Arrears refers to any amount that was due under a loan agreement but has not been paid by the agreed date. Being in arrears is not the same as being in default — it is usually an earlier stage — but left unaddressed it can trigger a formal default event.
How arrears accumulate
If a scheduled repayment is missed, the unpaid sum immediately becomes an arrear. Interest on overdue amounts may continue to accrue daily under the terms of your agreement, and some facilities charge an additional late-payment fee. The longer arrears remain outstanding, the faster the total owed grows.
What to do if you are in or approaching arrears
The most important step is to contact your lender as early as possible — ideally before the payment date if you can see a shortfall coming. Many lenders, including Credicorp, can discuss options such as a temporary payment arrangement or a revised repayment schedule where circumstances genuinely warrant it. Early communication is almost always better than silence.
- Check your agreement for any grace period before a missed payment becomes a formal default
- Gather up-to-date management accounts to share with your lender
- Consider independent business finance advice if the position is complex
Arrears and your company's credit record
Persistent arrears may be reported to commercial credit reference agencies, affecting your company's ability to obtain finance in future. Resolving arrears quickly — and keeping a clear record of the resolution — limits the long-term impact.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: What does default mean on a business loan?, What is debt restructuring for a limited company?.