What counts as a “wholly or predominantly business” purpose

When your company borrows from us, you confirm that the loan is for a “wholly or predominantly business” purpose. It is a short phrase that carries real weight: it is part of what keeps the lending outside the consumer-credit regime, and it defines what the money can and cannot be used for. This article explains the test, gives examples, and describes the declaration you sign.

What the test means

“Wholly or predominantly business” means the borrowing must be entirely, or mostly, for the purposes of your business — not for personal or household spending. “Wholly” is straightforward: the whole loan is for the business. “Predominantly” recognises that life is not always tidy: if the main purpose is genuinely business, an incidental personal element does not automatically take it out of scope. But the centre of gravity must clearly be the business.

This is not a box-ticking formality. The business-purpose test, together with the borrower being a company, is what places the lending outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001. We explain that framework in regulated vs unregulated business loans. The test exists precisely because consumer protections are for personal borrowing, and this is not personal borrowing.

Examples of a business purpose

Borrowing that would normally count as wholly or predominantly business includes:

• buying stock or raw materials for the business to sell or use;
• covering a short cash-flow gap before customer invoices are paid;
• paying suppliers, business rent, or business bills;
• repairing or replacing equipment, tools or vehicles the business uses;
• funding a specific, time-limited business opportunity.

The common thread is that the money serves the trading needs of the company.

Examples that would not qualify

Borrowing that is really for personal or household use does not fit, even if a company technically takes it out. That would include funding a director’s personal spending, a family holiday, personal debts unrelated to the business, or household costs. If the true purpose is personal, dressing it up as a company loan does not change its nature — and we would not lend for it.

The borrower also has to be the right kind of entity. Our lending is to a company or LLP — a body corporate — borrowing for its own business. The purpose test and the borrower test work together.

The declaration you sign

Because the purpose is so central, we ask you to confirm it explicitly. As part of taking out the loan, you sign a business-purpose declaration — a statement that the borrowing is wholly or predominantly for the purposes of your business. You can read about it in business purpose declaration.

This is a meaningful statement, not a rubber stamp. By signing, you are confirming the loan is for the business, which is one of the foundations on which the agreement rests. You should only sign if it is true. If you are unsure whether your intended use counts, the honest course is to ask before you sign, or to choose a product designed for personal borrowing instead — but note that we lend only to businesses.

Why this protects you too

It can feel like extra paperwork, but the purpose test is not only about us. It keeps the product honest: it ensures our short-term business facility is used for business cash flow, the thing it is built for, rather than for personal spending where a different kind of product — and different protections — would be more appropriate. If your need is genuinely a business need, you are in the right place. If it is personal, a business loan is the wrong tool, regardless of who signs the form.

To see what we currently offer, and to check the amounts, terms and costs, visit our business loans page.