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Most directors choose a business lender the way they would choose a savings account: find the best headline rate, apply. It is the wrong method, because in business lending the headline rate is routinely the least informative number on the page. This guide is the checklist we would use ourselves — seven questions, in the order they should be asked, and the traps each one catches.
1. Total cost of credit, not rate
Ask every lender the same question: "If I borrow £X for Y weeks, what is the total number of pounds I will repay?" That single figure — the total cost of credit — collapses interest, arrangement fees, establishment fees, monthly service charges and documentation fees into something you can actually compare. Two offers at "the same rate" can differ substantially once fees are counted; a higher-rate offer with no fees can beat a lower-rate offer with them, especially on small, short borrowing where a fixed fee looms large. Be wary of a lender that quotes you nothing but a monthly percentage. A clear representative example and a key information sheet mean someone has gone out of their way to make the sums easy for you. For reference, ours: representative example — borrow £200 for 30 days, repay £220.
2. Personal guarantee: yes or no, and it changes everything
Before comparing anything else, sort your shortlist into two piles: lenders who require a director's personal guarantee and lenders who do not. A PG puts your personal savings — and ultimately your personal assets — behind the company's debt, which means a PG-backed loan at a low rate and a no-PG loan at a higher rate are different products, not different prices. Read the offer documents rather than the marketing page, because "unsecured" frequently means "unsecured against the company, guaranteed by you". Our guide to secured vs unsecured loans covers what a guarantee actually exposes. Credicorp does not take personal guarantees on any product.
3. Does the product shape match the gap?
A fixed-term loan suits a dated, one-off gap. A revolving credit facility suits a lumpy but recurring one, because you draw and repay as needed and pay only for what you use. Instalment products suit a single large purchase you want to spread. A lender pushing its only product at every problem is answering its question, not yours; a good sign is a lender whose site helps you pick between its own products — a which-loan tool, a calculator you can play with before applying, honest pages about when not to borrow.
4. Early repayment: reward, neutral, or penalty?
Business fortunes change fast, and the ability to clear a loan early — cheaply — is worth real money. The spectrum runs from lenders who rebate interest for early settlement (you pay only for the days you had the money), through those who are neutral, to those who charge the full term's interest regardless or add an early-settlement fee. Ask directly: "If I repay in half the term, what do I pay?" On short-term daily-rate products the answer should be roughly half the interest; if it is not, the effective cost of your likely scenario is higher than the quoted one.
5. Speed and process — measured honestly
"Funding in 24 hours" usually describes the fastest case, not the typical one. The questions that matter: what documents are needed up front (bank statements, filed accounts, VAT returns)? Is the eligibility check a soft search, leaving no mark on the company's credit file, or a hard application? How long from application to decision, and from decision to money — for a company like yours, not the best case? Small unsecured lending should be measured in hours or days; anything involving security or guarantees runs to weeks, whatever the advert says. A lender whose process is written down step by step is easier to hold to it.
6. What happens when things go wrong
Nobody reads the collections section of a lender's site until it is personal, which is exactly why you should read it first. What is the late fee, and is it a one-off or repeating? Does the total cost have a cap — is there a stated maximum you could ever owe, however badly it goes? What does the lender say it does on a missed payment: talk to you first, or default straight to enforcement and reporting? A published help-with-payments page, a capped total cost, and a named route to a real human are the tells of a lender that has thought about bad weeks. If none of the three exists, that tells you what the bad week will be like.
7. Transparency as a proxy for everything else
You cannot audit a lender, but you can score its paperwork. Are all fees on the website, or discovered in the offer? Are terms in plain English, and short enough to actually read? Is there a real UK company behind the brand — check the registered number at Companies House — with a real address and a phone number that answers? Does it explain who it will not lend to? Lenders comparison-shop you through credit files, so the checklist above just returns the favour. We have published our own answers side by side on the borrowing options compared page, including where other lenders beat us.
Running the checklist
Illustrative example. A landscaping company needs £450 for eight weeks to buy materials ahead of a paid contract. Lender A quotes a lower monthly rate but adds a £48 arrangement fee and requires a personal guarantee, taking the total repayable to £533 with the director personally exposed. Lender B (terms like ours) charges 0.25% per day plus a £5 establishment fee, no guarantee: £450 over 56 days costs £63 interest plus £5 — total repayable £518, company-only exposure, interest rebated if the contract pays early. The "cheaper rate" costs £15 more and puts the director's home behind the debt. If your own numbers point our way, you can check eligibility with a soft search and apply online.
Frequently asked questions
- What is the most important thing to compare between business lenders?
- The total cost of credit — the full number of pounds repayable for your specific amount and term, with every fee included — compared alongside whether a personal guarantee is required. Those two together tell you more than any headline rate, because fees distort small short-term borrowing heavily and a guarantee changes who ultimately carries the risk.
- Are business loans from non-bank lenders safe?
- Lending money to a business is not the regulated activity that consumer credit is, so diligence is on you: verify the lender is a real UK-registered company at Companies House, that all fees and terms are published before you apply, that the total cost is capped and stated, and that there is a genuine route to a human being. A lender transparent on all four is a reasonable counterparty whatever its size.
- Does comparing business lenders damage my company's credit file?
- Reading websites and gathering quotes costs nothing. What can leave marks is making multiple full applications, each with a hard credit search, in a short window. Use lenders' soft-search eligibility checks — which leave no footprint — to build your shortlist, and save the hard application for the lender you have actually chosen.
- Why do some lenders not require a personal guarantee?
- It is a business-model choice. Lenders advancing large sums over years use guarantees to shift risk onto directors. Lenders advancing small sums over weeks — Credicorp lends £50 to £500 over 14 to 84 days — can price and cap that risk within the product itself, assess the company on its recent trading, and leave the director's personal position out of it entirely.