A UK company rarely needs an FCA licence to lend to businesses

The licence everyone expects to need

A founder who runs a small investment firm from the UAE came to us not long ago with a plan he had clearly thought about carefully. He wanted a UK company to lend to software businesses, secured facilities in the mid-six-figures to companies with real revenue, no personal guarantee from the founders behind them. He had budgeted months of delay and a serious sum for the thing he assumed stood between him and the first loan: an FCA lending licence.

He needed neither the months nor most of the money, because for what he actually wanted to do, the licence does not exist in the form he imagined. That is the single most useful thing to know before you spend on it. The UK does not license "lending" as such. It regulates particular lending, to particular borrowers, done in particular ways, and a great deal of business lending sits outside the line entirely.

This is not a loophole and it is not a soft area, so it rewards getting right rather than guessing. This note sets out where the regulatory line actually falls, why lending to companies usually sits on the free side of it, the three places it still bites, and the one registration almost every business lender genuinely does need and now cannot afford to overlook.

What the FCA regulates, and what it leaves alone

The starting point is the general prohibition in section 19 of the Financial Services and Markets Act 2000: you may not carry on a regulated activity in the United Kingdom by way of business unless you are authorised or exempt. Doing so is a criminal offence under section 23, and the agreements can be unenforceable.

So the whole question is whether lending to businesses is a regulated activity. If it is not, the general prohibition simply does not reach it.

The regulated activity here is "entering into a regulated credit agreement as lender", set out in article 60B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. The weight falls entirely on the word regulated. Not every loan is a regulated credit agreement. The Order defines one narrowly, and the definition is about who borrows, not about the fact that money is lent at interest.

That is the pivot the founder had missed, and most people miss it the same way. They hear "lending" and assume a licence, when the law asks first who the borrower is.

Why lending to companies falls outside it

A regulated credit agreement, under article 60B and the definitions in article 60L of the Order, is an agreement where the borrower is an "individual or relevant recipient of credit". That phrase is a term of art. It covers a natural person, a sole trader, a small partnership of two or three partners, and an unincorporated association. It does not cover a body corporate.

The consequence is clean and the FCA states it plainly: lending to limited companies, limited liability partnerships and partnerships of more than three persons is outside its remit. A company that lends only to corporate borrowers is therefore not carrying on a regulated activity at all, and needs no FCA authorisation to do it. The borrowers in the founder's plan were funded software companies, bodies corporate every one, so his core activity sat outside the perimeter from the start.

The amount reinforces the point where the borrower is an individual rather than a company. A credit agreement for more than £25,000, entered into wholly or predominantly for the purposes of the borrower's business, is an exempt agreement, even if the borrower is a sole trader or a small partnership. The exemption depends on a business-purpose declaration in the form set out in the FCA's rules at CONC App 1.4, by which the borrower acknowledges they are giving up the protections a consumer would have. Get the declaration right and a large loan to an unincorporated business is outside the regime too.

The three places it still bites

Outside the perimeter is not the same as unregulated in every direction, and a lender that assumes a blanket exemption walks into the exceptions. Three of them matter.

The first is the small or unincorporated borrower. Lend below £25,000 to a sole trader or a two-person partnership, or to any individual for a non-business purpose, and you are making a regulated consumer credit agreement. That needs full FCA authorisation and brings the Consumer Credit Act 1974 and the FCA's CONC rules with it. A business lender that occasionally helps an early, unincorporated client with a modest facility can slide across the line without noticing.

The second is security and guarantees. The founder's instinct to take no personal guarantee was, as it happens, a tidy one. A loan to a company is a corporate matter, but the moment you take a guarantee from an individual secured on their home, or lend to an individual against their dwelling, you reach into territory where a loan secured on an individual's land can be a regulated mortgage contract. Keeping facilities corporate, and security off directors' homes, keeps the structure on the simple side of that line.

The third is marketing. Promoting the loans is a separate regime from making them. A financial promotion is restricted under section 21 of the Financial Services and Markets Act 2000 whether or not the lending itself is regulated. Promotions aimed only at businesses and investment professionals have exemptions a consumer-facing campaign does not, so how the lender advertises, and to whom, is its own question to answer rather than an afterthought bolted onto a website.

