Can I repay a business loan early — and will I be charged early settlement fees?

Short answer: Yes — most business finance facilities can be repaid early, but whether you pay an early settlement or exit fee depends entirely on the product and the lender’s contract. Some lenders only charge a small admin fee; others apply a percentage of the outstanding balance or compensation for breaking a fixed-rate period. Always ask the lender or broker for a written settlement figure before you make any payment. Ready to compare settlement terms from matched lenders? Get Quote Now.

Important: UK Business Loans does not lend or provide regulated financial advice. We act as an introducer and will put your enquiry to lenders and brokers; any loan agreement, including early repayment terms and fees, will be set by the lender.

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Quick answer & what this page covers

Most business loans and finance agreements can be repaid early. The cost of doing so varies by:

• type of finance (term loan, asset finance, invoice discounting, merchant cash advance, etc.),
• whether the rate is fixed or variable, and
• what the lender’s contract says about notice, compensation and admin fees.

This page explains the typical rules for common business finance types, how settlement figures are calculated, a short checklist for repaying early, negotiation ideas to lower charges, and worked examples so you know what to ask for when matched with lenders via UK Business Loans. If you want lenders to send settlement quotes and early‑repayment terms, Get a Free Eligibility Check.

Who you’re dealing with — our role and a compliance note

UK Business Loans connects business owners with lenders and brokers — we are an introducer, not a lender or adviser. We do not set or control loan terms, interest rates, or exit fees. That means:

• Any early settlement charges will be shown in the lender’s paperwork.
• We can ask matched lenders/brokers to include settlement figures in their quotes, but the final charge is confirmed by the lender.
• Before repaying early, you should read the lender’s terms or ask the broker for a formal settlement figure in writing.

If you’d like matched providers to give written settlement terms, Get Quote Now.

Why early repayment rules vary — core principles

Early repayment is governed by the facility agreement you signed. Key concepts to understand:

• Fixed vs variable rate — breaking a fixed-rate deal often triggers compensation or “breakage” costs because the lender must replace lost interest income or hedge positions.
• Notice periods — some lenders require advance notice before settlement.
• Methods of charging — fees may be a flat admin charge, a percentage of the outstanding balance, or calculated as interest compensation.
• Product design — leases and hire‑purchase often have specific early termination formulas, while overdrafts are often repayable on demand.

Always treat any published examples as illustrative — lenders vary widely. If you want quotes that include exact settlement terms, start with a Free Eligibility Check.

How early repayment generally works — practical guide by finance type

Term loans / unsecured business loans

Term loans are normally repayable early, but the lender’s agreement will say how. Typical charges:

• Small admin fee (one-off) or
• Percentage of outstanding balance (commonly 1–5% as an illustrative range), or
• Compensation for breaking a fixed-rate period (calculated to reflect lost interest).

Tip: Request a settlement figure and a written confirmation of the date to which it applies.

Secured loans / commercial mortgages

Commercial mortgages often allow redemption but may include early redemption penalties during specific periods, plus legal & valuation costs. Check the mortgage deed for “early redemption” clauses and any admin charges.

Asset finance / hire purchase / finance lease

Early settlement is usually possible. Lenders calculate a settlement figure that may take account of remaining rentals, loss in interest, and VAT on interest. Some deals use a rebate method reducing the payable amount over time.

Tip: Ask how the lender calculates the rebate — some methods are more favourable than others.

Invoice finance / factoring

Settlement can be more complex: notice periods, termination fees, and retained reserve release timings apply. You may need to reconcile outstanding advances, interest and reserve balances before the facility can be closed.

Merchant cash advances / revenue-based funding

Technically not a traditional loan — repayment is often linked to future card takings. Some providers offer an early settlement discount; others charge a fixed exit fee. Ask the funder for their early-settlement calculation.

Overdrafts and revolving facilities

Overdrafts are usually repayable on demand and rarely carry a formal early repayment fee, but closure may trigger administrative charges or notice requirements in the agreement.

Want to compare options for business finance providers? Learn more about our business finance matching service at our business finance page.

How lenders calculate settlement figures — what to expect

Common calculation methods:

• Outstanding balance + accrued interest to the settlement date + admin/exit fee.
• Compensation for breaking fixed-rate periods (often a formula linking remaining term and interest differential).
• Fixed percentage of the outstanding balance (simple and common for some unsecured loans).
• Rebate method for asset finance (reduces as you progress through contract).

Always request a formal written settlement figure showing the exact date it applies — oral estimates can change. If you need lenders to provide formal settlement quotes, Get a Free Eligibility Check.

Practical steps to repay early (if matched via UK Business Loans)

1. Locate your agreement and read the early repayment clause.
2. Contact the lender or broker and request a formal settlement figure in writing (sample line you can use: “Please provide a written settlement figure for early repayment as at DD/MM/YYYY including all fees and VAT.”).
3. Compare the cost of settlement to continuing monthly payments (include opportunity cost of capital).
4. Consider refinancing — matched brokers may be able to quote a cheaper replacement facility that covers exit costs.
5. Confirm payment method, notice required, and documentation to close the account.

