At Stop Loan Sharks, we’ve supported tens of thousands of people in escaping the grip of illegal lenders – but did you know that businesses can be targeted too?
Growth and cashflow are the lifeblood of any business, and borrowing is often essential for both. For small and medium-sized businesses in the UK, there are numerous borrowing options.
However, just as in personal finance, business owners can encounter barriers that make it difficult to access legitimate financial support and this is where illegal lenders, or loan sharks, can strike. These predatory lenders target vulnerable business owners with seemingly attractive and hassle-free loan offers.
They operate without regulation, often imposing very high interest rates and oppressive repayment terms. This can trap unsuspecting business owners in a cycle of debt that can put their livelihoods and businesses at risk.
Over the years, we have encountered small business owners who borrowed for business purposes, only to later discover their lender was operating illegally, and we can help.
If you’re a small business owner, here’s what you need to know:
Recognising the signs of illegal lenders
Illegal lenders prey on business owners who may be desperate for quick funding or unsure of where to turn. They often present themselves as friendly and approachable, offering loans with minimal paperwork and quick turnaround times.
However, once the borrower is ensnared, the lender exerts full control, dictating often unreasonable interest rates and conditions. Without authorisation, these lenders can use intimidation and coercion to extract payments, leaving borrowers prioritising their payments over other financial commitments.
Some warning signs include:
- High-pressure sales tactics, making borrowers feel rushed or obligated to take the loan
- No clear documentation or paperwork outlining loan terms
- Unclear or undisclosed interest rates and repayment conditions
- Possible requests for cash payments with no receipts or records
- Imposing longer-term repayment conditions than initially agreed
For business owners in this situation, the consequences of being in debt to an illegal lender can be severe. They may find themselves diverting critical funds to pay off a loan shark, leaving their business unable to meet payroll, purchase supplies, or invest in growth. The stress of dealing with illegal lenders can also take a toll on mental health, creating a climate of fear and uncertainty. However, help is available.
The role of the England Illegal Money Lending Team (IMLT)
The England Illegal Money Lending Team (IMLT) is a national organisation, hosted by Birmingham City Council. It was established over 20 years ago to investigate and prosecute illegal lenders while providing support to borrowers.
Every year, the IMLT, also known as Stop Loan Sharks, helps hundreds of people escape the grip of loan sharks and regain control of their financial futures.
While many people associate loan sharks with individual borrowers, the IMLT also supports businesses that have been targeted by illegal lenders.
Some of the thousands of borrowers it has supported in the past have been business owners who have borrowed for business purposes.
CASE STUDY:
Paul, a 42-year-old father from Devon, needed a loan to start his business. His wife’s friend said that she knew a man who had a money lending company who could lend him the money he needed for the start-up. He took out a loan of £20,000 as a business loan to start up a clothing business. His business unfortunately failed and only then did Paul realise that the lending company did not have a licence. It was agreed that he pay the loan back through the loan shark’s bank account at a rate of £2,000 every three months. He received a paperwork schedule of the payments via email but did not sign any paperwork. When Paul struggled with repayments he was threatened, being told that his debt had been sold on and that ‘they will be nasty to you’. He then discovered he was expected to pay an extra £4,000 in interest. The case was reported to the IMLT and the investigation is ongoing.
What types of business can the IMLT help?
If a business has borrowed money from a lender later discovered to be unauthorised, the IMLT can step in to help. However, certain criteria must be met:
– The loan must be under £25,000 and used for business purposes
– The business must be structured as a sole trader, a partnership with fewer than four partners, or an unincorporated association.
Who can’t the IMLT help?
– Any business that takes out a loan for more than £25,000 (this includes sole traders, partnerships of fewer than four and unincorporated associations). Loans for business purposes over £25,000 are classed as exempt agreements regardless of business type and are outside the IMLT’s jurisdiction. Lenders usually do not usually need to be authorised for business-to-business lending if the loan is more than £25,000.
– IMLT cannot investigate loans to limited companies or other business types not listed above
Support available from the IMLT
Business owners who believe they have borrowed from an illegal lender should not hesitate to reach out to the IMLT. The organisation employs a dedicated team of expert investigators, financial analysts, and support staff who are ready to assist those trapped in loan shark arrangements.
The first step is contacting the IMLT, which sets the process in motion. Borrowers who meet the above criteria will receive tailored advice on their options, including practical steps to manage their finances and access one-on-one support. The IMLT’s approach is non-judgmental – many borrowers feel ashamed or think they are in some way to blame, but the team understands the complex factors that lead people to illegal lenders.
Once a case is reported, the IMLT financial analysts and investigators examine the details, gathering evidence to build a case against the illegal lender.
If warranted, legal action is pursued, leading to prosecution. Since its inception in 2014, the IMLT has successfully prosecuted 427 individuals, resulting in a combined total of 609 years of imprisonment, among other sentences such as fines, community orders and suspended custodial terms.
How to stay safe from illegal lenders
Unauthorised lenders often ensure they blend into the financial landscape, making it difficult to distinguish them from legitimate lenders. However, there are several ways business owners can protect themselves:
- Check their authorisation – Legitimate lenders must be registered with the Financial Conduct Authority (FCA) in order to lend less than £25,000 for business purposes (or any amount to individuals). Business owners can check the FCA Financial Services Register to confirm if a lender is authorised.
- Read the fine print – Avoid any lender that refuses to provide clear documentation or written agreements detailing the terms of the loan.
- Watch for the red flags listed above – Be wary of lenders who demand cash payments, refuse to provide receipts, or use aggressive tactics to secure a loan agreement.
- Explore safer alternatives – Many legal and ethical lending options exist for small businesses, including credit unions, Community Development Financial Institutions (CDFIs), government-backed loan schemes, and grants from local authorities.
What if your lender is illegal?
If you suspect that you or someone you know has borrowed from an unauthorised lender, it is essential to act quickly. The IMLT offers several ways to report illegal lending and seek assistance:
- Confidential Helpline: 0300 555 2222 (available 24/7)
- Email: reportaloanshark@stoploansharks.gov.uk
- Website: stoploansharks.co.uk (Includes a reporting form and live chat support, available Monday to Friday from 9am to 5pm)
While the England IMLT covers businesses in England, there are similar teams in Scotland, Wales and Northern Ireland.
To access support in Wales go to stoploansharkswales.co.uk or call 0300 123 3311.
In Scotland, go to stopillegallending.co.uk or call 0800 074 0878
In Northern Ireland, go www.consumerline.org or call 0300 123 6262
