What your legal form decides when you borrow for the business
This page sets out what changes when you borrow as a limited company, an LLP, a sole trader or a small partnership, and what consumer-credit protections you keep either way. It's written for directors and founders working out how to borrow, before any papers are signed.
See worked examples of how this plays out in practiceLegal form against the £25,000 threshold
The table sets out five common legal forms and what each one means for the consumer-credit protections that follow you into business borrowing. Find your own form first, then read the row through before you decide anything else.
| Legal form | Consumer-credit rules | Amount threshold | Introducing you to a lender |
|---|---|---|---|
| Limited companyThe size of the loan does not change this, whether you are borrowing a small amount or a large one. | Outside the FCA's remit | No threshold applies | Follows the lending itself, so stays outside too |
| LLPTreated the same way as a limited company for this purpose, regardless of how the partners share profit between themselves. | Outside the FCA's remit | No threshold applies | Follows the lending itself, so stays outside too |
| Partnership of more than three peopleIt is the headcount that moves a partnership out of consumer-credit rules. | Outside the FCA's remit | No threshold applies | Follows the lending itself, so stays outside too |
| Partnership of two or three peopleAdd a fourth partner and the position changes, so it is worth checking who is actually named on the loan. | Inside the FCA's remit | £25,000 or less | Follows the lending itself, so inside the remit at that amount |
| Sole traderThe same threshold applies whatever the trade, because it is the borrower's legal form that the rule looks at. | Inside the FCA's remit | £25,000 or less | Follows the lending itself, so inside the remit at that amount |
Based on the Financial Conduct Authority's own statement of its remit, read 30 September 2026. It does not cover what the Financial Ombudsman Service can separately hear for micro-enterprises and guarantors, which is set out elsewhere on this page.
The Ombudsman doesn't stop asking who you are just because consumer-credit rules do
Consumer-credit rules decide which protections attach to the lending itself. They don't decide whether you can complain if a lender treats you badly. That second question is answered separately, by the Financial Ombudsman Service, and its reach doesn't track your legal form the way consumer-credit rules do.
Who the Ombudsman will hear
The Financial Ombudsman Service can hear a complaint from a micro-enterprise, a small business, or a guarantor, provided the business meets the eligibility criteria set out in FCA DISP 2.7.3R (read 30 September 2026). That test looks at the size of the business. A limited company that borrows outside consumer-credit rules at any amount can still bring a complaint if it falls within those criteria.
Why this matters if you've given a guarantee
A director who has signed a personal guarantee is a separate case from the business itself, and DISP 2.7.3R covers guarantors directly. If a lender pursues a guarantee in a way that doesn't follow the process it's supposed to, that's grounds for a complaint in its own right, whatever the legal form of the business the guarantee was attached to. The personal guarantee is covered clause by clause on The Personal Guarantee, Clause by Clause, and bringing a complaint is covered with a worked example on Taking a Complaint to the Financial Ombudsman as a Small Business.
When a start-up loan goes to you
A start-up loan from a government-backed scheme is usually approved before the business has traded long enough to show the lender anything. There is no set of company accounts to look at and sometimes no company at all yet. So the lender looks at the person applying, checks their income and their credit history, and lends to them directly. The loan sits in the founder's name, even where the founder goes on to trade through a limited company.
Why this flips the usual protection
Elsewhere on this page, a limited company borrowing in its own name generally sits outside consumer-credit rules, whatever the amount. A young-business loan works the other way round, because the borrower named on the agreement is an individual. That means the full set of consumer-credit protections applies to the loan itself: the lender has to give you the pre-contract information a consumer lender gives, and you keep the right to settle early and the right to complain to the Financial Ombudsman Service if something goes wrong with how the loan was sold or administered.
Why the company doesn't shield you from it
A limited company exists to keep the founder's personal assets separate from the company's debts, because the company signed for those debts. A young-business loan doesn't work through the company at all. You signed for it, so you owe it, in exactly the way you'd owe a personal loan for anything else. Setting up a limited company afterwards doesn't move the debt across to it. If the business doesn't work out, the loan is still yours to repay, on the same terms it started on.
This is a different mechanism from a personal guarantee, where a company borrows and a director promises to step in only if the company can't pay. The guarantee, covered clause by clause on the personal guarantee page, is a promise attached to someone else's debt. A young-business loan has no company debt behind it to guarantee. You are the borrower from the start.
Say Priya takes a start-up loan to buy equipment for a mobile coffee business, before she's incorporated anything. Six months later she sets up a limited company to run the business through. The equipment loan stays exactly where it was, in Priya's name, regardless of what the company does next. This is illustrative, not a record of an actual loan.
Government-backed schemes for established, trading companies work differently, because the borrower there usually is the company. The Growth Guarantee Scheme is one example, and the finance instrument reference sets out what counts as a government-backed scheme more generally. Checking which kind of scheme you're looking at, before you sign, tells you whether it's the business borrowing or you.
Buying the building you trade from
Not every loan a business takes out is about running the business day to day. Buying the premises you trade from is a different kind of borrowing: the property itself stands as security, and the lending behaves more like a mortgage than like working capital or equipment finance.
SMBMortgages.co.uk covers that ground in commercial property finance. If that is the borrowing in front of you, start there. The questions on this page about legal form and personal guarantees still apply once a lender is involved, but the shape of the loan itself follows its own rules, separate from the instruments covered here.