Exempt agreement

Definition

An exempt agreement is credit that the Consumer Credit Act 1974 and the FCA’s CONC rules do not regulate. Lending to a limited company, and most business lending above certain thresholds, is exempt. That means the representative APR and cancellation protections designed for consumers do not automatically apply.

In plain terms

It is why a business loan can be quoted without a consumer-style APR. The protections are different — you rely on the contract and commercial-law rights instead.

Why it matters for your company

Because business lending is exempt, always ask for the total amount payable and an APR so you can still compare fairly. See how representative APR is set.

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In practice

Picture a UK limited company arranging short-term working-capital finance. Because the borrowing sits with the company rather than a named individual, the agreement is treated as exempt from the Consumer Credit Act, so the lender does not need to present a consumer-style representative APR or build in the standard consumer cancellation window. The director signs on behalf of the company, and the commercial contract itself becomes the main reference point for how repayment, charges and default are handled.

In practical terms, this shifts where the director's attention needs to go. Rather than relying on statutory consumer protections to catch an unfavourable term, the director is expected to read the facility agreement closely before signing — checking how the total amount payable is calculated, what happens on early repayment, and what triggers default. The exemption does not mean fewer obligations disappear; it means they are set out in the contract rather than imposed by consumer-credit statute.

Common pitfalls

A common misreading is assuming that 'exempt' means unregulated or informal. It simply means a different rulebook applies — company law, contract law and general commercial-lending conduct standards, rather than the CCA's consumer machinery. Some directors also wrongly assume exemption means no cost comparison is possible; in fact, nothing stops a company asking a lender for a comparable measure such as an APR figure even where none is legally mandated, precisely to make like-for-like comparisons easier.

Another pitfall is conflating the company's exempt status with the director's personal position. The exemption applies to the agreement between lender and company; it says nothing about whether a director has given a personal guarantee elsewhere. Directors should treat these as two separate questions and check the facility documents for each rather than assuming the exemption covers both.