If your company is thinking about pausing or reducing payments, it helps to understand the difference between a payment holiday and forbearance. They are not the same thing, and which one fits depends on your situation.
A payment holiday
A payment holiday is an agreed, planned pause or reduction in scheduled payments, usually for a defined short period. It is something a company might request to manage a known, temporary dip, such as a seasonal gap. Whether one is available depends on your product and agreement, and interest continues to be treated in line with your terms during the pause.
Forbearance
Forbearance is support we put in place when a company is in or heading into genuine financial difficulty. It is a response to a problem rather than a planned convenience, and it can take several forms, from a temporary reduction to a revised arrangement, depending on what your business can sustainably afford.
Which should you ask about?
- A short, predictable cash-flow gap — ask about a payment holiday.
- Sustained difficulty meeting payments — ask about forbearance.
- If you are unsure, just tell us what is happening and we will guide you.
Credicorp lends only to UK limited companies and LLPs for business purposes. As an exempt business lender we sit outside the FCA consumer-credit regime, so consumer forbearance rules and the Financial Ombudsman Service do not apply, but we still aim to treat businesses in difficulty fairly.
See also: Can my company request a payment holiday?, Does a payment holiday increase the total cost?, The difference between a payment holiday and a reduced-payment plan.