Business lending glossary UK
Plain-English definitions of UK business loan terms and lending terminology — from APR and drawdown to revolving credit and representative example.
A
Asset finance
Asset finance is a way of funding equipment, vehicles or machinery by spreading the cost over time, with the asset itself usually acting as the security for the funding.
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AML (anti-money laundering)
Anti-money laundering (AML) is the set of laws and checks that require lenders to verify who they are dealing with and to report suspicious activity, governed in the UK by the Money Laundering Regulations 2017 and POCA 2002.
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Arrears
Arrears are payments that a borrower has missed and not yet made up — money that is overdue under a credit agreement but has not yet reached the threshold a lender treats as a formal default.
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B
Business overdraft
A business overdraft lets a company spend beyond its bank balance up to an agreed limit, with interest on the amount overdrawn. A revolving credit facility behaves in a similar, reusable way.
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BNPL (buy now, pay later)
Buy now, pay later (BNPL) lets a customer split the cost of a purchase into instalments. In a business context, spreading the cost of bills over time is a similar idea — the basis of Credicorp Slice.
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Body corporate
A body corporate is a legal entity, such as a limited company or LLP, that is separate in law from the people who own or run it — and is the kind of borrower Credicorp lends to.
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Business loan
A business loan is borrowing taken out in the name of a company or LLP rather than an individual, repaid over an agreed term. Short-term business loans bridge brief cash-flow gaps; the company is the borrower, not its directors.
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C
Companies House
Companies House is the UK's registrar of companies. It incorporates and dissolves limited companies and LLPs, and maintains the public register of company information that lenders rely on.
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Covenant
A covenant is a promise or condition in a loan agreement that the borrower must keep. Breaching a covenant can be an event of default, even if payments are up to date.
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CRA (credit reference agency)
A credit reference agency holds credit information and shares it with lenders. For UK business lending the main agencies are Experian, Equifax and Creditsafe; defaults can stay on a business file for years.
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Collateral
Collateral is an asset a borrower pledges to a lender as security for a loan. If the loan is not repaid, the lender can recover against the collateral. Unsecured lending takes no collateral.
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Cost of credit
The cost of credit is the total a borrower pays on top of the amount borrowed — interest plus any fees. It is the most honest figure for judging how much a facility really costs, more so than a headline rate alone.
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D
Due diligence
Due diligence is the set of checks a lender carries out before and during a lending relationship — confirming the borrower is genuine, understanding its ownership, and assessing risk.
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Drawdown
Drawdown is the act of taking money from an agreed facility — turning available credit into funds in the business's bank account. On a revolving facility a business can draw down, repay and redraw.
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Debenture
A debenture is a document that grants a lender security over a company's assets, registered at Companies House. It lets the lender recover against those assets if the company does not repay.
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Direct Debit
A Direct Debit is a standing instruction that lets a lender collect a scheduled payment from a business's bank account. It is governed by the Direct Debit Guarantee, which protects the payer if anything goes wrong.
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Director liability
Director liability is the question of when a company director can be held personally responsible for the company's debts. As a rule directors are not — the company is a separate legal person — unless they sign a guarantee or breach their duties.
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E
Exempt lending
Exempt lending is credit that falls outside the UK consumer-credit regime. Lending to a body corporate — a limited company or LLP — is exempt under FSMA RAO Articles 60B and 60L.
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Establishment fee
An establishment fee is a one-off charge for setting up a facility, separate from interest. It forms part of the total cost of credit and should be read alongside the interest rate when comparing facilities.
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Early settlement
Early settlement is repaying a facility before the end of its term. Where interest is charged on the outstanding balance, settling early reduces the cost because fewer days of interest accrue.
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Eligibility
Eligibility is the set of published criteria a business must meet to be considered for a facility. Credicorp's criteria: a UK limited company or LLP, trading for a short qualifying period, with a UK business bank account.
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F
FSMA RAO (Regulated Activities Order)
The FSMA Regulated Activities Order defines which financial activities are regulated in the UK. Articles 60B and 60L set the consumer-credit perimeter and exempt lending to bodies corporate.
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Flat rate
A flat rate charges interest on the original amount borrowed for the whole term, rather than on the reducing balance. It can look cheaper than it is, which is why APR is the fairer comparison.
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FCA (Financial Conduct Authority)
The FCA is the UK's financial-services regulator. Its consumer-credit perimeter covers lending to individuals; lending to companies and LLPs sits outside it under FSMA RAO Articles 60B and 60L.
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I
Interest
Interest is the charge a lender makes for the use of borrowed money, usually expressed as a rate. On short-term business lending interest is often charged daily on the outstanding balance, so settling early reduces the cost.
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Incorporation
Incorporation is the act of forming a company so that it exists as a separate legal person, registered at Companies House. It is what gives a business limited liability and makes it an eligible borrower for body-corporate lending.
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ICO (Information Commissioner's Office)
The ICO is the UK's independent data-protection regulator, responsible for upholding information rights and enforcing UK GDPR and the Data Protection Act 2018. Organisations that handle personal data register with it.
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Invoice finance
Invoice finance lets a business raise funds against its unpaid invoices, releasing cash tied up in receivables before customers pay. It includes invoice factoring and invoice discounting.
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K
KYC (know your customer)
Know your customer (KYC) is the process of identifying and verifying who a lender is dealing with — the business, its directors and its ultimate owners — as part of anti-money-laundering compliance.
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KIS (Key Information Sheet)
A Key Information Sheet is a pre-contract summary that sets out the headline terms of a facility — the cost, the repayments and the key conditions — so a director can understand an offer before signing.
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L
Limited liability
Limited liability means the owners of a company or LLP are not personally responsible for its debts beyond what they have agreed to contribute — their personal assets are generally protected.
