# How to read a business loan term sheet

A practical guide to reading a business loan term sheet — what principal, interest rate, cost cap, ERC, security and covenants mean, and what to check before accepting a credit offer.

**Site:** [creditcorp.co.uk/learn/how-to-read-a-business-loan-term-sheet/](https://creditcorp.co.uk/learn/how-to-read-a-business-loan-term-sheet/)

Creditcorp is the growing name for the Credicorp group. Credicorp Limited is the lender behind it — short-term working capital for incorporated UK businesses. No personal guarantee on any product. This page is a guide; applications go to [credicorp.co.uk](https://credicorp.co.uk/).

## Contents

- Key terms you will find on a term sheet
- Five things to check before accepting a credit offer
- Term sheet questions
- Ready to apply?

## Step-by-step guide

**Step 1: Check the principal and the total cost**

The principal is the amount borrowed. The total cost is the principal plus all interest and fees over the life of the loan. Look for both figures. If the term sheet shows only a daily or monthly rate, calculate the total cost yourself: (daily rate × number of days × principal) + any upfront fees. This is the number that matters.

**Step 2: Check the repayment schedule**

How is the loan repaid — as regular scheduled payments, a balloon payment at the end, or on demand? For a revolving facility, how does the interest accrue and when is it charged? Understanding the repayment shape tells you what cash flow commitment the company is taking on and when.

**Step 3: Check for security and personal guarantee**

Look for "debenture", "fixed charge", "floating charge", "security", "personal guarantee" or "director's guarantee". These are material commitments. If any appear, understand exactly what assets are covered and what the personal exposure is. If none appear, the product is unsecured — this is a significant difference from secured lending.

**Step 4: Check for early repayment charges and redemption fees**

Check whether you can repay early and whether there is a cost to doing so. Some lenders charge a penalty for early redemption. Others allow it at no charge. Knowing this before you take the facility avoids a surprise if the company wants to repay ahead of schedule.

**Step 5: Check for covenants and conditions**

Look for any ongoing obligations — information requirements, restrictions on further borrowing, minimum balance requirements, insurance obligations. Also check the conditions to drawdown — are there steps you must complete before accessing the money? These conditions may affect timing and add friction to the process.

## Frequently asked questions

**What is a term sheet?**

A term sheet (also called a credit offer, letter of offer, or indicative terms) is a document from a lender that sets out the key terms of a proposed lending facility before the full agreement is signed. It summarises principal, interest rate, fee structure, repayment terms, security requirements, and any conditions. It may be binding or non-binding — check whether accepting it creates a contractual obligation.

**What is an early repayment charge (ERC)?**

An ERC is a fee for repaying a loan before the agreed end of the term. It compensates the lender for lost interest income. Not all products have an ERC. Credicorp products allow early repayment — you only pay interest for the days you have actually borrowed. There is no ERC penalty for paying off early. Check the term sheet carefully: "early repayment charge" or "redemption fee" means there is a cost to repaying early.

**What does APR or annual percentage rate mean on a term sheet?**

APR is the annualised cost of credit expressed as a percentage, including interest and fees. It is designed to allow comparison across products over one year. For short-term business lending measured in weeks or months, APR can appear very high — a product with a daily rate and no long holding period will have a high APR even if the actual total cost is modest. The total cost in pounds over the borrowing period is a more useful comparison for short-term products.

**What are covenants in a business loan?**

Covenants are conditions a borrower must comply with during the term of the loan. They fall into two types: positive covenants (things you must do — maintain certain account balances, provide information, keep insurance current) and negative covenants (things you must not do — take on additional debt above a certain level, dispose of key assets). Breaching a covenant may trigger early repayment or other remedies. Short-term unsecured products like Credicorp's typically have minimal or no covenants.

**What should I check most carefully on a term sheet?**

Five areas to read carefully: (1) Is there any security — fixed charge, floating charge, debenture? (2) Is there a personal guarantee from the director? (3) Is there an early repayment charge? (4) What is the total cost in pounds, not just the rate? (5) Are there covenants that restrict what the business can do? These are the most impactful terms beyond the headline rate and amount.

## About Creditcorp / Credicorp

Credicorp Limited is a UK short-term business lender. Products: Business Bridging Loan (14–84 days, 0.25%/day), Credicorp Flex (revolving credit, 0.25%/day on drawn balance), Credicorp Slice (invoice-backed, flat fee). Incorporated UK companies and LLPs only. No personal guarantee. No debenture. Same-day decisions. Total charges capped at 100% of principal.

- [Apply or get a quote](https://credicorp.co.uk/)
- [Products overview](https://credicorp.co.uk/products/)
- [Eligibility](https://credicorp.co.uk/eligibility/)
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