How To Offer Finance Legally In The UK

‍

What customer finance really means at the till

Customer finance is simply a way for your customers to spread the cost of a purchase over time, rather than paying the full amount upfront. In practice, it usually means you offer a regulated credit option at the point of sale, with repayments agreed between the customer and a lender. For you as the merchant, the aim is straightforward: remove budget friction without discounting, keep the buying decision moving, and support bigger baskets where a customer might otherwise delay or walk away.

A key point is that offering or arranging finance is not just a commercial choice in the UK, it is a regulated activity. That is why most businesses deliver it through an FCA-authorised partner that can manage checks, agreements and ongoing compliance.

Why customers choose finance in your market

Even in resilient sectors, customers often balance larger purchases against household cash flow, rising living costs, and competing priorities. Finance can turn a “maybe later” decision into a confident yes now, because it converts a lump sum into predictable monthly payments. For customers, the appeal is not only affordability, but also clarity: a defined term, an agreed repayment schedule, and an understanding of total cost.

When explained properly, finance can feel like a responsible planning tool rather than debt. That is why the quality of your in-store and online communication matters: customers want to understand the APR, the term length, any deposit, and what happens if circumstances change.

The sales uplift: where finance changes outcomes

Offering finance can improve conversion rates by removing the sharpest objection, “I cannot justify the full cost today”. It can also raise average order value, because customers tend to shop to a monthly budget rather than a headline price. In many businesses, that means upgrades, add-ons and higher-margin options become more attainable without heavy promotions.

There is also a trust effect. A well-run finance option signals a professional operation with established processes, transparent pricing and clear customer support. Done correctly, finance helps you compete with larger retailers and national chains that already offer instalment options.

Standout line: Finance can protect margin by replacing discounting with payment flexibility.

Typical transaction values (what “finance-worthy” often looks like)

Sector exampleLower band (often financed)Typical bandHigher bandNotesHome improvement and furnishings£500£1,500 - £5,000£15,000+Common for fitted items and room projectsDental, medical and wellbeing£300£1,000 - £4,000£10,000+Treatment plans suit monthly repaymentsMotor and mobility£2,000£8,000 - £20,000£50,000+HP and PCP structures are commonEducation and professional services£250£1,000 - £3,000£8,000+Spreads cost across course durationRetail (premium goods)£200£600 - £2,000£5,000+Useful for bundles and higher-ticket SKUs

Examples of products and services customers often finance

The FCA and compliance reality check

In the UK, offering credit or introducing a customer to a lender is typically regulated, which means you may need FCA authorisation for credit broking unless you operate through an authorised partner. The Consumer Credit Act framework and the FCA’s Consumer Duty raise the bar on clarity, fairness and customer outcomes, including robust affordability checks and transparent explanations of costs and terms. You also need disciplined data handling and a clear complaints route, with escalation to the Financial Ombudsman Service where applicable.

Introducer and broker models: the low-friction way to do it properly

Many retailers and service providers choose an introducer model, where you present finance as a payment option and then pass the customer to an FCA-authorised broker or lender to complete the regulated steps. The authorised partner typically handles eligibility, identity checks, affordability assessment, documentation, and the credit agreement itself. This reduces your operational load and helps you avoid taking on a regulated permissions burden that does not match your core business.

Commercially, the model is simple: you make the sale, the finance provider pays you for the transaction (usually net of any agreed fees), and the customer repays the lender over the agreed term. The crucial point is that the customer experience still needs to be seamless, with fair, clear messaging and a process that does not feel like being bounced around.

If you are introducing customers to finance, treat it as regulated until a specialist confirms otherwise.

What the customer journey usually looks like

Choosing the right finance product for your customers

Different credit products suit different purchase types and customer expectations. In the UK, common structures include Hire Purchase (HP), Personal Contract Purchase (PCP), and personal loans, each with distinct ownership and repayment features.

Product typeBest suited toOwnership positionPayment shapeKey watch-outsHire Purchase (HP)Vehicles and assetsCustomer owns after final paymentFixed instalmentsExplain deposit, total payable, and early settlement clearlyPersonal Contract Purchase (PCP)Vehicles where flexibility mattersCustomer chooses at end (return, refinance, or final payment)Lower monthly plus optional balloonBalloon payment and mileage/condition terms must be clearPersonal loanGoods and servicesCustomer owns the purchase (loan is separate)Fixed monthly repaymentsEnsure total cost and term are understood

How to get started with Kandoo

Kandoo is a UK-based retail finance broker, designed to help businesses offer customer finance in a way that is smooth for customers and controlled for merchants. The starting point is aligning your proposition with how you sell today: typical order values, customer profiles, and the channels you use. From there, Kandoo can help structure a finance offer that fits, support onboarding, and ensure the customer journey remains clear and consistent with UK regulatory expectations. Once live, you can position finance as a standard payment method, train staff to explain it plainly, and use compliant messaging that builds confidence rather than pressure.

Next step suggestions:

FAQs

Do I need FCA authorisation to offer finance?

If you are offering credit or introducing customers to a lender, it is typically regulated in the UK and may require FCA permission for credit broking. Many businesses use an FCA-authorised broker or lender to avoid applying for their own authorisation.

What is “Limited Permission” and when is it relevant?

Limited Permission is often used where credit broking is ancillary to your main business (for example, a clinic or retailer offering finance occasionally). The FCA still expects appropriate governance, controls and compliant processes.

Can motor dealers offer finance without being regulated?

Generally no. Motor dealers arranging or broking finance usually need FCA authorisation or must operate as an Appointed Representative of an authorised firm. Even introducing customers to lenders can trigger regulatory obligations.

What do I need to tell customers about APR?

APR is only part of the story. Customers need to understand the monthly repayment, the term, the total amount payable, and any fees or conditions. Communications should be fair, clear and not misleading.

Who handles affordability checks and credit decisions?

In a broker-led model, the finance provider typically performs identity checks and affordability assessment, then issues the decision and agreement. Your role is to present the option clearly and support the customer through the process.

What happens if a customer complains?

Customers should have a clear route to raise complaints, usually starting with the finance provider or broker for credit agreement issues. If unresolved, eligible complaints may be escalated to the Financial Ombudsman Service.

Is offering finance higher risk for fraud?

Offering finance can increase fraud and identity risk, so strong checks and secure data handling are essential. Working with an established, FCA-regulated partner helps ensure robust verification and compliant processes.

Will every business be accepted by a finance provider?

Not always. Providers may look at trading history, turnover, profitability, product type and sector risk. Some sectors or use-cases can be restricted, so it is worth checking fit early.

Related reading: 7 Ways to Offer Finance to Customers, Everything you need to know about offering finance to customers., How To Offer Finance For Local Businesses.