Business Loan Agreement Template (UK)

Work out whether this is a regulated agreement

Under section 189 of the Consumer Credit Act 1974, "individual" includes a sole trader and a partnership of two or three people not all of whom are bodies corporate — but not a larger partnership or a limited company. A loan to a borrower in one of those individual categories may be a regulated consumer credit agreement requiring FCA authorisation and specific-form compliance from the lender; a loan to a limited company or larger partnership generally sits outside that regime as an unregulated commercial loan. This template makes that distinction an explicit field rather than assuming one or the other.

There's no general interest-rate cap on UK commercial lending

Unlike US state usury laws, which cap the maximum lawful interest rate on many loans, the UK has no general statutory interest-rate cap on commercial lending to a business. The FCA does impose a price cap, but it applies specifically to high-cost short-term consumer credit, not ordinary business lending. That doesn't mean the rate is unchallengeable — an unfair-relationship claim under sections 140A-140C of the Consumer Credit Act can still apply to a regulated agreement — but the specific US-style usury-cap framing doesn't carry over.

Make the guarantor clause actually work

A clause headed "Guarantors" that states no one but the borrower is responsible isn't a guarantor election — it's confusing drafting. This template makes it a genuine toggle: off, the loan carries no guarantor and the clause says so; on, it names the guarantor and states their liability. A UK guarantee given by an individual for a regulated agreement may also need to satisfy its own form requirements, which this template flags rather than assumes away.

Use the actual UK mechanism for securing the loan

Where a company grants security over its assets, the charge generally needs to be registered at Companies House within 21 days of creation under section 859A of the Companies Act 2006 — not a UCC-1 filing, which is a US mechanism with no UK equivalent. Missing that 21-day window can make the security void against a liquidator, administrator, or the company's other creditors, which is a real consequence worth stating plainly rather than leaving to a generic 'perfect the security interest' phrase.

Name a real UK arbitration framework

"The parties may submit to arbitration chosen by both parties" names no seat, no administering body, and no rules — in the UK, that's an arbitration clause that won't do its job if a dispute actually happens. Arbitration seated in England, Wales, or Northern Ireland runs under the Arbitration Act 1996, recently updated by the Arbitration Act 2025. One of that update's most significant changes: unless the parties expressly agree otherwise, the arbitration agreement is now governed by the law of the seat, reversing the earlier position where the main contract's governing law often carried across by default. This template names a specific seat and an administering body — the London Court of International Arbitration (LCIA) or the Chartered Institute of Arbitrators (CIArb) are the two most established options — rather than leaving the process undefined.

Clause-by-clause guide

Borrower status

States whether the borrower is an individual/sole trader/small partnership or a company/large partnership, which determines whether CCA protections apply.

Promise to pay

States the principal amount, currency and interest rate.

Security / charge

States whether the loan is secured, and if so, flags the Companies House registration duty.

Guarantor

An optional clause naming a guarantor and their liability, or stating plainly that none exists.

Default

Defines default and states the default interest rate.

Dispute resolution

Names a specific arbitration administrator and seat under the Arbitration Act 1996/2025.

UK compliance checklist

This covers general commercial-lending points; a regulated consumer credit agreement carries further FCA requirements.

• Check whether FCA authorisation is needed

  A lender entering into regulated consumer credit agreements as creditor generally needs FCA authorisation; this typically applies where the borrower is an individual, sole trader, or small partnership.

• Register any company charge within 21 days

  A charge created by a company must generally be registered at Companies House within 21 days of creation, or the security can become void against a liquidator, administrator, or other creditors.

  Companies Act 2006, section 859A

• Name a specific seat and administering body for arbitration

  Arbitration seated in England, Wales or Northern Ireland runs under the Arbitration Act 1996 as amended by the Arbitration Act 2025; naming a seat and administrator avoids an unenforceable, undefined arbitration promise.

• Consider the unfair-relationship test for regulated agreements

  For a regulated consumer credit agreement, a court can find the relationship between creditor and debtor unfair under sections 140A-140C of the Consumer Credit Act 1974, even where the loan itself was validly made.

How to complete the agreement

1. Confirm the borrower's status. Establish whether the borrower is an individual/sole trader/small partnership or a company/large partnership.
2. Enter the loan terms. Add the principal amount, currency, interest rate and payment schedule.
3. Decide on security. State whether the loan is secured and register any company charge within 21 days.
4. Decide on a guarantor. Name a guarantor if one exists, or leave the clause off.
5. Name the arbitration administrator and seat. Choose LCIA, CIArb, or another specific administrator and a seat.

Frequently asked questions

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