Is a Decision in Principle binding, and will it affect my credit score?
The short answer
A Decision in Principle (DIP) — also called an Agreement in Principle or Approval in Principle — is not legally binding, and it does not guarantee funding. It is a conditional indication from a lender or broker that, based on the information available at that moment, you may be eligible for finance.
A DIP may or may not impact your credit score. Many providers run a soft credit search for a DIP, which does not affect your score, but some may run a hard search, which can leave a footprint and could temporarily impact your score.
Always ask whether the DIP check will be soft or hard before you proceed, and limit the number of hard searches in a short period.
What a DIP really means
A DIP is an early eligibility signal, not a binding offer or a contract. It helps you gauge whether it’s worth progressing to a full application.
The final decision depends on detailed underwriting, documentary checks, and current lender appetite. Terms can change and approvals can be withdrawn if the facts differ from the initial data supplied.
Use a DIP to plan, but avoid committing to costs or timelines until a full offer is issued.
Who commonly uses DIPs?
UK SMEs in sectors like construction, manufacturing, logistics, retail, and healthcare often request DIPs to test eligibility and timelines. It can speed up conversations with suppliers and give stakeholders confidence.
If you operate in transport or distribution, see our guidance on logistics business loans to explore sector-specific considerations. Each sector has different lending norms and risk checks.
Best Business Loans does not issue DIPs or loans; we introduce you to suitable lenders or brokers who may provide one.
Common DIP outcomes
DIP accepted subject to underwriting and evidence. DIP declined with reasons and potential alternatives.
DIP deferred pending more information or updated financials. Use these outcomes to refine what you apply for and when.
Careful sequencing reduces the risk of unnecessary hard searches.
Is a DIP binding for UK business finance?
In UK commercial lending, a DIP is not binding on either party. It reflects initial checks and assumptions and can be changed or withdrawn.
The binding stage typically arrives later as a formal offer or Heads of Terms (HoTs), sometimes after further due diligence. Even then, most offers remain subject to conditions precedent before funds are released.
Your funding is only secured once you have executed agreements and met all conditions.
Why a DIP can change
A DIP can shift if lender risk appetite changes, credit policy updates, or market conditions move. It can also change if your management accounts, bank statements, or aged debtors show a different picture to what you disclosed.
Tax arrears, new CCJs, or material adverse events can affect the outcome. Variances in asset valuations, debtor quality, or contract certainty can also drive changes to price or structure.
Expect lenders to verify details before finalising terms.
DIP vs full offer vs Heads of Terms
DIP: an early, conditional indication of eligibility and ballpark quantum. It is largely data-led and often automated.
Heads of Terms: a more detailed, usually non-binding framework of pricing, security, and key conditions. It guides due diligence.
Full offer: a formal offer which may be binding subject to conditions. Funding follows once all conditions are satisfied.
Typical supporting evidence after a DIP
Last 3–12 months’ business bank statements, management accounts, and filed accounts. Contracts or order book summaries.
Debtor and creditor ledgers for invoice finance. Asset lists and valuations for asset finance or refinance.
Director ID checks, proof of address, and relevant licences or insurances.
Will a DIP affect my credit score?
Whether a DIP affects your credit score depends on the type of search performed. A soft search checks key data without leaving a visible footprint to other lenders and does not impact your score.
A hard search is recorded on your file and can temporarily lower your score, especially if there are multiple hard searches within a short period. Many lenders now use soft searches at DIP stage, but not all do.
Always confirm the search type in writing before proceeding.
Soft search vs hard search, explained
Soft search: visible only to you, used for pre-qualification and indicative decisions. It has no effect on your credit score.
Hard search: visible to you and other lenders, used for formal applications and deeper assessments. Multiple hard searches in a short timeframe can signal risk.
For commercial lending, providers may check both business credit data and director guarantees, which can involve both company and personal searches.
How many DIPs is too many?
As a rule of thumb, keep hard searches to a minimum and spread them over time. Too many hard searches can reduce your score and weaken your negotiating position.
Use a single route to market where possible, so you don’t trigger overlapping checks with the same bureaus. A curated introduction can reduce unnecessary footprints.
Our Quick Quote process is designed to help you avoid duplicate enquiries and minimise credit impact.
Will the final application impact my score?
Most formal applications involve a hard search. If you progress from DIP to full application, expect a hard check before final approval.
This is normal and expected in regulated environments. Ensure the application is genuinely suitable before proceeding.