The registration you do need, and the one the FCA is now watching

Here is the part the founder had not heard of at all, and it is the part that now matters most. A firm whose business is lending, but which is not FCA-authorised because its lending is unregulated, is not therefore outside the FCA. It is an "Annex 1 financial institution", and it must register with the FCA for anti-money-laundering supervision under the Money Laundering Regulations 2017.

Registration is not authorisation and it does not regulate how the firm lends. It makes the firm supervised for financial crime: it must have a money-laundering officer, run customer due diligence on its borrowers, keep records, and submit to FCA oversight of all of that. For a lender moving six-figure sums to companies it has to understand, this is not box-ticking; it is the substance of knowing who you are funding and where their money comes from.

The timing matters. The FCA has turned a hard light on exactly these firms. It wrote to the chief executives of Annex 1 businesses in 2024 about weak anti-money-laundering controls, followed up with around 300 firms in late 2025, and has continued through 2026 to warn publicly that unregulated lenders and the firms dealing with them are a financial-crime risk it is actively policing.

A new lending company that registers late, or treats the registration as a formality, is registering into a supervisor that is paying close attention. This is the governance a corridor lender has to build in from the first loan, not after the first review.

The company underneath the question

None of the above changes what the lending vehicle actually is. A UK lending company is a UK company first. It is incorporated at Companies House, it is UK tax resident because it is incorporated here, and it carries the ordinary obligations: Corporation Tax registration, annual accounts and a confirmation statement, and identity verification for its directors and people with significant control.

The ownership from the UAE adds steps rather than tax, exactly as it does for any inbound structure, a point set out in the note on a UK subsidiary of a UAE business and, on the formation and banking side, in the note on forming a UK company as a non-resident.

Two practical points follow for a lender specifically. The bank account is harder and slower than for an ordinary trading company, because a business built on moving money is a higher-risk proposition to the bank that must open the account, as the note on opening a UK business bank account as a non-resident describes. And where the parent funds the UK lender, how that funding is priced and documented is a related-party question in its own right, because interest and charges between the UAE parent and the UK company have to be commercial and are tested on both sides.

So the regulated-perimeter analysis decides what the company may lawfully do. It does not replace the ordinary work of forming and running the company that does it.

Regulated, exempt, or outside

The distinctions are easier to hold side by side than in prose.

Read down the right-hand column and the shape is clear. The large corporate lending a private-credit founder actually wants to do needs no licence, but it never needs nothing: the anti-money-laundering registration is the constant.

The founder's answer

To close the loop on where this started. The founder's plan, lending in the mid-six-figures to funded software companies, secured, with no personal guarantee, was outside FCA conduct regulation on every count. The borrowers were companies, the facilities were well over £25,000, and nothing touched an individual's home. He did not need the lending licence he had budgeted for, and the months he had set aside for authorisation were months he did not have to spend.

What he did need was the Annex 1 registration, a real money-laundering function around it, the ordinary company compliance underneath, and a bank willing to hold the account. The relief at not needing a licence was genuine. The work that remained was not nothing, and the sooner it was built the better, because the one supervisor he could not avoid was the one now watching his kind of firm most closely. That reordering, from the licence he feared to the registration he had not heard of, is the whole value of asking the question before building rather than after.

Frequently asked questions

Do I need FCA authorisation to set up a UK company that lends to businesses?

Usually not. Entering into a regulated credit agreement as lender is a regulated activity under article 60B of the Regulated Activities Order 2001, but a regulated credit agreement requires the borrower to be an individual or a small partnership. Lending to limited companies, LLPs and partnerships of more than three persons is outside the FCA's remit, so a company lending only to corporate borrowers generally needs no authorisation under section 19 of the Financial Services and Markets Act 2000. You will, however, almost certainly need to register with the FCA for anti-money-laundering supervision as an Annex 1 firm, which is a separate requirement from authorisation.

Is lending over £25,000 to a business always unregulated?

