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The end of regulated business finance?

Many business finance firms, probably the majority, have already left the regulated market (loans to unincorporated businesses that do not qualify for exemptions, i.e. loans under £25k not qualifying for the business use exemption). See my article from July here:

Yesterday, the FCA issued proposals for new reporting by consumer credit lenders ( that are likely to be entirely impractical for most, if not all, business finance lenders. Business lending systems just don't have the capabilities to report this information - for good reason as many of the fields are not relevant to business transactions.

If the proposals proceed (the FCA doesn't tend to do U-turns from its proposed handbook changes, and it claims to have already worked on the proposals with firms and associations) the new reporting rules seem likely to lead to a more or less complete closure of the regulated business finance market by large funders, leaving the sector to lenders with regulated books under £0.5m (and, quite possibly, higher rates).

In some ways, this is good news. Most lenders won't mind giving up this part of their activity, which is provided more as a service to SMEs than to earn any reasonable return. And the fallout should help ensure Government takes a serious look at whether it makes sense to keep business finance in the consumer credit regulation.

The problem is the harm it causes to the smallest users of business finance in the meantime. Lenders still in the sector may wish to consider responding to the FCA consultation, perhaps calling for business finance to be excluded from the new reporting. Not in their own interests, but in those of their small business customers.


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