Can I repay a building services business loan early — and will I pay fees?

Top-of-page compliance / short disclaimer: UK Business Loans is an introducer. We do not lend or provide regulated financial advice. We connect businesses with lenders and brokers. Terms and fees vary by provider — check your loan agreement or ask your broker for a settlement figure before repaying early.

Summary / Quick answer

Quick answer: Yes — most lenders allow full or partial early repayment on building services business loans, but whether you can and whether you’ll pay fees depends on the finance product (unsecured loan, secured loan, asset finance, hire purchase, invoice finance or merchant cash advance) and the lender’s contract. Read your agreement or ask your broker/lender for a written settlement figure before paying early. If you want us to check settlement options and compare lenders who specialise in trades, Get Quote Now.

What “early repayment” means for business loans

Early repayment covers several actions:

• Full settlement — paying off the remaining balance before the scheduled end date.
• Partial repayment / overpayment — paying extra towards the loan while keeping it open.
• Voluntary early termination — ending a leasing or hire purchase agreement early.
• Settlement of non-standard facilities — paying the agreed factor amount on merchant cash advances.

Business loans are commercial contracts. Unlike many consumer loans, business borrowers don’t always enjoy automatic statutory protections — the right to repay and any fees are set in the contract.

How early repayment works across common finance types for building services

Different finance types treat early repayment differently. Below are the typical approaches you’ll encounter as an electrician, plumber, HVAC contractor, M&E firm or building services contractor.

Unsecured business loans

Unsecured loans often permit overpayments and early settlement. However, some lenders include an early repayment charge (ERC) to compensate for lost interest when a borrower exits a fixed-rate or fixed-margin facility early.

• ERC format: fixed percentage of outstanding balance, months’ interest, or an interest shortfall calculation.
• Typical example (indicative): 2–4% of the outstanding balance if settled in the first 12–24 months — but this varies widely.

Secured business loans / property-backed loans

Secured loans are more likely to carry additional costs on early redemption. Expect:

• ERCs or redemption premiums.
• Solicitors’ costs and admin fees to remove the charge on title.
• Potential valuation fees if security needs re-assessment.

If property or a fixed charge secures the loan, obtain a formal redemption statement and confirm how and when the lender will instruct deeds to be released.

Asset finance (hire purchase, finance lease, lease purchase)

Asset finance is commonly used by trades for vans, plant, compressors, lifts and specialist equipment. Treatment of early repayment depends on agreement type:

• Hire Purchase (HP): You can usually settle by paying outstanding capital plus a calculated interest element. Lenders provide a settlement figure; that figure often uses a prescribed formula and may include an ERC.
• Finance lease / operating lease: These agreements can be expensive to terminate early — unpaid rentals, termination fees and VAT may apply.
• VAT and disposal: If assets are sold on early settlement, VAT and sale proceeds treatment can affect net cost.

Tip: Always ask the asset finance provider for a written settlement figure and how any sale of the asset will be handled.

Invoice finance / factoring

Invoice finance usually allows termination, but providers commonly require notice and may charge an exit fee. You will also need to repay any advances and accrued fees. In many cases there is no typical “ERC” percentage, but minimum term fees or an exit administration charge can apply.

Merchant cash advance (MCA)

MCAs are repaid via a percentage of daily/weekly card takings. Early settlement is possible but often negotiated: the provider typically offers a discounted “buyout” amount (or sometimes applies a settlement premium). Because MCAs can be expensive overall, early settlement calculations vary widely.

Typical early repayment charges & how they are calculated

ERCs are commonly calculated in one of these ways:

• Fixed percentage of the outstanding balance (e.g., 3% of the capital outstanding).
• Banding / step-down schedule (e.g., 5% in year 1, 3% in year 2, 0% thereafter).
• Interest shortfall / lost interest (the lender estimates future interest they’ve lost and charges accordingly).
• Fixed months’ interest (e.g., a fee equal to 3 months’ interest).

Indicative ERCs by finance type (illustrative only)

Finance type	Typical ERC / exit cost	Common timeframe
Unsecured loan	0–4% of outstanding or months’ interest	Higher in first 12–24 months
Secured loan (property)	Redemption premium + legal/admin fees	Varies — often early years
Hire Purchase	Outstanding capital + interest adjustment	Any time — formula varies
Invoice finance	Exit/admin fee; repayment of advances	Notice period often required
Merchant cash advance	Negotiated buyout / settlement	Varies widely

Example calculation (simple)

Outstanding capital: £50,000. Lender charges a 3% ERC. ERC = £1,500. If interest saved over remaining term is £2,000, net saving ≈ £500 — but solicitor/admin fees could reduce that. Always calculate net benefit before settling.

Building services sector specifics — why early repayment matters

Trades and building services firms often have irregular cashflow (retentions, staged payments, seasonal peaks). Early repayment can:

• Reduce interest costs and simplify liabilities after a big contract finishes.
• Free up security (e.g., remove a charge on property or assets) — useful if you’re selling a business or asset.
• Hurt working capital if you pay down too much while jobs remain outstanding.

Common scenarios: you finish a project and receive a large final payment or you sell equipment — getting a settlement figure first prevents unexpected fees that could erase the interest savings.

How to reduce or avoid early repayment fees

Practical tactics:

• Negotiate with your lender — some will reduce or waive ERCs if you refinance with them or give sufficient notice.
• Choose products that allow penalty-free overpayments when you sign — if you’re planning asset upgrades, include flexible terms in your search.
• Part-pay instead of full settlement to lower interest while avoiding ERC thresholds.
• Time settlement to when ERC step-downs apply (e.g., after year 2 the charge falls to 0%).
• Compare the true cost to refinance: fees + ERC vs interest saved on new deal.

