid with interest, to be used for business purposes. That sounds simple, but the detail matters: a business loan is legally and practically different from a personal or consumer loan, and the difference changes who is responsible for the debt, what protections apply, and how the borrowing is assessed. Below: what a business loan is, who can take one out, and how our own lending works.

Business loan vs personal loan

A personal (or consumer) loan is taken out by an individual for their own use — a car, a holiday, consolidating personal debts. A business loan is taken out for the needs of a business: buying stock, covering a gap before an invoice is paid, repairing equipment, or smoothing seasonal cash flow.

The purpose is not just a label. When the borrowing is genuinely for business, and the borrower is a company rather than an individual, the loan usually sits outside the consumer-credit rules that protect personal borrowers. That has real consequences, so it is worth understanding before you apply. We cover the test for what counts as a business purpose in what counts as a "wholly or predominantly business" purpose.

Who can borrow, and who is liable

Business loans can be offered to sole traders, partnerships, limited companies and limited liability partnerships (LLPs). Who can borrow depends on the lender. Some lenders advance money to the individual behind a sole-trader business; others lend only to incorporated businesses.

We lend to the company — a limited company or LLP — not to you personally. The borrower on the agreement is the business as a separate legal person, known as a body corporate. That distinction is the foundation of how our product is structured: the debt belongs to the company, and we do not take a personal guarantee from the director. In short, the company borrows, the company repays, and the company is the party named on the Business Loan Agreement.

What you typically agree to

Whatever the lender, a business loan agreement will set out a handful of core things: how much is borrowed, the term (how long you have to repay), how interest is charged, the total amount payable, and the repayment schedule. Before you sign anything, you should be able to see the full cost of credit in writing.

With us, those figures appear on your Key Information Sheet (KIS) — a plain-English summary — and again in the Business Loan Agreement itself. You see the amount borrowed, the term, the total amount payable, the total cost of credit, a simple annualised rate, and the full repayment schedule before you commit. We deliberately do not quote a consumer APR; we explain why in our article on what APR means on your loan.

Our business loan, specifically

Our live product is a short-term Business Bridging Loan of £50 to £500 over 14 to 84 days, repaid weekly or fortnightly. It is designed to bridge a short, defined cash-flow gap — not to fund long-term spending. Short-term borrowing of this kind is, in cost terms, expensive relative to a bank facility, so it suits a genuine short gap rather than an ongoing shortfall. For the amounts, terms and costs we currently offer, see our business loans page.

If you are weighing up whether this is the right tool at all, we would rather you read when not to take a short-term business loan first. A business loan is useful when it solves a clear, short problem and the company can comfortably afford the repayments. It is the wrong choice when it simply postpones a deeper shortfall.

The short version

A business loan is borrowing by a business, for the business, repaid with interest. Ours is made to your company as a body corporate, with no personal guarantee, and every figure is shown to you up front on your KIS. Understand the purpose, the cost and who is liable, and you will know whether a business loan is the right fit.

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A personal guarantee is one of the most important things to check before your company borrows — and one of the easiest to overlook. It can turn a company debt into a personal one. Here is what a personal guarantee is in UK business lending, how lenders use it, and why we do not take one.

What a personal guarantee is in UK business lending

A personal guarantee is a separate, legally binding promise by an individual — usually a company director — to repay the company's debt if the company cannot. The borrower on the loan is still the company, but the guarantee sits alongside it as a form of security. If the company defaults, the lender can pursue the guarantor personally. Where more than one director signs, a guarantee is often "joint and several", meaning each guarantor can be pursued for the full amount, not just their share.

That is a significant shift in risk. Normally, the whole point of a limited company is that it is a separate legal person — a body corporate — and its debts are its own. A personal guarantee deliberately pierces that protection for one specific debt, exposing the director's personal assets, which can include personal savings and, in some cases, their home.

How other lenders use it

Personal guarantees are common in business lending, especially for "unsecured" loans. Because an unsecured loan has no asset behind it, lenders often manage their risk by asking a director to guarantee it personally. That is why a loan can be advertised as "unsecured" yet still put your personal finances on the line — the security is you. We explain that distinction in secured vs unsecured business loans.

