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The same £15,000, borrowed for the same van, is a legally different loan depending on whether a sole trader or a limited company borrows it. Directors who have traded both ways are often surprised how deep the differences run — who owes the money, whose credit file it touches, which regulator watches it, and what happens if it goes wrong. Here is the comparison, difference by difference. (For who we can lend to, see limited company, LLP or sole trader eligibility — this article is about how the borrowing itself differs.)
Who owes the money
A sole trader is the business, so a "business loan" to a sole trader is legally a loan to the individual. The debt is theirs personally, alongside their mortgage and their credit cards, and every personal asset stands behind it by default — no personal guarantee needed, because the whole loan is already personal. A limited company is a separate legal person: the company owes the debt, and the individual behind it does not, unless they separately sign a guarantee. That single distinction drives everything below.
Whose credit file it touches
A sole trader's borrowing is reported against the individual: it appears on their personal consumer credit file, affects their personal score, and is visible next time they apply for a mortgage. A company's borrowing sits on the company's file at business credit reference agencies such as Experian Business, Creditsafe and Equifax Business. With our lending, the director is identity-checked but never personally credit-searched, and the loan never appears on their consumer file — see do you credit-check the director personally.
How it is regulated
Lending to sole traders generally falls within the FCA consumer-credit regime (sole traders count as "relevant recipients of credit" for most agreements), bringing CONC conduct rules and, for smaller agreements, Financial Ombudsman Service access. Lending to a limited company or LLP for business purposes sits outside that regime under Article 60B FSMA RAO 2001: no FOS, no FSCS. That is not a loophole — it is Parliament drawing the consumer-protection line around individuals rather than bodies corporate. The practical consequence is that a company must do its own diligence on any loan, because the regulatory safety net is not there. Our guide to regulated vs unregulated business loans goes deeper.
How affordability is assessed
Lenders assess a sole trader's application on the person: their income from all sources, their household outgoings, their personal credit history. A company is assessed on the entity: its turnover, its business bank-account behaviour, its own credit file. This is why a director with a rocky personal history can still borrow through a well-run company, and why a spotless personal record does nothing for a company with weak trading.
What happens on default
For a sole trader, default is personal: county court claims against the individual, enforcement against personal assets, and ultimately bankruptcy. For a company, default is corporate: the creditor pursues the company, the company's credit standing is damaged, and the worst case is the company's insolvency rather than the owner's — provided no personal guarantee was given and the director met their legal duties. The limited-liability shield holds only when the borrowing genuinely sits with the company, which is exactly how we structure ours: see lending to the company, not the director.
The takeaway
Sole-trader borrowing is personal borrowing with a business purpose; company borrowing is a separate person's debt. Neither is automatically better — regulated consumer protections are worth something, and so is keeping business risk off your family's balance sheet. But know which one you are signing before you sign it. What we offer to limited companies and LLPs, with current amounts, terms and costs, is on our business loans page.