Can I take a repayment holiday on a business loan?

2 min read

A pauseInstalments stop for a set time

Interest runsCost usually still accrues

By agreementGranted case by case

What a payment break is

A repayment holiday — sometimes called a payment break — is a period agreed with the lender during which you do not make your normal instalments. It is a deliberate, temporary pause, not a cancellation: the debt remains, and payments resume at the end of the break. It exists to give a fundamentally sound business room to manage a short-lived cash-flow problem without falling into arrears. The key word is agreed — it only works if the lender signs it off in advance. The full explainer is in the repayment holiday definition.

When it helps

A payment break earns its place when a company faces a real but temporary squeeze — a large customer paying late, a seasonal trough, or a one-off shock — and simply needs a few cycles of relief before normal cash flow returns. In that situation, pausing payments can be the difference between riding out a rough patch and tipping into arrears. It is a cash-flow tool for genuine, short-term pressure, not a way to make an unaffordable facility affordable. For seasonal patterns, see finance for a seasonal business.

What it costs

A holiday is not a free pass. In most cases interest continues to accrue on the outstanding balance during the pause, so the cost does not vanish — it is carried forward, and the loan typically ends up costing more overall or the term extends to absorb it. That is the trade-off: short-term relief now in exchange for a slightly higher total later. Going in with eyes open is what makes it a sensible tool rather than an expensive surprise. Ask the lender exactly how the paused interest is treated before you agree.

What this means for your company

If a temporary cash-flow gap is looming, a repayment holiday is worth raising with the lender early — well before any payment is missed. Be clear that it is a short-term need with a clear end, and ask how interest is handled during the break so you understand the cost. Credicorp lends to the UK limited company, with no personal guarantee, so it is the company's facility under discussion. If the pressure is deeper than temporary, see what if I can't repay my business loan.

Frequently asked questions

Does interest stop during a repayment holiday?

Usually not. In most cases interest keeps accruing on the outstanding balance while payments are paused, so the cost is carried forward rather than waived. Ask the lender exactly how the paused interest is treated before agreeing.

Will a payment break show as missed payments?

Not if it's agreed in advance. A properly arranged holiday is recorded as an agreed pause, not arrears. The danger is simply not paying without agreement, which does read as missed payments and harms the account.

When should I ask for a repayment holiday?

Early — ideally before a payment is missed — and only for a genuine, temporary squeeze with a clear end. It buys breathing room for a sound business, but it doesn't fix a facility that is fundamentally unaffordable.