Underwriting

Definition

Underwriting is the assessment a lender carries out to judge the risk of lending to your business and to set the terms of any offer. The underwriter weighs your ability to repay against the chance of default, then decides whether to approve the facility, how much to advance, the price, and any conditions attached. In short-term commercial lending it is the gate every application passes through before funds are released.

In plain terms

Think of underwriting as the lender answering one question: "If we advance this money, will it come back on time?" To answer it, an underwriter looks at how your business trades, not just a single credit number. They read bank statements, recent turnover, the consistency of your cash flow, existing debt commitments and how you have handled credit before.

Modern underwriting blends data and judgement. Automated checks score the obvious risk signals in seconds; a human underwriter handles the nuance — a seasonal dip, a one-off large invoice, a recent change of ownership. The better the picture you give, the less the underwriter has to assume, and assumptions usually cost you.

What an underwriter actually checks

For a UK limited company seeking working capital, the typical checklist covers:

• Affordability — does free cash flow comfortably cover the repayments?
• Trading history — length of trading, revenue trend and stability month to month.
• Credit profile — the company's business credit score, any arrears, CCJs or defaults.
• Existing commitments — current loans, overdrafts and any charges registered against the company.
• Purpose — what the money is for and whether it makes commercial sense.

Because Credicorp lends to the company rather than the director, the focus stays firmly on the business's numbers rather than your personal finances.

Why it matters to your business

Underwriting decides three things you care about: whether you get the money, how much, and at what cost. A strong, clearly-evidenced application can unlock a larger facility and a sharper price; a thin or messy one invites caution, which usually means a smaller offer or a higher margin to cover the uncertainty.

It also shapes speed. The faster an underwriter can satisfy themselves, the faster you draw down. Submitting clean bank statements, up-to-date management accounts and a one-line explanation for anything unusual can be the difference between a same-day decision and a week of back-and-forth.

An example

A Manchester wholesaler applies for a £60,000 working-capital facility. Turnover is £900,000 a year and stable, but two months show a sharp drop. Without context, an underwriter might read that as deteriorating trade and decline or shrink the offer.

The director attaches a note: those two months coincided with a supplier strike, since resolved, and the following month rebounded to normal. With that explanation and three months of clean statements showing recovery, the underwriter approves the full amount. Same numbers, different outcome — because the application removed the guesswork.