Some lenders go further and pair a guarantee with a debenture or floating charge over company assets, layering security on top of security. When a personal guarantee is in place and the company fails to pay, the lender can demand the money from the guarantor, take court action against them as an individual, and enforce against their personal assets. Directors sometimes take out separate personal-guarantee insurance precisely because the exposure is real.

Why we do not take one

We do not take a personal guarantee. We lend to your company, the company is the borrower, and the company is liable for the debt. If the company cannot repay, we pursue the company — not you personally.

We made that choice deliberately. Our product is a short-term facility for the business, and we keep the risk where the borrowing is: with the business. It keeps the line between company and director clean, and it means a director is not putting their family's finances behind a short-term business loan. We assess affordability on the company itself — its turnover, bank-account history and business credit file — not on your personal income, which is consistent with not relying on you as a backstop.

What this means for directors

Because there is no personal guarantee, a director's personal assets are not on the line for this loan. We also do not record the loan on your personal consumer credit file — we run a business credit check on the company and an identity check on you, but the borrowing itself is the company's. You can read more in will applying for a Credicorp loan affect my credit file.

That said, "no personal guarantee" is not the same as "no consequences". The company is still fully responsible for repaying, and a default can affect the company's own credit standing and its ability to borrow in future. Directors also have separate legal duties to their company, and there are situations — quite apart from any guarantee — where a director can face personal liability, for example through wrongful trading. Those are general company-law matters, not part of our loan; if you want the wider picture, see can a director be personally liable.

The takeaway

A personal guarantee makes a director personally responsible for a company's debt. Many lenders require one even on unsecured loans. We do not. The borrowing is the company's, the liability is the company's, and the figures you will repay are set out in full on your Key Information Sheet (KIS) and in the Business Loan Agreement before you sign. When comparing offers, always ask whether a personal guarantee is required — it is one of the most consequential terms in any business loan. See what we currently offer on our business loans page.

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We lend, so it might seem odd for us to write an article about when not to borrow from us. But a short-term business loan is a specific tool for a specific job, and using it for the wrong job can make a difficult situation worse. We would rather you borrowed only when it genuinely helps. This is an honest guide to when a short-term business loan is the wrong choice.

First, the honest part: it is expensive

Short-term, unsecured borrowing is expensive compared with a bank overdraft or a longer-term facility. That is the trade-off for speed and for not pledging an asset. Used well — to bridge a short, defined gap that genuinely pays off — that cost can be worth it. Used badly, the cost compounds the problem. Everything below flows from that single fact: borrow only when the benefit clearly outweighs the cost, and you can see that cost in full on your Key Information Sheet (KIS).

When a short-term loan is the wrong tool

• To plug an ongoing, structural shortfall. If the business loses money every month, a short-term loan does not fix that — it adds a repayment on top of an existing gap and postpones the reckoning. Short-term credit bridges a temporary gap; it cannot cure a permanent one.
• To repay other expensive debt by taking on more. Borrowing short-term to service other borrowing is a warning sign. It rarely reduces the total owed and often increases it.
• For a long-term or large purchase. Funding something you will use for years with borrowing you must repay in weeks is a mismatch. A longer-term product fits better — see bridging loan, term loan, or credit facility.
• When you are not confident you can repay on schedule. If the funds you are counting on to repay are uncertain, a missed repayment can affect the company's credit standing and add to the strain. Only borrow against money you are genuinely confident is coming.
• For personal or household spending. Our lending is for business purposes only, and you sign a declaration to that effect. If the need is personal, this is the wrong product entirely.

Questions to ask before you apply

A short, honest checklist:

• What exactly is the gap, and when will it close? If you cannot answer precisely, pause.
• Where is the money to repay coming from, and how sure is it?
• Can the company comfortably afford the repayments alongside everything else?
• Is there a cheaper option that would do the same job in time?
• Will this solve the problem, or just delay it?

