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What early repayment means for a limited company
Early repayment means settling your outstanding principal and any accrued interest before the scheduled end of term. For limited companies, this can free up cash flow headroom or remove a charge from the balance sheet ahead of a trade sale, refinance, or investment round.
Lenders are not obliged to waive remaining interest, and many commercial facilities include a clause that compensates the lender for the yield they lose when a loan redeems ahead of schedule. Always confirm whether your facility agreement contains such a clause before assuming a clean exit.
How to obtain a settlement figure
Write to your lender — email is normally acceptable — requesting a formal settlement figure valid for a stated date, typically 14 or 28 days from the request. The figure will include outstanding principal, accrued daily interest to the proposed settlement date, any ERC, and administration fees.
Compare that total against the remaining scheduled repayments discounted at the contract rate. If the settlement figure is lower, early exit is straightforwardly cheaper. If it is higher, model the breakeven point month by month.
Early repayment charges explained
An ERC is usually expressed as a percentage of the outstanding balance or as a fixed number of months' interest. Some lenders apply a sliding scale: a higher charge in month two than in month twenty. Read the charging schedule in your original facility letter, not the headline summary.
ERCs are legitimate and enforceable for business borrowers — unlike the consumer mortgage market, FCA rules do not cap them for exempt commercial lending. Negotiate before you sign, not after.
When early repayment makes financial sense
Early repayment is most advantageous when your company holds surplus cash earning less than the loan rate, when you are approaching a refinance and want a clean ledger, or when a debenture or personal guarantee needs removing to facilitate a transaction. Model the net saving, accounting for any tax treatment of the ERC as a business expense.
Frequently asked questions
Can my limited company repay a commercial loan early without penalty?
Some facilities allow penalty-free early repayment after a minimum period; others apply an ERC throughout the term. Check your facility agreement or ask your lender for the specific clause — there is no statutory right to penalty-free early exit for business borrowers.
Is the ERC tax-deductible for my company?
In most cases, an ERC paid on a business borrowing is treated as a finance cost and is deductible against corporation tax profits. Confirm with your accountant, as treatment can vary where the loan is linked to a capital asset.
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.