Does the FCA Consumer Duty apply to businesses using invoice finance?
The FCA Consumer Duty, introduced in July 2023, applies to products and services provided to retail customers and does not directly govern invoice finance provided to limited companies. Where a provider offers products to sole traders that fall within the consumer credit definition, Consumer Duty obligations could apply to those products. Businesses operating as limited companies dealing with an invoice finance provider are engaged in a commercial relationship and are expected to assess the suitability of the product for themselves.
What this means for your business
The FCA Consumer Duty, which came into force in July 2023, sets higher standards of consumer protection for financial products and services aimed at retail customers. For most UK SMEs using invoice finance, particularly those operating as limited companies, the duty does not apply directly to their relationship with an invoice finance provider. This is because the arrangement is treated as a commercial transaction, and businesses are expected to take responsibility for evaluating whether the product suits their needs. However, sole traders should be aware that if their invoice finance facility falls within the consumer credit definition, the provider may have Consumer Duty obligations in relation to that product, which could affect how the product is presented, priced and supported.
Key points
- The FCA Consumer Duty applies to products and services provided to retail customers, not to commercial lending arrangements with limited companies.
- Invoice finance provided to limited companies is treated as a business-to-business relationship, meaning companies must assess product suitability themselves.
- Sole traders using invoice finance may receive Consumer Duty protections if their facility falls within the consumer credit regulatory perimeter.
- Limited companies do not benefit from the same regulatory protections as retail consumers, so due diligence before signing any facility agreement is essential.
- Businesses should review the terms of any invoice finance agreement carefully, as commercial clients have fewer automatic safeguards than retail customers under FCA rules.
Common pitfalls
A common mistake is assuming that because a product is sold by an FCA-authorised firm, full Consumer Duty protections automatically apply to a limited company. This is not the case. Directors of small limited companies sometimes overlook the fact that they are entering a commercial agreement with fewer built-in protections than an individual consumer would receive. Sole traders should check whether their facility is regulated under consumer credit rules, as this determines whether Consumer Duty obligations are relevant. Failing to read the facility agreement thoroughly, or not seeking independent advice, can leave businesses exposed to unfavourable terms they assumed were regulated away.
Related questions
Does being FCA-regulated mean an invoice finance provider must follow Consumer Duty rules for all clients?
Not necessarily. An FCA-authorised invoice finance provider must follow Consumer Duty rules only in relation to products offered to retail customers. Where the client is a limited company, the relationship is commercial and Consumer Duty obligations do not apply to that part of the business.
Are sole traders treated differently from limited companies under FCA rules for invoice finance?
Yes, they can be. If a sole trader takes out a facility that falls within the consumer credit definition, the provider may have regulatory obligations under Consumer Duty that do not apply when dealing with a limited company. Sole traders should check with their provider whether their specific facility is regulated under consumer credit rules.
What protections do limited companies have when entering an invoice finance agreement if Consumer Duty does not apply?
Limited companies rely on contract law and the terms negotiated in the facility agreement rather than consumer protection regulation. It is important for directors to review all terms carefully, seek legal or financial advice if needed, and ensure they understand charges, notice periods and recourse obligations before signing.
Director, Best Business Loans Ltd
Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.
Last reviewed: 25 June 2026