Is business finance for my limited company regulated by the FCA?

Mostly no. Business finance for limited companies is not regulated by the Financial Conduct Authority, and merchant cash advances are not loans and are not FCA-regulated. That is Ask Sterling's understanding of the rules, not legal advice. The reason is in how the law defines a "credit agreement": it is built around individuals and small partnerships, and a limited company is neither.

Why a limited company sits outside

The FCA's credit rules hang off the Regulated Activities Order 2001 (the RAO). Article 60B defines a "credit agreement" as "an agreement between an individual or relevant recipient of credit ("A") and any other person ("B") under which B provides A with credit of any amount".

A "relevant recipient of credit" means "a partnership consisting of two or three persons not all of whom are bodies corporate", or an unincorporated body that is not made up entirely of bodies corporate.

A limited company is not an individual, and it is not that kind of partnership. So, as we read it, lending to a limited company is not a regulated credit agreement.

Sole traders are different

Sole traders and small partnerships are inside the definition. Some of their business borrowing is exempt: article 60C exempts an agreement where the lender provides "credit exceeding £25,000" and it is entered into "wholly or predominantly for the purposes of a business". But introducing them is still regulated credit broking, which is why Ask Sterling works with limited companies only. See why limited companies only.

What being unregulated means for you

• No FCA promotion rules. CONC 3, the FCA's rules on credit adverts, does not apply to a promotion that "indicates clearly that it is solely promoting credit agreements … for the purposes … of a customer's business". That is why business offers often show no APR.
• No Consumer Duty. The FCA says the Duty "does not, for example, apply to credit products outside our remit, such as unregulated business lending."
• No statutory early settlement right. The contract decides. See can I repay an advance early.
• Contract law still applies, and so does advertising law and data protection law.

Sterling's take: unregulated is not the same as unsafe, but it does mean nobody else is checking the maths for you.

How to protect your company anyway

1. Convert every offer to an APR with the MCA APR calculator. A 1.35 factor over 6 months, paid daily, is about 126%.
2. Read the personal guarantee before anything else. It decides what you personally owe if the company cannot pay.
3. Ask who gets paid. Ask Sterling is paid a fee by our funding partner for each introduction; you pay us nothing. See how we get paid.
4. Never pay an upfront fee to "release" funds. Read funding scams.

What to do next

If you are a sole trader or partnership, look for an FCA-authorised broker or lender. If you are a limited company, read the merchant cash advance guide and check any offer with the offer checker.