Good preparation reduces the risk of declines and repeated checks.
How to get a DIP without harming your credit
The best approach is to prepare thoroughly, confirm search types, and funnel enquiries through a targeted shortlist. Preparation helps you secure a strong first-pass outcome.
Work with introducers who prioritise soft searches at early stages where possible. Choose providers active in your sector to improve your match quality.
Use one clear, accurate information set to prevent conflicting submissions.
Practical steps before requesting a DIP
Check your company credit file and director records for errors and CCJs. Ensure VAT, PAYE, and Corporation Tax are up to date or transparently managed.
Prepare management accounts, bank statements, debtor book details, and key contracts. Know your funding purpose, timeline, and preferred structure.
Decide whether personal guarantees or assets are available, as this affects lender appetite and pricing.
Ask these questions before a DIP
Will you perform a soft or hard search for the DIP? Which credit bureaus will you use?
What documents will you need next, and how long is the DIP valid? What would change the decision or pricing?
At what stage do you perform hard searches, and will multiple funders run them?
How Best Business Loans can help
Best Business Loans is an independent introducer that helps you navigate the market. We use AI-driven matching to connect you with lenders or brokers that fit your sector, need, and profile.
Our Quick Quote / Eligibility Check is free to use and designed to reduce duplicated enquiries. You stay in control of when to proceed to any formal application.
We do not offer loans or give regulated financial advice. Credit is subject to status and provider terms.
FAQs, risks, and next steps
Below are straight answers to common questions UK SMEs ask about DIPs. This helps you move forward with confidence.
Remember that processes vary by lender, finance type, and sector. Treat a DIP as a starting point, not a promise.
When you are ready, you can request an Eligibility Check to see suitable routes without commitment.
Does a DIP guarantee the amount or rate?
No, a DIP does not guarantee the amount or the interest rate. It is based on preliminary data and may change after underwriting and document reviews.
Final pricing reflects risk, security, and current market conditions. A strong DIP improves momentum but not certainty.
Get all assumptions into writing to avoid misunderstandings later.
How long does a DIP last?
Validity periods vary, commonly 30–90 days. Expired DIPs often need refreshing, which may involve updated searches or documents.
If your financials or circumstances change, tell the provider promptly. Transparency helps you avoid last-minute issues.
Keep your management information current during the validity window.
Can a DIP be withdrawn?
Yes, a DIP can be withdrawn or adjusted if material information changes or fails to verify. This includes changes in revenue, cash flow, liabilities, or credit status.
It may also be withdrawn if lender appetite shifts or new risks emerge during due diligence. This is part of prudent lending practice.
Contingency plan for timing and alternatives to maintain operational continuity.
Can a DIP strengthen supplier negotiations?
Yes, a DIP can signal intent and improve confidence in timelines. It can help you secure provisional terms from suppliers.
Be clear that a DIP is conditional and not a guarantee. Avoid contractual commitments until you have a formal, executable offer.
Share only what is necessary and maintain confidentiality.
What if multiple brokers run checks on my behalf?
Coordinate your route to market to avoid duplicate hard searches. Too many checks can lower your score and complicate approvals.
Choose one introducer and agree on the lender shortlist. Keep a record of who is authorised to submit on your behalf.
Ask each party to confirm search types in advance.
Key takeaways
- A DIP is not binding and can change after underwriting.
- Soft searches usually do not affect your score; hard searches can.
- Confirm the search type before requesting a DIP.
- Prepare documents to reduce the risk of changes or withdrawal.
- Use a focused route to market to minimise duplicate checks.
Important information and compliance
Best Business Loans is an independent introducer, not a lender or credit broker, and does not provide financial advice. Any introductions are to third-party lenders or brokers who may be authorised and regulated by the Financial Conduct Authority where required.
All information on this page is for general guidance only and should not be relied upon as advice. Finance is subject to status, eligibility, affordability checks, and provider terms.
We aim for communications that are clear, fair, and not misleading, in line with FCA and ASA expectations and Google’s financial services policies. Updated October 2025.
Next steps — Get your Quick Quote / Eligibility Check
It takes a couple of minutes to submit your details. Our AI-driven process helps identify suitable providers and the likelihood of a positive outcome.
We’ll introduce you to relevant lenders or brokers who may be able to issue a DIP based on a soft search where possible. You choose if and when to progress to a full application.
Start now to explore options that fit your sector, cash flow, and growth plans.