Can I offer unregulated finance?

Written by

Max Walker

Monday 19th February 2024

Man sitting on a sofa with green cushions buying something on his phone with a credit card

Wanting to find a straightforward way to help your customers spread the cost of their purchase? Unregulated finance could be an accessible and hassle-free option for your business, depending on the type of finance you wish to offer.

In this guide, we explain what unregulated finance is and how it could help you to drive sales sooner.


What is unregulated finance?

Unregulated finance is interest free finance repayable in monthly instalments over 11 months or less. This means you don’t have to be authorised by the Financial Conduct Authority (FCA) if you plan to only offer interest free finance for terms less than 11 months.

If you wish to offer interest bearing credit (where the customer is charged interest at a fixed rate), or offer terms longer than 11 months, you’ll need to apply for relevant FCA permissions. You can find out about the different retail finance products available here.


Who is unregulated finance most suitable for?

Unregulated finance may be suitable for your business if you…

Want to offer short-term interest free finance

Unregulated finance is only applicable on interest free finance for up to 11-month terms. If your customers want to spread the cost over a longer period, or you want to offer a finance option that’s cost-neutral to your business, you’ll need to seek authorisation.

Offer low or mid-priced products

If you’re offering products that cost thousands of pounds, the monthly cost is likely to be unaffordable for the majority of customers if they need to repay in less than 11 months.

Therefore, unregulated finance is perhaps most suitable for products that cost less than around the £3,000 mark. Furniture retailers, for example, could find unregulated finance best suits their products.

Have high profit margins

There’s no cost to the customer for using 0% finance. However, you as the retailer will be required to pay a subsidy to cover the cost of borrowing. For some retailers, it simply isn’t viable to take a chunk out of their profits to pay for finance and therefore regulated interest bearing finance may be the best option for them.


The benefits of unregulated finance

There are lots of advantages when it comes to offering unregulated finance, including...

Enjoy all the benefits of offering retail finance

Offering retail finance comes with several benefits: greater footfall and traffic, increased conversions, boosted average order value, accelerated purchasing decisions, increased customer loyalty and much more. You can reap the rewards of offering credit without the hard work that often comes with being regulated.

Start offering retail finance sooner

The FCA declined nearly one in five applications for authorisations in 2022 – that’s a huge number of retailers who wish to offer finance, but aren’t given the go-ahead.

Even those prepared to go through the challenging application process risk being declined. For some, unregulated finance provides a simpler, quicker route to offering finance.

It may well be that you could choose to offer unregulated finance while undertaking the application process to become FCA authorised, giving you a route to start offering a specific finance option to customers sooner.

Easy onboarding

We pride ourselves on our smooth and simple onboarding and integration process. Often the biggest delay is waiting for retailer authorisation from the FCA.

As you don’t need to wait to become authorised to offer unregulated finance, there’s nothing holding you back. In our experience, retailers can be up and running within just a couple of weeks.

More cost-effective than you might first think

While you will need to pay a subsidy when offering interest free finance, you may save costs in other areas.

For example, applying for FCA authorisation costs up to £1,000 plus annual FCA administrative fees. If you choose to partner with a third-party compliance expert, you’ll have their costs to consider too.

You should also think about how much business finance is expected to drive. After all, our research shows that 57% of customers would not have made any purchase without finance being available.

Yes, a small proportion of your profits will go towards paying a subsidy… but would you have gained the sale in the first place without finance?


Putting responsible lending first

With our unregulated finance product, your customers will still be subject to affordability and credit checks.

Some lenders may describe their products, particularly buy now pay later options, as ‘unregulated’ – when they basically mean customers can take out finance unchecked. This is not something we do here at Novuna Consumer Finance.

Ultimately, we want to make sure your customers are treated fairly and ethically. We offer soft search to allow customers to see how likely they are to be accepted for credit before applying – with no impact on their credit score. If the customer chooses to go ahead with the full application, they’ll be subject to a hard credit check. This ensures credit is only offered to those who are likely to be able to afford the repayments, providing greater protection for customers who are at greater risk of falling into unmanageable debt.


What are my options if I want to offer regulated finance?

If you want to offer interest bearing finance, or offer interest free credit for over 11 months, you’ll need to obtain relevant authorisation from the Financial Conduct Authority. There are a couple of ways to do this:

Apply for limited or full permission

As offering retail finance is considered an FCA regulated activity, you will need to apply for the relevant permissions. The application process can be challenging, and you’ll need to submit reports on a regular basis to ensure ongoing authorisation, but partnering with a third-party compliance expert could help you to navigate the process.

Read our guide on applying for FCA permission to find out more.

Become an Appointed Representative

This allows you to offer retail finance under the regulatory umbrella of a Principal firm rather than seeking direct FCA authorisation. While this may be a less complex way to start offering finance, you will still need to meet the Principal firm’s requirements and compliance standards.

For more information, read our guide on becoming an Appointed Representative.


We’ll help you start offering finance sooner

Whether you’re just starting to consider your retail finance options or looking to switch finance providers, our team can help.

We’ll build a bespoke finance package that works best for your business and your customers, maximising sales opportunities and profitability. This could include launching unregulated finance to help you get started sooner.

To find out more about the options available, get in touch with our team.

Written by

Max Walker

Senior Business Development Manager, Max, is all about helping retailers find the right finance solutions to grow their business. With over six years of experience working at Novuna, Max knows our market-leading finance options inside out and loves to find creative solutions for retailers looking to offer finance for the first time.