# How short-term business finance is priced, in plain English

“Why does short-term business credit cost what it costs?” is a fair question, and it is asked far more often than it is answered clearly. The honest answer is that a small, fast, short-duration loan is priced on a completely different basis from a mortgage or a multi-year SME term loan — and once you see the cost drivers, the headline numbers stop looking arbitrary. This piece walks through those drivers in plain English. It deliberately quotes *no* specific rate, fee or APR: live figures change, they depend on the product and the borrower, and the only authoritative source for them is the operating lender. What this page gives you is the shape of the question, so the number you are quoted is one you can actually read.

## Why “APR” is the wrong first question

APR — annual percentage rate — was designed to compare loans of broadly similar length. It annualises the total cost of credit so a borrower can line up one year-long loan against another. Apply that same machinery to a loan that lasts a few weeks and the annualised figure balloons, because a modest, fixed cost spread over a fraction of a year projects to a very large number when you stretch it to twelve months. That does not mean the credit is “expensive” in cash terms — it means APR is the wrong lens for a short instrument. For short-duration finance, the figures that actually tell you what you will pay are the **total cost of credit** (the cash amount over the principal) and the **total repayable**. Start there.

## The cost drivers, one at a time

Strip a short-term business facility back to its parts and the price is built from a small number of recurring components. None of them is a secret; they are the same levers every responsible lender works with.
- **Fixed origination and servicing work.** Verifying the company at Companies House, running a business credit check, assessing affordability from bank statements, setting up the facility, collecting repayments and handling the account — much of this costs roughly the same whether the loan is small or large, short or long. On a short, small loan that fixed work is a larger share of the total, which is the single biggest reason short credit looks proportionally dearer than a big term loan.
- **The cost of money itself.** A lender funds loans from somewhere, and that funding has a price that moves with the wider rate environment. When base rates rise, the lender’s own cost of capital rises, and that feeds through into pricing.
- **Expected default risk.** Some loans are not repaid in full. Pricing has to cover the expected losses across the whole book, not just the loan in front of you. The more an underwriting model can narrow that uncertainty — through verification and affordability checks — the more precisely risk can be priced rather than padded.
- **Term length.** Time is a cost and a risk in its own right: the longer a lender’s money is out, the more can change. Short terms cut that exposure, which is part of why short facilities are structured the way they are.
- **The structural perimeter.** Where a lender chooses to operate — which borrowers, which products, which protections — shapes its cost base, and that flows into price too.

## How the lending model changes the maths

Pricing does not float free of the product. The structure of the facility itself moves several of the drivers above. The Creditcorp Group operator, Credicorp Limited, lends only to **incorporated UK businesses** — limited companies, LLPs and PLCs. The *company* is the borrower, not the director, and there is [no personal guarantee](/articles/why-we-dont-take-personal-guarantees). That single design choice changes the risk picture: the lender’s recovery on default is company-level only, with no second pocket to dip into, so the underwriting and the pricing have to carry that risk on their own. Lending to body-corporate borrowers rather than individuals also places the facility [outside the FCA consumer-credit regime](/articles/outside-the-consumer-credit-regime), which is a different regulatory cost base from consumer lending — explained on our [lending-and-regulation page](/lending-and-regulation/). Different perimeter, different cost structure, different price. It is not better or worse in the abstract; it is a different instrument for a different borrower.

## Reading an offer like a director, not a headline

When a quote lands, the useful questions are practical ones, and a lender that prices honestly will answer all of them without flinching:
- What is the **total amount repayable**, in pounds, by the end of the term?
- What is the **total cost of credit** — the cash above the principal — and is it capped?
- Are there **any fees** beyond that figure, and what triggers them (late payment, early settlement, arrears)?
- What happens if the company **repays early** — does the cost fall, and by how much?
- What happens if the company **misses a payment** — what is the charge, and how does the lender handle hardship?

Those five answers tell you more than any single annualised percentage. They turn an abstract rate into a concrete decision: this much money, for this long, costing this much, under these conditions. If a lender cannot give you all five in plain terms, that itself is information.

## Where to get the actual numbers

This is a group corporate and insight site — we explain how pricing works, but we do not set or quote it. Live figures for any specific product, including the total cost of credit and any caps, sit with the operating lender. If you want a real quote for a real loan, that is the place to go: the operator can run the eligibility and affordability checks and show you the exact total repayable for your company, with no guesswork from us in between. Before you apply, it is also worth reading the operator’s own list of [alternatives to check first](/articles/alternatives-we-recommend-you-check-first) — sometimes a business overdraft, card or invoice finance is the cheaper fit, and an honest lender will say so.

## Related
- [Outside the consumer-credit regime: a longer-form explainer](/articles/outside-the-consumer-credit-regime)
- [Why Credicorp does not take a personal guarantee](/articles/why-we-dont-take-personal-guarantees)
- [The alternatives we recommend you check before applying](/articles/alternatives-we-recommend-you-check-first)
- [Lending and regulation — Article 60B in plain English](/lending-and-regulation/)
- [Apply or see live pricing at Credicorp Limited (the operator)](https://credicorp.co.uk/business-loans/)