SMEs could access finance more easily after the FCA set out practical steps to help.
A recent review by the FCA found that many challenges related to accessing finance related to the wider market and capability challenges, rather than its own regulations.
The review found that microbusinesses, which make up nearly 10% of all SMEs, often faced the greatest challenges and are less likely to access external finance. Limited awareness of available options, convoluted application processes, duplication and difficulty accessing targeted products were all highlighted as issues, along with limited collateral and intangible assets.
Amid the review and as part of its commitment to supporting growth, the FCA is focusing its next steps in three areas to reduce friction:
- Supporting a more proportionate regulatory regime through Consumer Credit Act reform.
- Helping unlock the benefits of open finance, including prioritising SME lending as a key use case.
- Monitoring industry work to explore whether digital verification could reduce duplication in customer checks, while maintaining effective financial crime controls.
The FCA’s director of competition, Graeme Reynolds, said:
“Small businesses need to be able to access the finance they need at the right time to start up, grow and invest. Our regulation is not a major obstacle – that does not mean the system works as well as it could. We’re focusing on where we can make a practical difference by reducing unnecessary friction, supporting a more proportionate regulatory framework and helping unlock the benefits of open finance.
“The review complements wider government and regulatory work to improve access to finance for smaller businesses. Where stakeholders identified issues that fall outside the FCA’s remit, such as on alternative lending, it has shared those findings with the relevant government departments and bodies best placed to address them.”