Consider the alternatives first

Before taking short-term credit, it is worth checking whether a cheaper or more suitable option fits. An overdraft, a business credit card, invoice finance, or a government-backed scheme may suit better depending on your situation. We set these out neutrally in alternatives to short-term lending. None is universally better — the right answer depends on your need — but you should know they exist before you commit.

If you are already in difficulty

If the real situation is that the business is struggling, borrowing more is usually not the answer, and free help is available. For the business, Business Debtline (businessdebtline.org, 0800 197 6026) and the Federation of Small Businesses (fsb.org.uk) offer free advice, and HMRC Time to Pay (gov.uk) may help with tax. If you are struggling personally as a director, StepChange (stepchange.org) and Citizens Advice (citizensadvice.org.uk) are free. Seeking advice early is a sign of good management, not failure.

When it is the right tool

To be balanced: a short-term business loan can be a sensible choice when the gap is genuinely short and defined, the money to repay is reliable, the company can afford the repayments, and the cost is worth the benefit. If that describes your situation, you can see what we currently offer on our business loans page. If it does not, the most useful thing we can tell you is: not yet, or not this.

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Your business credit score is a number that tells lenders and suppliers how risky it is to extend credit to your company. A stronger score can mean easier access to business finance, better terms, and more generous supplier credit. Much of what feeds it is within your control. This guide explains how the score works, and the practical steps that move it.

What a business credit score is and how it works in the UK

A business credit score is a rating, produced by a business credit reference agency, that summarises the likelihood your company will pay what it owes — in short, your company's creditworthiness. A business credit score in the UK is not standardised. Each agency uses its own scale and its own scoring model, so your company can score differently with different agencies, and there is no single universal number. The main UK agencies are covered in business credit reference agencies explained.

Crucially, this is a score on the company, not on you as an individual. It is built from the business's own record, not your personal consumer credit history.

What feeds the score

Most agencies turn the score into a risk band and a suggested credit limit that suppliers and lenders use at a glance. While each agency weighs things differently, business credit ratings generally draw on:

• Payment history — whether the company pays suppliers and lenders on time. Trade references and "days beyond terms" data show how promptly invoices are settled: late payments reported by suppliers can pull a score down, while consistent on-time payment supports it.
• Companies House filings — filing your annual accounts and confirmation statement on time, and keeping company and director details accurate. Late or overdue filings are a visible red flag.
• Public records — county court judgments (CCJs), which signal unpaid debts that ended up in court.
• Credit utilisation and commitments — how much credit the business is using relative to what it has available.
• Business age and stability — a longer, steady trading history generally reads as lower risk than a very new one.
• Director information — for small companies, agencies may consider data about the directors, since a micro-company's risk is tied to the people running it.

Practical steps to improve it

You will not change a score overnight, but steady habits move it in the right direction:

• Pay on time, every time. Settling supplier invoices and any borrowing on or before the due date is the single most influential habit. If you are heading for a missed payment on borrowing with us, tell us early — see early repayment: how and what you save for how settling sooner reduces interest.
• File at Companies House on time. Submit your accounts and confirmation statement by their deadlines and keep your registered details current. Overdue filings are easy to fix and visibly damaging.
• Check your own file. Review what each agency holds, and challenge errors. Checking your own file does not harm your score.
• Deal with CCJs. If your company has a CCJ, paying it and having it marked "satisfied" is better than leaving it outstanding.
• Build a track record. Using modest trade credit and repaying it reliably helps establish a positive history, especially for a newer company.
• Keep utilisation sensible. Routinely maxing out every facility can read as strain; leaving some headroom reads as control.

How your score relates to borrowing from us

When your company applies, we run a business credit check as part of how we assess it. But the score is one input, not the whole decision. We also look at the company's turnover and bank-account history to judge whether the borrowing is genuinely affordable. You can read about our approach on how we lend.

And borrowing from us is assessed on, and recorded against, the company — not your personal consumer credit file. A strong business credit score helps your company across the board: with lenders, suppliers and partners. Treat it as a long-term asset of the business. Build it with consistent, on-time payments and tidy filings, and check it regularly so you can fix problems before they cost you.

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