The Financial Conduct Authority outlined measures on 17 September to improve SME finance. Its review found no evidence that its regulation was a major barrier. It nevertheless identified obstacles for borrowers and lenders.
SMEs receive 21% of the value of UK business loans. They account for 60% of private-sector employment. The review began in March and received 19 written submissions.
COSTLY CREDIT AND BORROWER RISKS
The Times reported that unclear broker commissions in unregulated lending could push microbusinesses towards expensive, unsuitable short-term borrowing. Its own investigation found that some businesses accumulated unsustainable debt across numerous funding facilities.
The newspaper also reported that UK Finance welcomed practical measures in the review. The trade body is developing voluntary digital verification with banks and building societies to reduce repeated checks.
REGULATORY WORK AHEAD
The FCA’s response includes consumer credit reform and open finance. Better financial information could help lenders assess businesses with limited histories or intangible assets.
An early 2027 discussion paper will outline options for the first open-finance framework, with SME lending a priority. Consumer credit proposals will also require consultation as relevant legislation is repealed.