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Improve your credit and financial position before applying
Lenders price risk. A business with clean accounts, a strong DSCR, low existing leverage, and a history of on-time payments will attract better terms than one that applies reactively in a cash-pressure situation. The single most effective cost-reduction strategy is to begin the process before funds are urgently needed, allowing time to address any credit file issues, update management accounts, and present a well-packaged application.
See how to improve your business credit score and how to prepare management accounts for the groundwork steps.
Offer meaningful security
The quality and liquidity of security is the most direct lever on the rate a lender will offer. A first fixed charge over a freehold property with strong LTV coverage will attract substantially better pricing than an unsecured or subordinated facility. If the business or a director owns assets that could be charged, assess whether offering them as security is worthwhile given the rate reduction it may achieve.
However, weigh this carefully: giving security means those assets are encumbered and may be unavailable for future borrowing or are at risk if the business encounters difficulties. The decision is commercial, not purely financial.
Negotiate fees and structure
Arrangement fees, early repayment charges, and non-utilisation fees are all negotiable, particularly for larger facilities or where you have an existing relationship with the lender. If you have a competing offer, present it — lenders will often match or beat a credible alternative rather than lose the business.
Structure can also reduce cost. Drawing only what you need immediately (and drawing the rest in tranches as required) reduces the balance on which interest accrues. On a revolving facility, avoiding carrying a large undrawn balance reduces any non-utilisation fee exposure. Ask your lender whether a flexible drawdown structure is available.
Repay early where the maths supports it
Where an early repayment charge (ERC) applies, model whether the interest saved by early repayment exceeds the ERC. On longer-term fixed-rate facilities, an ERC is often calculated as a percentage of the outstanding balance and can be significant. On shorter-term or variable-rate facilities, ERCs are sometimes absent or modest.
If you are refinancing to achieve a lower rate, calculate the breakeven point: how many months of lower repayments does it take to recover the ERC and any arrangement fee on the new facility? If the payback period exceeds the remaining term of the existing facility, refinancing may not reduce your overall borrowing cost.
Frequently asked questions
Does using a broker increase or reduce my cost of borrowing?
A broker adds a fee (typically 1–2% of the facility, sometimes a flat retainer), but a well-connected broker may access pricing or products not available directly, and can present your application more effectively. On larger facilities, a broker's market access often more than offsets their cost. On smaller or simpler facilities, approaching lenders directly is usually more efficient.
Is a fixed or variable rate cheaper?
Neither is inherently cheaper — it depends on where rates move relative to your rate lock. Fixed rates offer payment certainty; variable rates offer potential savings if market rates fall. For planning purposes, model both scenarios over your repayment term before deciding.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.