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Limited company
A limited company is a UK business structure registered at Companies House that exists as a separate legal person from its owners, giving its shareholders limited liability for the company's debts.
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Late-payment fee
A late-payment fee is a charge added when a scheduled payment is missed, typically after a failed Direct Debit collection. It is separate from interest and counts towards the total cost cap.
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M
P
PEP (politically exposed person)
A politically exposed person (PEP) holds a prominent public function — such as a senior politician, judge or central-bank official — and is screened more closely under anti-money-laundering rules because of the higher risk.
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Payment holiday
A payment holiday is a temporary pause or reduction in repayments agreed with a lender to help a borrower through a difficult period. It is a form of forbearance; the debt is still owed.
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POCA (Proceeds of Crime Act 2002)
The Proceeds of Crime Act 2002 is the UK law that creates the Suspicious Activity Report regime: lenders must report transactions they suspect involve the proceeds of crime.
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Personal guarantee
A personal guarantee is a director's or member's separate written promise to repay a company's borrowing personally if the business cannot. It exposes personal assets; lending without one keeps liability with the company alone.
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R
Responsible lending
Responsible lending means lending only what a business can sensibly handle, being clear about cost, and supporting borrowers in difficulty. Credicorp applies these standards voluntarily on lending outside the consumer-credit regime.
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Recovery
Recovery is the action a lender takes to collect a debt that has not been repaid, usually after a default. A responsible lender treats it as a last resort, preferring an agreed arrangement wherever possible.
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Representative example
A representative example illustrates the typical cost of a facility using a worked set of figures — amount, rate, fees and total repayable — so a borrower can see how the cost works on a concrete case.
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Revolving credit facility
A revolving credit facility is a pre-agreed credit limit a business can draw down, repay and redraw as often as it needs. Interest is charged only on the amount drawn, making it flexible for managing uneven cash flow.
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S
Sanctions
Sanctions are legal restrictions that prohibit dealing with certain named individuals, entities or regimes. Lenders screen borrowers against sanctions lists as part of anti-money-laundering checks.
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Sole trader
A sole trader runs a business as an individual, with no separation between the person and the business in law. Sole traders are not eligible to borrow from Credicorp, which lends only to limited companies and LLPs.
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Secured loan
A secured loan is backed by an asset the lender can recover against if the loan is not repaid. It contrasts with unsecured lending, where no asset is taken and the lender relies on its assessment of the business.
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SAR (Suspicious Activity Report)
A Suspicious Activity Report is the report a regulated business files when it suspects activity involves the proceeds of crime or money laundering, under the Proceeds of Crime Act 2002.
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T
Total cost cap
A total cost cap is a ceiling on the combined interest and fees a borrower can be charged on a facility, expressed as a proportion of the amount borrowed. Credicorp caps the total cost of any single borrowing at a fixed proportion of the amount borrowed.
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Term
The term of a facility is the length of time over which it runs and is repaid. Short-term business lending has a brief term, which keeps the cost in pounds low even though the annualised rate looks high.
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U
UK GDPR
UK GDPR is the United Kingdom's General Data Protection Regulation — the retained version of the EU GDPR — which governs how organisations, including lenders, handle personal data.
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UBO (ultimate beneficial owner)
An ultimate beneficial owner is the individual who ultimately owns or controls a company — typically anyone holding more than 25% — identified and verified as part of anti-money-laundering checks.
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Unsecured credit
Unsecured credit is borrowing where the lender takes no asset as security. There is nothing for the lender to repossess if the debt is not repaid, so the cost of credit reflects the higher risk the lender carries.
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V
W
What is forbearance in the UK?
Forbearance is the temporary arrangements a lender offers a borrower in financial difficulty — such as reduced or paused payments — to help them recover without immediately defaulting.
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What is a loan default in the UK?
A default is a breach of a credit agreement — most often missed payments — that a lender formally records once the breach reaches a defined threshold, with consequences for the borrower's credit standing.
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Working capital
Working capital is the cash a business has available to meet its day-to-day costs — current assets minus current liabilities. Healthy working capital lets a company pay suppliers, staff and tax on time as money moves through the business.
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What is an LLP in the UK? Limited liability partnership explained
An LLP is a UK business structure that combines the flexibility of a partnership with limited liability for its members, registered at Companies House under the Limited Liability Partnerships Act 2000.
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What is APR? UK annual percentage rate explained
What is APR in the UK? Annual percentage rate expresses the yearly cost of borrowing as a single percentage, combining the interest rate with any compulsory fees so two facilities can be compared on a like-for-like basis.
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Business lending terminology: common questions
What is the difference between a business loan and a revolving credit facility?
A business loan provides a fixed lump sum repaid over an agreed term with a set schedule. A revolving credit facility gives a business a borrowing limit it can draw on, repay, and redraw as needed — making it more flexible for working-capital needs. Both carry an interest charge; the cost structure differs depending on how and when funds are used.
What does APR mean in UK business lending?
APR (annual percentage rate) expresses the yearly cost of borrowing as a single percentage figure, combining the interest rate with any mandatory fees. It is a standard comparison tool so businesses can evaluate facilities on a like-for-like basis. Credicorp is not a consumer lender, but we publish our APR so directors can judge the true cost of a facility before committing.
What does "no personal guarantee" mean in business lending?
A personal guarantee is a commitment by a company director to repay a business loan from their personal assets if the company cannot. Credicorp lends to the company — not to the director — so our standard products do not require a personal guarantee. The debt sits against the business's balance sheet and credit record, not the director's personal file.
What UK business structures can borrow from Credicorp?
Credicorp lends to UK limited companies and limited liability partnerships (LLPs) registered at Companies House. We do not lend to sole traders or consumers. See our eligibility criteria and how we lend pages for the full qualification criteria.