Can I settle early, and are there early repayment or termination fees?
Short answer: yes — but check the contract and ask for a settlement figure
You can often settle business finance early, but whether you should depends on the deal and any fees involved. Always request a written settlement figure and a clear explanation of any charges before proceeding.
Can you always settle a business loan early?
Most lenders permit early settlement because it reduces their future credit risk and simplifies bookkeeping. However, the right to settle early and the cost of doing so is governed by the finance agreement you signed.
For regulated consumer loans different rules may apply, but most UK commercial and business lending is contract-based and not subject to consumer protections. That means the terms you agreed with your lender will usually determine whether you pay an Early Repayment Charge (ERC) or other termination fees.
Before taking any step, ask the lender or broker for a settlement statement showing the outstanding balance, any interest charged to the settlement date, and the exact fee calculation. This written figure protects you from unexpected costs and lets you compare options, such as refinancing or partial repayment.
Typical charges you may encounter
Early Repayment Charges (ERCs) are common for fixed-rate loans and term facilities; they compensate lenders for lost interest. ERCs are often expressed as a percentage of the outstanding balance or as a sliding scale depending on how early you repay.
Breakage costs apply when a lender needs to close hedging positions, such as swaps used to manage fixed-rate exposure. These costs can be variable and sometimes substantial; therefore, lenders should provide a clear calculation and explanation.
Other fees include administration charges for providing a settlement statement, arrangement or termination fees stated in the contract, and in asset finance the settlement may reflect a residual or balloon sum. Invoice finance arrangements may include notice periods or reclaimable fees if you terminate early.
How fees vary by finance type
Term loans and overdrafts often include ERCs or notice periods, but variable-rate loans may allow low-cost settlement because the lender keeps intended interest. Asset finance (hire purchase, finance leases) commonly includes settlement formulas that factor in remaining rentals and the asset’s residual value.
Invoice finance and factoring agreements frequently set notice periods and reconciliation processes for outstanding invoices; terminating early can require settling the facility and paying any contractual exit fee. Refinance and consolidation options can reduce aggregate fees but may involve arrangement or break costs.
For sector-specific funding such as sustainability loans there may be additional conditions linked to grant outcomes or project milestones; if you are exploring green finance options see our sustainability loans guide for more detail. Sustainability loans can include clauses tied to project delivery or reporting that affect settlement mechanics.
Practical steps to minimise cost and risk
Always get a full settlement statement in writing and request a breakdown of any ERC, administrative fee, or breakage cost. Compare that figure with the cost of keeping the loan to term or refinancing through another lender or broker.
Negotiate with your lender — some may reduce or waive fees if you move to another product with the same lender or provide replacement business to compensate. Use a broker or an introducer like Best Business Loans to check multiple market options and to seek more competitive exit terms before committing to an early settlement.
Consider timing and partial payments; some agreements allow partial early repayments without triggering ERCs so long as the loan remains above a threshold. Make sure you confirm whether partial settlements reduce future interest or simply shorten the term.
What to do next and how Best Business Loans can help
If you are thinking about settling early, start by locating your loan agreement and identifying any ERC, breakage costs, notice period, or administration fees. Then request a binding settlement figure from the lender and, if unclear, ask for a worked example showing how the fee was calculated.
Best Business Loans does not supply loans but can help you compare lenders or brokers who understand early settlement terms and can negotiate on your behalf. When you submit a Quick Quote through our platform you can flag that you are seeking early settlement or refinancing and we will match you with providers experienced in exit solutions.
Key takeaways
Yes — early settlement is usually possible, but costs and rules vary widely by lender and product. Always obtain a written settlement statement and ask for a full breakdown of any Early Repayment Charge, breakage cost, or administrative fee.
Compare your options — pay the fee, refinance, or negotiate a waiver — and use a platform like Best Business Loans to find lenders or brokers who specialise in the specific finance type you hold. If you’d like a quick eligibility check, submit our Quick Quote to get matched fast and confidentially.
Ready to check your options?
Complete a Quick Quote for an eligibility check and Decision in Principle; it only takes a few minutes and is free. Our AI-driven matching will connect you with lenders and brokers who can provide precise settlement figures and competitive exit solutions.
For questions or guidance email hello@bestbusinessloans.ai or submit your Quick Quote now to start the conversation. We act as an independent introducer and do not offer lending ourselves — our role is to help you find the most relevant, trusted finance providers for your needs.