Mini-bonds and loan notes (non-transferable debt)
Borrow directly from the public, often your customers, by issuing bonds or loan notes that pay interest and cannot be traded. Strict rules apply to who you can offer them to, and investors can lose all their money.
- No security
How it works
A mini-bond is an unlisted bond or loan note: investors lend the company money for a set term at a set interest rate, and usually cannot sell the bond to anyone else. Companies have used them to raise money from loyal customers.
High-risk warnings. The FCA has warned investors about risky mini-bonds and loan notes. Since 1 January 2021 its rules ban mass-marketing speculative illiquid securities to ordinary retail investors. These are unlisted bonds and preference shares where the money raised is used to lend to others, invest in other companies, or buy or develop property. They can be promoted only to certified sophisticated or high net worth investors. The ban does not cover a company raising money for its own commercial or industrial activities, certain listed bonds, or a single UK property.
Public offer rules. Since 19 January 2026, offers of securities to the public are prohibited unless an exception applies. The exceptions include offers totalling no more than £5 million over 12 months, offers to fewer than 150 people (apart from qualified investors), offers only to qualified investors, and offers made through a regulated platform, such as an FCA-authorised public offer platform.
Promotions. Inviting people to invest, in the course of business, is a financial promotion and must be approved by an FCA-authorised firm unless an exemption applies.
Upsides and downsides
Upsides
- No shares given up
- Can turn loyal customers into lenders and supporters
- Fixed interest rate and term, agreed in advance
Downsides
- Strict promotion and public offer rules, and legal costs to match
- Investors can lose everything, and you must repay them all at the end
- Bonds usually cannot be traded, so investors may want to be repaid early
Risks
- Breaking the financial promotion or public offer rules
- Not being able to repay bondholders at the end of the term
- Reputational damage with customers if repayments are missed
What it costs
- How it is priced
- Interest paid to bondholders, plus legal, platform and marketing costs
- Costs that are easy to miss
- Legal costs and an authorised firm's approval of your promotion
- Platform or arranger fees
- Marketing the offer
- Repaying everyone in full at the end of the term
Offers totalling no more than £5 million over 12 months are one of the exceptions to the public offer rules. Larger offers need another exception, such as a regulated platform.
Have a quote? True cost of a loan: work out the APR-equivalent and total cost
Does it fit?
Could fit when
- You have a loyal customer base and an established business that can pay a fixed return
- You want to borrow without giving up shares or offering security
Unlikely to fit when
- You make a loss and could struggle to pay interest
- The money would go into property development or lending on, which cannot be mass-marketed to the public
- You need more than £5 million
Who can use it
- Business types: Private limited company, Public limited company, Co-operative or community benefit society
- Needs sales (revenue)
- The money should be for the company's own commercial or industrial activities. Speculative uses such as onward lending or property development cannot be mass-marketed to retail investors
- Promotions must be approved by an FCA-authorised firm unless an exemption applies
- The offer must fit an exception to the public offer rules
Am I ready?
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- Promotion approval
- Offer document
- Repayment plan
Regulation and protections
The bonds themselves are usually unregulated investments, but promoting them and offering them to the public are regulated. Speculative illiquid securities cannot be mass-marketed to retail investors.
The public offer rules changed on 19 January 2026, when the Public Offers and Admissions to Trading Regulations 2024 replaced the old prospectus regime.
Types of provider: Bond issuance platforms; FCA-authorised firms that approve promotions; Solicitors.
Also consider
Sources
- FCA: PS20/15 High-risk investments: marketing speculative illiquid securities (including speculative mini-bonds) to retail investors · checked 7 October 2026
- FCA: Consumers warned to beware of risky mini-bonds and loan notes · checked 7 October 2026
- legislation.gov.uk: Public Offers and Admissions to Trading Regulations 2024, Schedule 1 (exceptions) · checked 7 October 2026
- FCA: PS25/10 Final rules for public offer platforms · checked 7 October 2026
- legislation.gov.uk: Financial Services and Markets Act 2000, section 21 (restriction on financial promotion) · checked 7 October 2026