Business loans for sole traders: the £25,000 line nobody explains

Search for a sole trader business loan and the results tell you that you can get one, which was never really in doubt. The question worth answering is what changes when the borrower is a person rather than a company, and the answer is not the rate. It is how much of the Consumer Credit Act applies to the agreement you sign, and that turns on a single number. CapExpand is a broker working across 200+ UK lenders; the lender makes every credit decision.

The £25,000 line

Under the Consumer Credit Act 1974, a sole trader is an “individual”. That matters because the Act protects individuals, not companies. Borrow £25,000 or less for the business and you have a regulated consumer credit agreement, with the pre-contract disclosure, the cancellation right, the arrears and default notice rules and the route to the Financial Ombudsman Service that go with one.

Borrow more than £25,000 wholly or predominantly for business purposes and section 16B of the Act exempts the agreement. In practice the paperwork will carry a declaration to that effect, because a declaration creates a presumption that the borrowing was for the business. So the same person, at the same lender, in the same week, can sign a protected agreement at £20,000 and an unprotected one at £30,000.

A limited company sits outside all of this permanently. A company is not an individual under the Act, so no amount of company borrowing is regulated consumer credit. That is the real trade in borrowing through a limited company: more doors, less protection.

Six lenders that start at £25,001

The clearest evidence that the line is real sits in our own panel data. Of the 54 unsecured lenders publishing a minimum advance, 6 start at exactly £25,001, one pound above the threshold: Allica Bank, Finance for Enterprise, Finance Yorkshire, HSBC, Investec and NatWest (panel profiles, September 2026). A further 11 set their minimum higher again.

A minimum priced above the line is an ordinary commercial decision rather than anything to hold against a lender. Writing regulated consumer credit carries its own permissions, disclosure and arrears handling, and a lender whose book starts at £50,000 has no reason to build for it. What the pattern tells a sole trader is more useful than any of that: the smallest facilities, the ones under the line, come from a different and shorter part of the market than the larger ones.

What the protection is actually worth

Two things, mostly. The first is that the agreement has to tell you what it costs in a prescribed way before you sign, which makes a regulated sole trader loan easier to compare than an exempt one. The second is that if it goes wrong, the Financial Ombudsman Service can look at the complaint. Above the line, your remedy is the contract and, if it comes to it, the courts.

This is not a reason to keep borrowing under £25,000. Splitting a genuine £40,000 need into two smaller facilities usually costs more and reads badly to the next lender. It is a reason to know which side of the line you are on before you sign, and to read the default clauses with more care when you are above it.

Where partnerships sit

Section 189 of the Act counts a partnership of two or three people as an individual, as long as they are not all companies. Add a fourth partner and the partnership is treated like a body corporate: outside the Act, no consumer credit protection, at any amount.

It catches people out because nothing about the business changes on the day the fourth partner joins. The trading is the same, the lenders are the same, and the regulatory position of every future agreement has quietly flipped.

The products that do not mind

Where a lender is underwriting something other than your accounts, incorporation counts for less. Asset finance is secured on the van or the machine, so the asset carries much of the decision. Invoice finance is underwritten on the businesses that owe you money rather than on you. A merchant cash advance reads your card takings. Our panel carries 38 asset finance lenders and 20 invoice finance lenders alongside the 55 unsecured ones.

Those counts describe the whole panel in each category rather than a filtered list of lenders that take unincorporated borrowers, which is not something we publish a number for. Trading structure is one of the first things we check against a lender's criteria on a live case, and it is a question worth asking early rather than at submission.

The one thing we cannot place

For property-secured lending we work with UK limited companies and LLPs only, for business and commercial purposes. That covers bridging, commercial mortgages, buy-to-let and development finance. It is a scope decision on our side, not a statement about the market: property lenders do write unincorporated business. If that is what you need, a broker whose permissions cover it is the right call, and saying so here is cheaper for you than finding out three weeks in.

Everything else on this page is open to a sole trader or a partnership, including the unsecured lending covered by the roster below.

What the panel asks either way

The criteria that shorten a lender list are largely blind to how you are set up. At September 2026, 39 of the 55 unsecured lenders on our panel have a product where the borrower does not own a home, 21 will look at under a year of trading, and 24 accept defaults or judgments that are settled or more than 24 months old. Invoice finance is the most forgiving on trading time at 14 lenders for a start-up ledger.

On amounts, 36 lenders on our panel have an unsecured product covering £25,000, with a median published floor of 19.2%, checked September 2026. Those are spans across panel products on a date, not offers, and £25,000 is worth quoting here only because it is where the regulatory line falls.

What a lender will ask for

Business bank statements for three to six months or an Open Banking connection, your SA302 tax calculation and tax year overview for the last year or two, identity and address evidence, and what the money is for. There are no filed accounts to send and no company number to quote, which removes a step rather than adding one.

The part that slows a sole trader case most often is a single bank account carrying both household and business spending, because the lender cannot separate the trading from the living. Enquiring does not affect your credit score.

Sources and method

Panel counts and amount bands are ours, dated above. The legal half of this page rests on the primary text of the Consumer Credit Act rather than on secondary summaries, because the £25,000 figure is widely quoted and frequently quoted wrongly.

1. Consumer Credit Act 1974, section 16B: exemption for business-purpose credit over £25,000
2. Consumer Credit Act 1974, section 189: the definition of “individual”
3. FCA, consumer credit and the regulated perimeter
4. GOV.UK, Self Assessment tax returns and the SA302
5. Financial Ombudsman Service, who it can consider a complaint from