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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.

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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.

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.

MLR 2017 (Money Laundering Regulations)

The Money Laundering Regulations 2017 require lenders to verify the identity of the businesses they lend to and to screen them for sanctions and politically exposed persons, regardless of the consumer-credit regime.

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.

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.

Vulnerable customer

A vulnerable customer is someone whose circumstances make them less able to manage a financial relationship or more at risk of harm. Good lenders identify vulnerability and provide extra support and a low-friction path to help.

A

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.

Asset finance Asset finance is a way of funding equipment, vehicles or machinery by spreading the cost over ti 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. AML (anti-money laundering) Anti-money laundering (AML) is the set of laws and checks that require lenders to 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. Arrears Arrears are payments that a borrower has missed and not yet made up — money that is overdue under a cr 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.

B

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.

Business overdraft A business overdraft lets a company spend beyond its bank balance up to an agreed limit, wi 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. BNPL (buy now, pay later) Buy now, pay later (BNPL) lets a customer split the cost of a purchase into instalme 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. Body corporate A body corporate is a legal entity, such as a limited company or LLP, that is separate in law f 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. Business loan A business loan is borrowing taken out in the name of a company or LLP rather than an individual 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.

C

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.

Companies House Companies House is the UK's registrar of companies. It incorporates and dissolves limited comp 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. Covenant A covenant is a promise or condition in a loan agreement that the borrower must keep. Breaching a cov 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. CRA (credit reference agency) A credit reference agency holds credit information and shares it with lenders. F 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. Collateral Collateral is an asset a borrower pledges to a lender as security for a loan. If the loan is not re 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. Cost of credit The cost of credit is the total a borrower pays on top of the amount borrowed — interest plus a 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.

D

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.

Due diligence Due diligence is the set of checks a lender carries out before and during a lending relationship 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. Drawdown Drawdown is the act of taking money from an agreed facility — turning available credit into funds in 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. Debenture A debenture is a document that grants a lender security over a company's assets, registered at Compa 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. Direct Debit A Direct Debit is a standing instruction that lets a lender collect a scheduled payment from a bu 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. Director liability Director liability is the question of when a company director can be held personally respon 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.

E

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.

Exempt lending Exempt lending is credit that falls outside the UK consumer-credit regime. Lending to a body co 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. Establishment fee An establishment fee is a one-off charge for setting up a facility, separate from interest. 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. Early settlement Early settlement is repaying a facility before the end of its term. Where interest is charged 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. Eligibility Eligibility is the set of published criteria a business must meet to be considered for a facility. 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.

F

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.

FSMA RAO (Regulated Activities Order) The FSMA Regulated Activities Order defines which financial activities a 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. Flat rate A flat rate charges interest on the original amount borrowed for the whole term, rather than on the 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. FCA (Financial Conduct Authority) The FCA is the UK's financial-services regulator. Its consumer-credit perime 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.

I

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.

Interest Interest is the charge a lender makes for the use of borrowed money, usually expressed as a rate. On 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 c Incorporation Incorporation is the act of forming a company so that it exists as a separate legal person, regi 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 c ICO (Information Commissioner's Office) The ICO is the UK's independent data-protection regulator, responsible 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 c Invoice finance Invoice finance lets a business raise funds against its unpaid invoices, releasing cash tied u 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 c

L

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.

Limited liability Limited liability means the owners of a company or LLP are not personally responsible for it 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. Limited company A limited company is a UK business structure registered at Companies House that exists as a se 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. Late-payment fee A late-payment fee is a charge added when a scheduled payment is missed, typically after a fa 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.

P

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.

PEP (politically exposed person) A politically exposed person (PEP) holds a prominent public function — such a 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 ri Payment holiday A payment holiday is a temporary pause or reduction in repayments agreed with a lender to help 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 ri POCA (Proceeds of Crime Act 2002) The Proceeds of Crime Act 2002 is the UK law that creates the Suspicious Act 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 ri Personal guarantee A personal guarantee is a director's or member's separate written promise to repay a compan 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 ri

R

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.

Responsible lending Responsible lending means lending only what a business can sensibly handle, being clear ab 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-cr Recovery Recovery is the action a lender takes to collect a debt that has not been repaid, usually after a def 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-cr Representative example A representative example illustrates the typical cost of a facility using a worked set 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-cr Revolving credit facility A revolving credit facility is a pre-agreed credit limit a business can draw down, r 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-cr

S

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.

Sanctions Sanctions are legal restrictions that prohibit dealing with certain named individuals, entities or r 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. Sole trader A sole trader runs a business as an individual, with no separation between the person and the busi 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. Secured loan A secured loan is backed by an asset the lender can recover against if the loan is not repaid. It 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. SAR (Suspicious Activity Report) A Suspicious Activity Report is the report a regulated business files when it 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.

U

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.

UK GDPR UK GDPR is the United Kingdom's General Data Protection Regulation — the retained version of the EU GD 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. UBO (ultimate beneficial owner) An ultimate beneficial owner is the individual who ultimately owns or controls 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. Unsecured credit Unsecured credit is borrowing where the lender takes no asset as security. There is nothing f 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.

W

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.

What is forbearance in the UK? Forbearance is the temporary arrangements a lender offers a borrower in financi 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. What is a loan default in the UK? A default is a breach of a credit agreement — most often missed payments — t 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. Working capital Working capital is the cash a business has available to meet its day-to-day costs — current as 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. What is an LLP in the UK? Limited liability partnership explained An LLP is a UK business structure that combi 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. What is APR? UK annual percentage rate explained What is APR in the UK? Annual percentage rate expresses the y 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.

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.

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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.

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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.

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