Where the borrower is a company, LLP or partnership of more than three, the amount is irrelevant: it is outside the regime regardless. Where the borrower is an individual, sole trader or small partnership, a loan over £25,000 made wholly or predominantly for the purposes of their business is an exempt agreement, provided the business-purpose declaration in the FCA's CONC App 1.4 form is in place. Below £25,000, or where the purpose is not business, lending to an individual or small partnership is regulated consumer credit and does require FCA authorisation. The threshold and the declaration only matter for individual and small-partnership borrowers.

What is an Annex 1 firm and do I have to register?

An Annex 1 financial institution is a firm that carries on activities such as lending, financial leasing or safe custody that fall within the Money Laundering Regulations 2017 but do not require full FCA authorisation under the Financial Services and Markets Act 2000. An unregulated business lender is the classic example. It must register with the FCA for anti-money-laundering supervision, appoint a money-laundering officer, carry out customer due diligence, keep records and submit to FCA oversight of its financial-crime controls. Registration is mandatory where the firm's business includes lending, and the FCA has been scrutinising these firms closely since 2024.

If my lending is not regulated, why is the FCA involved at all?

Because conduct authorisation and anti-money-laundering supervision are two different things. The FCA does not regulate how you lend to businesses, but it does supervise whether you have proper controls against money laundering and terrorist financing, through the Annex 1 registration under the Money Laundering Regulations 2017. The FCA wrote to the chief executives of Annex 1 lenders in 2024 about weak controls, followed up with around 300 firms in late 2025, and has continued to warn through 2026 that unregulated lenders are a financial-crime risk. Being outside conduct regulation does not put a lender outside the FCA.

Can a UAE company own the UK lending company?

Yes. A UK company can be wholly owned by a UAE company or a non-resident individual, and ownership from abroad does not change the regulatory analysis, which turns on who the UK company lends to, not on who owns it. The ownership adds the ordinary inbound steps: Companies House identity verification for directors and people with significant control, Corporation Tax registration, and a slower bank account. How the UAE parent funds the UK lender also needs to be priced and documented as a related-party arrangement, because interest and charges between them must be commercial and are examined on both sides of the corridor.

Does taking security or a personal guarantee change things?

It can. Lending to a company is a corporate matter, but taking a guarantee from an individual secured on their home, or lending to an individual against their dwelling, reaches into the regulated mortgage regime, where a loan secured on an individual's land can be a regulated mortgage contract requiring authorisation. This is one reason business lenders keep facilities corporate and avoid security over directors' homes. A guarantee from another company, or security over corporate assets, does not raise the same issue. Where personal security is unavoidable, the structure needs checking before the facility is documented, not after.

Do I need to worry about how I advertise the loans?

Yes, and it is a separate question from whether the lending is regulated. A financial promotion is restricted under section 21 of the Financial Services and Markets Act 2000 regardless of the lending's status, so a communication inviting businesses to borrow is caught by the promotion regime even where the loans themselves are unregulated. Promotions directed only at businesses and investment professionals have exemptions that a consumer-facing promotion does not. How and to whom a lender markets therefore needs its own analysis, because an unregulated loan can still be promoted unlawfully.

Is this different from running the lending company day to day?

The regulatory perimeter decides what the company may lawfully do; it does not replace the ordinary job of running a UK company. The lender still files accounts and a confirmation statement, registers for and pays Corporation Tax, verifies its directors' identities, and keeps proper records, exactly like any other UK company. On top of that sit the Annex 1 anti-money-laundering obligations and, if any lending crosses into the regulated categories, the relevant FCA permissions. The lending question and the company-administration question are answered separately, and both have to be answered.

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Critical advisory. The most useful thing a prospective business lender can learn is that the licence they fear is usually not the obligation they have. Lending to companies sits outside FCA conduct regulation, business lending over £25,000 to a sole trader can be structured outside it, and the real, unavoidable requirement is the quieter one: registration with the FCA as an Annex 1 firm for anti-money-laundering supervision, built properly and early, into a regime the regulator is now watching with unusual attention. I have had this conversation often enough this year to know the relief is real and the remaining work is routinely underestimated.

We look at the regulatory perimeter and the ordinary company and tax position together, across the UAE and the UK, because a lending company that is clean on one and loose on the other is not clean at all.

This note is general information and not regulatory or legal advice on your own plans, so take advice on the specifics before you lend.