Not upheld: irresponsible lending complaint against The Enterprise Fund Limited trading as GC Business Finance

Decision detail

Summary

Mrs S, a sole trader, borrowed £25,000 from TEF in 2023 to purchase an existing small business that was already struggling. She complained that TEF lent irresponsibly and that the loan was unaffordable, arguing that TEF should have conducted more thorough checks including requiring an accountant to sign off her business forecasts. The business ultimately failed, leading to the loss of her full-time job and negative impacts on her health and finances. The ombudsman found that TEF's checks were reasonable and proportionate, that it was not wrong to lend to enable her to attempt to turn around the business, and that the subsequent changes in her circumstances were not foreseeable at the time of lending. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that TEF's checks were reasonable and proportionate for a business loan. While the business was struggling when Mrs S took it over, it was not unreasonable for TEF to lend to enable her to attempt to turn it around. The ombudsman rejected the suggestion that TEF should have required an accountant to sign off forecasts, noting this would have imposed additional costs and was not a standard requirement. The ombudsman found that TEF assessed more than just Mrs S's personal creditworthiness; it also reviewed her business plan and personal survival budget. The subsequent business failure and job loss were not foreseeable at the time of lending.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website