Need lenders to provide settlement figures and quotes? Start Your Enquiry.

Ways to reduce or avoid early settlement fees

• Negotiate: some lenders will reduce or waive fees to keep you as a customer or if you refinance through them.
• Refinance: a cheaper new loan can offset exit costs.
• Partial repayments: reduce the outstanding balance to lower any percentage-based fee.
• Ask for staged settlement: pay in instalments to spread the cost.
• Choose lenders with favourable exit terms when comparing quotes — brokers can help find these.

Want matched quotes so you can compare early‑repayment terms? Get Quote Now.

Important legal, tax and reporting considerations

Early repayment can affect accounting entries and interest deductibility. There may be VAT implications on interest or finance charges for some products. Before acting, check with your accountant or tax adviser. UK Business Loans does not provide tax or legal advice — we can only introduce lenders and brokers who can supply settlement figures.

Example scenarios (illustrative)

1) Fixed-rate term loan — illustrative numbers

Loan outstanding: £100,000. Remaining term: 24 months at fixed rate. Lender charges compensation equal to three months’ interest (illustrative). If monthly interest would be £1,000, compensation = £3,000 + admin fee £150 = settlement adds £3,150 to capital requirement. Always confirm the lender’s own formula.

2) Asset finance (hire purchase)

Original capital: £60,000 over 48 months. After 18 months the settlement figure may be remaining retail cash price less a time-apportioned rebate plus VAT on any interest — the lender will provide the exact figure. The later into the agreement you are, the lower the settlement is likely to be.

These are examples only — ask matched lenders for written settlement figures before committing.

Frequently asked questions

Will early repayment affect my credit score?

Generally repaying a facility early won’t harm your credit score and often improves it by reducing liabilities — but lenders may record account closure; check with the lender.

Are early repayment fees negotiable?

Often yes. Lenders and brokers may negotiate or offer alternatives like refinancing; it depends on the lender’s policies and your account history.

Do I need to notify my lender in advance?

Many agreements require notice. Request a settlement figure that includes the date the figure is valid to ensure you have the correct amount.

Is the settlement figure fixed?

It’s typically fixed for a short period (e.g., 7–30 days). Always confirm the validity period in writing.

Can UK Business Loans provide exact early repayment fees?

No — we don’t set fees. We can match you with lenders/brokers who will provide written settlement figures in their quotes.

What if I was matched with multiple lenders?

You can request settlement quotes from any matched lender. Compare total costs (including exit fees) before deciding.

Final summary & next step

Yes — you can usually repay business finance early, but charges vary by product and lender. Key actions: always request a formal written settlement figure, compare the cost of early repayment with continuing payments, and consider refinancing or negotiation. UK Business Loans can match you with lenders and brokers who will include settlement terms in their quotes. Ready to get written settlement quotes and compare options? Get a Free Eligibility Check — it only takes a couple of minutes.

Privacy & data note: when you complete the enquiry form your details will be shared with lenders and brokers who may contact you. See our privacy policy for more information.

1) How do I get a business loan in the UK?
Complete UK Business Loans’ quick enquiry form and we’ll match you with trusted lenders and brokers who will contact you to discuss options (the form is an introduction, not a loan application).

2) What types of business finance can I apply for?
You can access term loans, asset and equipment finance, invoice finance/factoring, merchant cash advances, overdrafts, commercial mortgages and specialist products like sustainability or refinance loans.

3) How much can I borrow and who can apply?
Our partners arrange funding from around £10,000 up to £10m+ for sole traders, limited companies, LLPs, start‑ups and established SMEs depending on eligibility.

4) Will submitting an enquiry affect my credit score?
No — submitting an enquiry via UK Business Loans does not affect your credit score; lenders typically only run credit checks if you decide to proceed.

5) How quickly will I get responses and offers?
You can usually expect a call or email from matched lenders or brokers within hours, with formal quotes following after they review your details.

6) Can I repay a business loan early and will I be charged early settlement fees?
Yes — most facilities can be repaid early but any early repayment or exit fee depends on the lender and product, so always request a written settlement figure before paying.

7) How are early settlement fees and settlement figures calculated?
Lenders may charge a fixed admin fee, a percentage of the outstanding balance, compensation for breaking fixed‑rate periods, or apply a rebate method for asset finance, so ask for a formal written figure showing all elements.

8) Will repaying a loan early reduce the total interest I pay?
Usually yes because you stop future interest, but fixed‑rate compensation or breakage costs can offset savings so compare the settlement figure with continuing payments.

9) Can I get business funding if I have poor credit?
Yes — some of our partner lenders specialise in customers with imperfect credit histories and can offer tailored solutions, though terms may vary.

10) Does UK Business Loans charge for matching me with lenders and are the partners regulated?
No — our service is free and no obligation, and we only work with reputable, FCA‑regulated brokers and lenders.