A business deal that was a regulated agreement, and why that was the right answer

• £11,800IT equipment funded
• RegulatedAgreement status
• PartnershipBusiness type

Customer situation

An estate agency trading as a partnership, replacing the laptops and mobile phones its agents work from, equipment used entirely for the running of the business.

Asset required

New laptops and mobile handsets, around £11,800 in total.

The challenge

The challenge here was not finding a lender. It was getting the regulatory status right, and it is the part of a deal most people never see.

There is a widespread assumption that business finance is never regulated. That consumer credit rules are for consumers, and a business buying equipment sits outside them. That assumption is wrong often enough to matter, and getting it wrong is not a paperwork problem. An agreement documented as unregulated when it should have been regulated is an agreement the customer did not get their statutory protections on.

Why this one was regulated

Whether the Consumer Credit Act applies turns on who is borrowing, not on what the money is for:

• A limited company is not an individual, so its agreements fall outside the Consumer Credit Act entirely.
• A sole trader, or a partnership of three or fewer partners, is treated as an individual, so the agreement is regulated by default.
• There is an exemption for borrowing wholly for business purposes, but it only applies above £25,000.

This client was a partnership, and the equipment cost around £11,800. Business purpose was never in doubt, but because the amount was below the £25,000 threshold, the business-purpose exemption did not apply. The agreement was regulated, and was arranged and documented on that basis.

The CW solution

We identified the status at the outset rather than at signing, and placed the deal with a lender authorised to write regulated agreements for this profile, not every asset finance lender is, and a lender that only writes unregulated business agreements would have had to decline it late, after the client had been waiting.

Key outcome

The equipment was funded and the partnership got the agreement it was legally entitled to: pre-contract credit information, a statutory right to withdraw, the right to settle early with a rebate of charges, and access to the Financial Ombudsman Service if anything ever went wrong. None of that is a concession. It is what the law provides when the borrower is an individual or a small partnership, and the only way to lose it is to have the deal written up incorrectly.

People hear “regulated” and assume it means consumer, or that something has gone sideways. On a partnership under £25,000 it simply means the deal has been read correctly. The one to worry about is the business agreement that should have been regulated and was not.