How to choose a business lender

Start with fit, not price

The most expensive mistake isn't paying a slightly higher rate — it's choosing the wrong kind of finance. Before you compare lenders, be clear on what you actually need. A short-term cash-flow gap calls for working capital or a revolving facility; a long-lived asset calls for a term loan or asset finance. Our short-term vs long-term guide walks through the matching principle.

Once you know the product, you can compare lenders who actually offer it well. A specialist short-term lender will usually beat a generalist on speed and flexibility for working capital, even if a high-street bank quotes a lower rate on a product that doesn't fit your timeline.

Compare total cost, not the headline rate

Lenders present cost in different ways — monthly rates, APR, factor rates, flat fees — and they're not directly comparable at a glance. The only fair comparison is the total amount repayable over the exact period you'll hold the money, including every fee.

Watch for charges that don't appear in the headline:

• Arrangement or origination fees, sometimes deducted from the advance.
• Early-repayment charges — and whether repaying early actually saves you interest.
• Default fees, late-payment charges and renewal costs.
• For revolving facilities, non-utilisation fees on undrawn funds.

Our fees guide breaks these down. Ask every shortlisted lender for a single number: the total cost in pounds for your scenario.

Scrutinise the terms

Two loans with identical headline costs can be wildly different contracts. Before signing, get clear answers on:

• Security and guarantees — is the loan unsecured, and is a personal guarantee required? This is one of the biggest practical differences between lenders.
• Flexibility — can you repay early, top up, or vary payments if trading dips?
• Covenants — are there conditions you must keep meeting, and what happens if you breach them?
• Default terms — exactly what triggers default, and what the lender can do next.

Read the agreement itself, not just the marketing. Our how to read a loan offer guide shows what to look for.

Weigh speed, service and transparency

Beyond cost and terms, the day-to-day experience of dealing with a lender matters — especially if you'll borrow from them repeatedly. Consider how quickly they decide and fund, whether you deal with people or only portals, and how clearly they communicate. A lender that explains its pricing in plain English and publishes its terms openly is signalling something about how it will treat you when things get complicated.

Reputation is worth a few minutes of research: independent reviews, how long they've operated, and whether their public statements match the contract. A transparent, established lender that lends responsibly is worth more than a marginally cheaper one that's opaque about the details.

Red flags to walk away from

Some signals should end the conversation:

• Pressure to sign fast — "this rate expires today" is a sales tactic, not a fact of finance.
• Costs that won't be put in writing — if they won't give you a total repayable figure, you can't compare.
• Vague or shifting terms between the quote and the contract.
• Upfront fees before any offer — legitimate lenders are paid from the loan, not before it.
• Encouragement to overborrow — a good lender lends what you can afford, not the most you'll accept.

Our guide on spotting predatory lending covers these in depth. Credicorp lends to UK limited companies with transparent terms, no personal guarantee, and total costs stated up front — and you can apply online to see exactly what's on offer for your business.