Do you need a business loan broker?

Often not. A limited company with clean accounts borrowing a plain amount can go direct to its own bank, and Start Up Loans are applied for direct. A business loan broker earns its fee when your bank has said no, when the deal needs a specialist lender, or when you want several lenders to compete without applying to each one. Whatever you pay, price it: on a £50,000 loan every 1% of fee is £500.

Rules from the FCA Handbook and UK legislation, checked 1 November 2026. This is general information, not legal advice.

How MerchantSwitch fits in

We should say this first, because you are reading it on our site. MerchantSwitch is an introducer, not a lender or a financial adviser, and we are not authorised or regulated by the FCA. Funding enquiries are passed to our specialist commercial finance broker partner, which works with a panel of more than 200 UK lenders. MerchantSwitch is free for businesses and we may receive a commission. When the partner contacts you, ask for its FCA registration and whether it charges you a fee, in writing, before you share any payment details.

When to go direct and when a broker helps

Go directA broker is worth it
Your bank already knows you and your accounts are cleanYour bank has declined you, or offered less than you need
A Start Up Loan (£500 to £25,000 at 7.5%), which you apply for directSpecialist deals: vehicles, buying a business, bridging, invoice finance
A small, simple loan where one application is enoughYou want several lenders quoting and do not have time to apply to each

Are business loan brokers regulated by the FCA?

It depends on the borrower, not the broker. The consumer credit rules cover agreements with an individual or a "relevant recipient of credit", which the law defines as a partnership of two or three people not all of whom are companies, or an unincorporated body. A limited company is neither.

You areBorrowingIs the loan regulated?Does broking it need FCA permission?
A limited company or LLPAny amountNoNo
A sole trader, a 2 or 3 person partnership, or a club or association£25,000 or lessYesYes
The sameOver £25,000, mainly for the businessExempt from most consumer credit rulesYes, it still counts as credit broking

The practical upshot: a limited company borrowing through a broker has very little regulatory protection, because the loan sits outside the regime. That makes the checks below more important for companies, not less. You can look up any firm, and the activities it is permitted to carry on, on the FCA Financial Services Register.

The FCA rules that protect you

An FCA-authorised broker that asks a sole trader for a card number on the first call, before any written notice of its charge, is breaking the first rule. Whoever you are, treat that as a reason to walk away.

What a broker fee really costs

Not published: neither the FCA nor the legislation sets or reports a typical broker fee, so here is the arithmetic per 1%. Take a £50,000 loan over 3 years at Santander's published representative APR for that size, 11.2%: £1,628.97 a month. If you pay a broker fee out of the money you borrow, you keep less cash for the same repayments, which pushes up the true cost:

FeeIn poundsPer year of the loanEffective APR (from 11.2%)
1%£500£16712.0%
2%£1,000£33312.8%
3%£1,500£50013.6%

A 1% fee is £50,000 × 1% = £500, or £167 for each of the 3 years. The broker has to beat your bank's offer by at least that much for the fee to pay for itself. If it cannot show you that in writing, go direct.

Four questions to ask any business loan broker

  1. What is your FCA firm reference number, and are you authorised for credit broking?
  2. Do I pay you a fee, how much, when, and what happens if no loan completes?
  3. What commission will the lender pay you, and does it vary by lender?
  4. How many lenders did you place business loans with in the last year?

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Frequently asked questions

Do I need a broker for a business loan?

Not for a straightforward loan from your own bank, or for a Start Up Loan, which you apply for direct. A broker is worth it when your bank has declined you, when the deal needs a specialist lender (asset finance, an acquisition, bridging), or when you want several lenders quoting without making each application yourself.

Are business loan brokers regulated by the FCA?

It depends on who is borrowing. Loans to limited companies and LLPs are not regulated credit agreements, so broking them needs no FCA permission. Introducing a sole trader, a partnership of two or three people, or an unincorporated body to a lender is credit broking, and that includes business loans over £25,000 that are exempt from most consumer credit rules. Check any broker on the FCA Register before you share documents.

How much does a business loan broker charge?

No regulator publishes a typical fee, and brokers can be paid commission by the lender instead of, or as well as, a fee from you. Whatever the fee is, work out what it costs: on a £50,000 loan every 1% is £500. An FCA-authorised broker must tell you its fee, and must not take payment details until it has sent you a written notice of the charge and you have confirmed it.

Can I get a broker fee back if I do not get the loan?

If you are an individual (for example a sole trader) and no loan follows within 6 months of the introduction, everything above £5 of a broker's fee stops being payable or can be recovered under section 155 of the Consumer Credit Act. On a £1,000 fee that is £995. Limited companies do not have this right, so agree refund terms in writing.

Does a broker have to tell me about commission?

Under FCA rules, a credit broker must prominently disclose any commission from the lender that could affect its impartiality or your decision, in good time before you sign, and can only call itself independent if it offers a representative range of lenders without being tied by its lender agreements. Ask how many lenders it actually placed deals with last year.

Related answers

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Sources

Every figure on this page comes from the provider's own website or terms, or a named primary source, read on 1 November 2026. Where a provider does not publish a term we say "Not published" rather than fill the gap from a comparison site.