01 / The mechanics
How it works
- You agree an amount, a term and a repayment schedule before any money moves.
- The full sum is advanced at the start, so you pay for all of it from day one whether you use it immediately or not.
- Repayments are usually fixed and taken on the same day each month, which makes the cost easy to plan against.
- Security may be taken over company assets, and a personal guarantee is often requested alongside it.
02 / The trade-offs
Who it usually suits
A known, one-off cost with a predictable payback, such as a fit-out or an acquisition.
Where the cost sits
Interest over the term, plus arrangement fees deducted at drawdown. Ask for the total amount repayable, not the headline rate.
03 / Look closely
What to watch for
Early settlement charges, and personal guarantees that survive the company that borrowed.
Questions worth asking
- What is the total amount repayable over the full term?
- What does it cost to settle early, and is that a fixed sum or the remaining interest?
- Is a personal guarantee required, and does it survive if the company closes?
- What counts as a default, and how much notice is given before any action?
04 / Take a step back
Before you commit
If the need is a timing gap rather than a purchase, a revolving facility usually costs less because you only pay for what is drawn.