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Option 1: Renewal with the existing lender
Your existing lender will often approach you with a renewal offer as the facility approaches maturity. This is the path of least resistance — no new onboarding, no fresh legal work, no gap in funding. However, renewal terms are set at current market conditions, not your original rate. The lender knows switching has a cost, which reduces their incentive to offer their most competitive terms. Always obtain at least one external quote before accepting a renewal.
Option 2: Refinance with a new lender
If the external market offers better terms — lower cost, longer tenor, fewer covenants, or a product structure better suited to your current business — refinancing at maturity avoids the ERC that would apply mid-term. Maturity is the cheapest moment to switch lenders. Begin the process at least six to eight weeks before your end date to allow for underwriting, legal work, and security transfer without a gap in your facility.
Ensure the new facility is signed and drawn down before or on the day the existing facility expires. Bridging gaps with an overdraft or trade credit is possible but adds complexity and cost.
Option 3: Closing without replacement
If your company has built sufficient internal cash reserves, or if the purpose for which the facility was taken has been fully achieved, closing without a replacement loan is a viable and often underconsidered option. The balance sheet becomes unencumbered, debenture obligations fall away, personal guarantees (if any) are released, and the company's borrowing capacity is preserved for future needs. Evaluate whether the cost of maintaining a facility you may not draw on is justified by the optionality it provides.
The decision framework
Start from your company's three-year plan: will you need debt capital in the next 12–24 months? If yes, maintaining a facility or refinancing into a committed line is likely correct. If your pipeline is funded from operating cash flow and no capital investment is foreseeable, closing is probably the right answer. Run the numbers, benchmark the market, and make the decision with six to eight weeks in hand — not in the final week of the term.
Frequently asked questions
What happens if we do nothing when the loan term ends?
At maturity, the full outstanding balance becomes immediately due and payable. If you do not repay it or refinance it, the account moves into arrears and the lender can begin enforcement proceedings. Do not allow a facility to mature without a confirmed plan.
Is there a cost to refinancing at maturity rather than mid-term?
Refinancing at maturity avoids an ERC but still incurs arrangement fees and potentially legal costs on the new facility. These are typically lower than a mid-term exit cost, making maturity the structurally cheaper switching point.
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.