What is an agreement in principle for a

2 min read

ConditionalNot a guarantee

Soft searchUsually no footprint

IndicativeAmount and rate

ThenFull underwriting

What it tells you

An agreement in principle (AIP), sometimes called a decision in principle, is an early read on how much a lender is likely to advance and roughly on what terms, based on the headline information you provide. It lets you plan a purchase or reassure a supplier before committing to a full application. It is common in property-backed deals and increasingly offered on unsecured facilities too.

What it does not tell you

An AIP is not a promise of funds. The formal offer follows full underwriting, document verification and, where relevant, valuation. Terms can change if the detailed picture differs from the summary you gave. Treat an AIP as a strong signal, not a signed deal.

How to use one well

Get an AIP early if you are bidding on stock, premises or an acquisition and need to show you can fund it. Most AIPs rely on a soft search, so shopping around at this stage rarely marks your file. When you are ready to commit, convert it through a full business loan application and check affordability with the affordability calculator.

Frequently asked questions

Is an agreement in principle binding on the lender?

No. It is an indication given in good faith on summary information, subject to full underwriting and verification. The binding commitment is the formal offer you receive after the detailed assessment.

Does getting an agreement in principle hurt my credit score?

Usually not — most are based on a soft search that other lenders cannot see. Confirm this with the lender, as practice varies, before requesting several at once.