The Financial Conduct Authority has concluded its review into small business access to finance, finding that regulatory requirements are not the primary barrier to commercial lending in a statement published on 17 September 2026. The regulator found no evidence that its own rules represent a major barrier, concluding that the primary challenges reported stem instead from structural market dynamics, information asymmetries, and capability gaps among businesses.
‘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.’ said Graeme Reynolds, FCA director of competition.
What the review actually looked at
The review focused on the specific segment of small business lending directly governed by the FCA: facilities of £25,000 or less extended to sole traders and small partnerships, which generally fall within the consumer credit regulatory perimeter. Lending to limited companies, facilities exceeding £25,000, and non-bank alternative finance were excluded.
That narrow focus materially qualifies the regulator’s headline conclusions. The FCA did not examine the majority of SME borrowing by value, nor does it claim to have done so. Where respondents raised structural concerns outside its regulatory remit, most notably regarding alternative finance markets, the regulator referred those findings to the relevant government departments and statutory bodies.
Where the friction actually sits
The frictions identified by the review are fundamentally operational. Business owners frequently lack visibility over available financing options from the outset. Application processes remain unnecessarily burdensome, with redundant due diligence repeated across every lender approached. Furthermore, where enterprise value is anchored in intangible, unpledgeable assets, such as proprietary software, recurring contracts, or client books, standard commercial credit products fail to reflect the shape of the business.
The regulator was equally explicit regarding where these constraints are most acute. Micro-enterprises account for 95.5 per cent of the UK's SME population, yet they tap external credit far less frequently than larger peers, bearing the brunt of these market frictions. Crucially, that 95.5 per cent figure reflects the structural composition of the business population, rather than a metric of credit rejection.
Three things the FCA says it will do
The Treasury is reforming the Consumer Credit Act toward a more modern and outcomes-based regime while keeping key protections, and the FCA says that once that legislation is through, it will consult on the future regulatory framework. Consumer credit parameters are being redrawn elsewhere in the same period, with Malaysia introducing buy now, pay later under its Consumer Credit Act 2025.
The second is open finance. The FCA has published an open finance roadmap and is developing proposals for a first scheme, with a discussion paper promised that will set out the options. Small business lending is one of two prioritised use cases for that first scheme. The regulator also committed to further infrastructure testing and TechSprints.
The third is the one it is watching rather than leading. UK Finance is supporting work on a voluntary digital verification service intended to cut the duplication in customer checks that the review complained about. The FCA describes itself as monitoring that industry-led initiative. Shared infrastructure of this kind has moved faster where a regulator has driven it, as with MAS's plan to widen the COSMIC bank information-sharing platform.
What this means for lenders and their technology
For firms selling into SME lending, the useful signal is where the regulator has placed its weight. Duplicated identity and due diligence checks have now been identified by the FCA as a source of friction worth removing, which strengthens the commercial case for reusable verification, though the chosen route is voluntary and industry-led rather than regulatory. Open finance data sharing has found its first concrete application in SME lending, a clearer direction than the sector has had for some time.
There is no open consultation, no rule change, no deadline, and no date for the promised discussion paper. This is a completed review and a feedback statement, published as FS26/2, together with a set of directions of travel.
