The FCA has published the findings of its review into small business access to finance. Its conclusion is that its own regulation is not a major barrier. The problems it found sit elsewhere. Applications are complex. Checks are repeated by every lender. Decline letters explain little. Personal guarantees put founders off applying. It has set out three areas of work in response. The biggest is open finance for small business lending.
01What the FCA found
The feedback statement, FS26/2, was published on 17 September. It closes a review the regulator opened in March. According to the FCA, only 21% of the value of UK business loans goes to small and medium-sized firms. And 54% of those firms use no external finance at all.
The review focused on lending of £25,000 or less to sole traders and small partnerships. That lending falls inside the FCA's consumer credit rules. Around 60% of small firms that sought finance in the last three years asked for less than £25,000.
The FCA found no evidence that its regulation is a major barrier. What it did find was a list of frictions. The evidence came from 19 written responses and a roundtable of more than 40 organisations. Applications are seen as complex and slow, with different lenders asking for different documents. Firms are asked to provide the same identity information to brokers and to several lenders in turn. Lenders often give limited or vague reasons for a decline. That makes it hard to improve the next application. Personal guarantee requirements put some firms off applying at all.
02What happens next
The FCA has committed to three areas of work. It will monitor an industry project on digital identity verification. That could stop firms repeating the same checks with every lender. It will deliver a more proportionate rulebook for regulated small business lending as the Treasury reforms the Consumer Credit Act. And it will push open finance forward, with small business lending named as one of two priority uses.
Open finance is not the same as open banking. Open banking is live and lets you share current account data. Open finance would extend that to a wider set of financial data. A lender could then assess a young business on its real trading, not on last year's accounts. According to the FCA, a discussion paper on the first open finance scheme will be published in early 2027.
None of this changes an application you make this month. The FCA's own timetable puts the concrete changes in 2027 and beyond.
03What it means if your bank has said no
The frictions the FCA describes are the ones founders already know. A decline with no useful reason. Sending the same documents three times. The regulator has now written that pattern down. It is also the reason a broker exists. A broker reads the application once, knows which lenders ask which questions, and puts the case to the right one.
For a business trading for under five years, the route the FCA's own review points to is a Start Up Loan. It is a personal loan for business purposes, it is unsecured, and no personal guarantee is taken. For an established business, the options after a bank decline are set out in where the money is now. The Bank of England's agents said much the same thing this month: lenders have money to lend but prefer bigger firms. Three official sources are now describing the same gap. The finance exists. Getting to it is the work.
