One of the first decisions I made about Credicorp was that we would lend to the company and not to the person who runs it. It sounds like a technicality. It is not. It changes who carries the risk, how we assess a loan, and what happens if things go wrong. I think it is the single most important thing about how we lend, so let me make the case for it properly.
Speaking as Credicorp’s founder and managing director. Here is why we draw the line where we do.
What “lending to the company” actually means
When you run a limited company or an LLP, the business is its own legal person, separate from you. Lawyers call it a body corporate. It can owe money, sign contracts and be responsible for debts in its own right, distinct from the director who runs it. If that idea is new to you, our explainer on what is a body corporate walks through it in plain terms.
We lend to that body corporate, for business purposes, and the debt sits with the company. Many lenders blur this line by asking the director to stand behind the loan personally. We do not.
We take no personal guarantee
A personal guarantee is a promise from a director to repay the company’s debt out of their own pocket if the business cannot. It can mean a lender coming after your savings, or your home. For a lot of small-business owners, it is the most frightening part of borrowing, and rightly so.
We do not take one. If you want to understand exactly what a guarantee is and why it matters, read what is a personal guarantee. Our position is simple: the company borrows, the company repays, and if the worst happens, the director does not lose what is theirs personally because of it. That is not a loophole or a perk we might withdraw. It is a principle the whole business is built on.
Why we check the company, not the director’s personal file
If the company is the borrower, it follows that the company is what we should assess. So we run a business credit check, using business credit reference agencies such as Experian Business, Creditsafe and Equifax Business. We look at the company’s turnover, its bank-account history and its business credit file to judge affordability.
We do carry out an identity and anti-money-laundering check on the director, because we have to know who we are dealing with. But the loan is not recorded on the director’s personal consumer credit file, and we do not assess affordability on a director’s personal income or benefits. A capable owner with a thin or bruised personal record can still be running a perfectly sound company, and we would rather judge the business on its own merits.
The trade-off, told honestly
I will not pretend this comes free of consequences. Because a company is not an individual under Article 60B FSMA RAO 2001, lending to it sits outside the consumer-credit rules that protect people. That means this lending is not covered by the Financial Ombudsman Service or the FSCS, and after our own complaints process the final step is the courts. This is not the same as a Consumer Credit Act exemption; the point is simply that those consumer protections are for individuals, and a company is not one.
I would rather you weigh that openly than be surprised by it. We try to earn the trust those external bodies would otherwise enforce, by being clear about cost, careful about affordability, and genuinely helpful in difficulty.
Why it is worth it
Lending to the company, with no personal guarantee, puts the risk where I believe it belongs: on the business decision, not on a director’s family. It keeps our assessment honest, because we have to understand the company rather than lean on a personal signature as a safety net. And it means that when a business takes a calculated risk and it does not pay off, the person behind it is not ruined. That is the kind of lender I wanted to build, and it is why we draw the line exactly here.