What to ask your lender or broker to get a clear picture:

• “Please provide a written settlement figure and its expiry date.”
• “Show a breakdown: ERC, admin, legal and valuation fees.”
• “What notice period and documents are required to remove any security?”

Checklist — steps to take before making an early repayment

1. Check your loan agreement for ERC clauses and notice periods.
2. Request a written settlement figure and ask how long it is valid.
3. Confirm third-party costs (solicitor, valuation, land registry fees).
4. Calculate net benefit: interest saved less ERC and fees.
5. Keep a working capital buffer for ongoing contracts and retentions.
6. Obtain written confirmation after settlement that the account is closed and security released.

If you’d like help getting settlement figures and comparing options from lenders who understand trades, Start Your Enquiry and we’ll match you to brokers and lenders who can provide clear costs.

Questions to ask any prospective lender or broker

• “Is there an early repayment or exit fee? How is it calculated?”
• “Will you provide a formal settlement figure and how long is it valid?”
• “Are any admin, solicitor or valuation costs payable on redemption?”
• “If I make overpayments, will this reduce the term or monthly payment?”
• “Will repaying early affect any linked facilities (overdraft, invoice finance)?”

How UK Business Loans can help

We don’t lend. We match building services businesses (minimum loan needs from about £10,000) with lenders and brokers who specialise in trades. Complete a quick, free enquiry and we’ll:

• Match you to partners who can provide written settlement figures and explain ERCs.
• Help compare refinancing and settlement options to identify any net savings.
• Connect you with providers experienced in asset finance, invoice finance, MCAs and secured lending for contractors.

Ready to check settlement costs and compare options? Free Eligibility Check — Get Quote Now.

Frequently asked questions

Will repaying a business loan early affect my credit score?

No — settling a loan early doesn’t in itself damage your credit file. Lenders may run checks when you seek new finance. Always confirm whether the lender will record the settlement and how it will appear on your file.

Can I make extra monthly repayments?

Some lenders allow unlimited overpayments; others cap them or charge. Check your agreement and ask for terms on overpayments before you start.

Are early repayment charges the same for hire purchase and lease?

No. HP tends to allow settlement of the outstanding balance (often via a formula). Leases can include termination fees or unpaid rentals. Always request a settlement statement.

How long does a settlement figure remain valid?

Typically 7–28 days but it varies. Confirm the expiry date so the quoted figure still applies on payment day.

Can UK Business Loans find lenders who allow penalty-free overpayments?

Yes. Complete our short form and we’ll match you to brokers and lenders with flexible overpayment terms or low ERCs suitable for building services businesses.

If my loan is secured against property, what extra steps are required to remove the charge?

You’ll usually need a redemption statement, solicitors to handle deed release, and payment of any legal/admin fees. Ask for a full cost breakdown before settling.

Legal & compliance

UK Business Loans is an introducer. We do not offer loans or regulated financial advice. We connect businesses with lenders and brokers. Using our service does not guarantee a loan. Terms, eligibility and fees vary by lender — always check your loan agreement or ask for a settlement figure in writing before repaying early. Read our Privacy Policy, Terms & Conditions and Cookies for more information.

For further information on finance tailored to trades, see our industry overview on building services business loans.

If you’re ready to compare settlement figures and shop for flexible terms suited to contractors, Get Quote Now — our quick enquiry takes under two minutes and is free and no obligation.

1. Can I repay a business loan early and will I pay fees? — Most lenders allow full or partial early repayment but fees (ERCs), notice periods and costs depend on the finance type and your contract, so always request a written settlement figure before paying.

2. What are early repayment charges (ERCs) and how are they calculated? — ERCs are lender fees to compensate for lost interest and are usually calculated as a fixed percentage, months’ interest, a step‑down schedule or an interest shortfall on the outstanding balance.

3. Can I make extra monthly repayments without penalty? — Some lenders permit unlimited overpayments while others cap them or charge fees, so check your loan terms or ask our matched brokers for products with penalty‑free overpayments.

4. Will repaying a loan early affect my credit score? — Settling a loan early does not automatically harm your credit file, although lenders may run checks if you apply for new finance.

5. How long is a settlement figure valid for? — Settlement figures commonly expire in 7–28 days, so confirm the exact expiry with the lender or broker before transferring funds.

6. How do secured (property‑backed) loans differ from unsecured loans for early repayment? — Secured loans often incur redemption premiums, solicitors’ and admin fees and require deed release steps, whereas unsecured loans generally have fewer third‑party costs but may still include ERCs.

7. Can UK Business Loans help me find lenders for asset finance, invoice finance or merchant cash advances? — Yes — we match building services businesses with lenders and brokers experienced in asset finance, invoice finance and MCAs to provide settlement figures and repayment options.

8. What should I check before paying off or refinancing my business loan? — Request a written settlement figure and expiry date, get a breakdown of ERCs and third‑party costs, calculate net savings after fees, and ensure you retain working capital for ongoing projects.

9. How quickly will I hear back after submitting an enquiry to UK Business Loans? — After our short free enquiry you’ll typically receive contact from matched lenders or brokers within hours.

10. What loan amounts and business types can UK Business Loans help with? — We connect sole traders and companies across sectors (including building services) with finance options ranging from around £10,000 up to multi‑million facilities through our network of trusted lenders and brokers.