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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 10253
Experience:  I have been practising for 30 years.
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I want to know if I am legally allowed to lend money peer to

Customer Question

I want to know if I am legally allowed to lend money peer to peer to a friend of mine's friend?
Submitted: 9 months ago.
Category: Law
Customer: replied 9 months ago.
In addition at what stage with lending do I need to consider being regulated by the FCA? I have no intention of lending money as a business only to help some of my friends and close relations in business or personal issues.
Expert:  F E Smith replied 9 months ago.

Thank you for your question - what exactly are you lending the money for please?

Customer: replied 9 months ago.
I would be lending money to help start-up a small self-employed business.
Expert:  F E Smith replied 9 months ago.

Money lent on a non-commercial basis is not regulated by the FCA.

There is no one thing which makes a loan regulated as opposed to not being regulated.

If I lend my friend £100, it’s not regulated. If I lend several friends £100 and, I charge them a commercial rate of interest and I agree that they will repay me a fixed amount over a fixed period of time and it is done as an investment in order to make money rather than to simply help someone out then that would be regulated.

If it’s a case of lending someone some money and there being (even a formal agreement to pay you back at some stage in the future or if the business takes off, then that is not going to be regulated. So it depends on the terms under which you are lending the money regardless of the purpose.

Can I clarify anything for you?

Please take a moment to look at the top right hand corner of the page and rate my service by clicking one of the stars at the top of the screen. Then press Submit. Thank you. If you still need any point clarifying, I will still reply because the thread does not close.

Best wishes.


Customer: replied 9 months ago.
Thank you for the quick response.So if I understand your two examples correctly.It is not the fact that I might charge some interest to protect my capital it is whether or not not intention is to make money as a rerun in a commercial sense that dictates whether the lending should be regulated?However in your second example it would seem that if the loan is more open ended and based not on the return of a fixed some over a fixed period but rather based on the success of the business (in other words more an investment in another business) then this would not be considered as regulated lending.
Customer: replied 9 months ago.
That should say return not rerun
Expert:  F E Smith replied 9 months ago.

Your understanding is correct on both counts