The Financial Conduct Authority has concluded that its regulation is not a major barrier to SME finance. The more immediate problems are practical: smaller businesses may not know which options exist, applications can be difficult, checks are repeated and companies with limited conventional collateral can struggle to find a suitable route. For business owners and their accountants, that points to a better starting question: what does the business need the capital to do?
The FCA’s 17 September update says many of the challenges sit in the wider market and in information and capability, rather than in regulation alone. It highlights limited awareness of finance options, complex application processes, duplicated checks and difficulty accessing products for businesses with limited collateral or largely intangible assets.
That finding matters because an owner rarely begins with a perfectly defined product request. They may know that the company needs £500,000 to fund payroll, fulfil a contract, buy equipment, refinance short-term debt or acquire another business. Deciding whether the answer is invoice discounting, factoring, asset finance, property-backed borrowing, a term loan or a combination is a separate piece of work.
What the FCA Has Actually Said
Regulation is not the principal explanation. The FCA says its review found no evidence that its regulation is a major barrier to SME access to finance.
Microbusinesses face the greatest friction. They account for 95.5% of SMEs and are less likely to use external finance.
The problems are practical. Awareness, application complexity, repeated checks and products that do not fit firms with limited tangible security were all identified.
The response is still developing. The FCA is focusing on Consumer Credit Act reform, open finance and industry work on digital verification. Those measures may reduce friction over time; they do not create an instant funding solution for an individual business.
The FCA Has Described a Navigation Problem
The FCA’s Feedback Statement FS26/2 records two striking numbers: only 21% of the total value of UK business loans is provided to SMEs, while 54% of SMEs use no external finance at all. Those figures do not prove that every business without finance is underserved; some companies deliberately avoid borrowing. They do show why access cannot be reduced to the number of lenders in the market.
A business owner has to recognise the need, understand the available structures, assemble information, approach the right funder and compare terms that may not use the same definitions. A lender then has to assess the borrower, the purpose of the money, cash generation, security and repayment. Friction at any of those stages can stop an otherwise viable enquiry.
The FCA also makes an important perimeter point. Its review focused on lending most directly affected by FCA regulation, including business lending of £25,000 or less to sole traders and small partnerships. Much lending to limited companies, business lending above £25,000 and parts of the alternative market fall outside its remit. The publication should therefore not be read as a regulatory endorsement of a product, lender or broker.
A Business That Needs £500,000 Does Not Necessarily Need a £500,000 Loan
The product label should come after the commercial problem. A recruitment company waiting 60 days for clients to pay may have a working-capital gap linked directly to its debtor book. A manufacturer may need equipment whose useful life and resale value can support asset finance. A property-owning trading company may have equity in its premises but weak short-term cash flow. An importer may need a facility that follows purchase orders, shipping and customer payment.
Each business may describe the need as “£500,000 of finance”, but the appropriate structures, costs and risks are different. A conventional term loan may be suitable in one case and unnecessarily restrictive in another. Invoice finance may release useful working capital for the recruitment company but do little for a business whose sales are mainly to consumers or whose invoices are disputed.
| Possible Route | When It May Fit | Questions That Determine the Real Result |
|---|---|---|
| Invoice discounting or factoring | B2B sales on credit terms with an eligible debtor book. | Debtor quality, concentration, eligibility, disputes, recourse, facility limit, service charge and control of collections. |
| Asset finance or asset refinance | Equipment, vehicles or machinery are being acquired or already owned. | Asset value, useful life, deposit, balloon, ownership, maintenance, existing charges and total cost. |
| Commercial mortgage or property-backed capital | The business owns or is buying suitable commercial property. | Value, loan-to-value, affordability, term, security, fees, early repayment and the risk to the property. |
| Trade or purchase-order finance | Funding is required between supplier payment and customer settlement. | Orders, counterparties, margins, shipping, currencies, insurance, control of goods and repayment timing. |
| Term or unsecured borrowing | Cash flow supports scheduled repayments and the purpose is clearly defined. | Affordability, covenants, guarantees, price, repayment profile, existing debt and use of funds. |
| Asset-based or blended facility | No single asset class meets the entire requirement. | How receivables, stock, plant and property interact; intercreditor terms; availability; reporting; and total blended cost. |
Invoice Finance Is a Route, Not the Diagnosis
Invoice finance can be a strong answer where a business sells to creditworthy commercial customers and has cash trapped in unpaid invoices. Availability can increase as eligible sales grow, making the facility responsive to turnover in a way that a fixed loan may not be. It can support payroll, stock, contract mobilisation or expansion without waiting for every customer to reach the end of its payment terms.
But “the debtor book is £1m” is not the same as “£1m is available”. A funder may exclude old debt, disputed invoices, overseas customers, related-party balances, retentions or debt above a concentration limit. The advance rate, concentration reserve, service fee, discount charge, minimum fee, recourse and termination provisions all affect the usable cash and total cost.
Factoring and invoice discounting also create different operational arrangements. Factoring can include collections and visible funder involvement; confidential invoice discounting usually leaves collections with the business and may demand stronger systems and reporting. The correct comparison is the accessible money and conditions, not the largest headline facility.
Start With a Business Funding Triage
Record the amount, purpose, timing and repayment source. Then map turnover, margin, debtor quality, customer concentration, invoice terms, assets, property, existing borrowing and immediate cash pressure. Only after that should the enquiry be routed to invoice finance, asset finance, commercial property debt, term lending or a blended structure.
Accountants Do Not Need to Select the Product
The accountant is often the first adviser to see the pressure: a growing debtor balance, an overdraft that no longer matches turnover, fixed assets carrying no debt, a contract that strains working capital or tax liabilities competing with payroll and suppliers. That insight is more valuable than a premature product recommendation.
Instead of asking “does your client need invoice finance?”, the referral question can be “does your client need capital, and what must it achieve?” The accountant can help establish the trading position, quality of earnings, cash conversion, liabilities and the accuracy of management information. A finance adviser can then test which lenders and structures are credible.
This approach also protects professional boundaries. The accountant does not have to compare every lender or recommend a regulated or unregulated credit product. Willow does not replace accounting, tax, legal or corporate-finance advice. The advisers contribute different evidence to the same decision.
What a Useful Initial Fact-Find Should Cover
This is not an invitation to produce a perfect data room before having a conversation. It is a way to avoid sending the same generic application to several lenders whose products solve different problems. Where urgency is genuine, identifying the best evidence first can save time.
One Business May Need More Than One Facility
Consider an SME with £1m of unpaid invoices, £800,000 of plant, £2m of commercial property and £300,000 of overdraft and short-term debt. Looking only at invoice finance may ignore cheaper or more stable capacity elsewhere. Looking only at the property may tie long-term secured debt to a short working-capital cycle. Refinancing equipment might release cash but could leave the underlying debtor delay unchanged.
A coordinated review can separate permanent capital from fluctuating working capital. Property debt may refinance a long-term liability; asset finance may match borrowing to equipment; invoice finance may flex with eligible sales. The combined structure must still be affordable and operationally manageable. More facilities are not automatically better.
The order matters too. New security can affect existing debentures and lender consent. One funder may require priority over receivables while another holds an all-assets charge. Legal advice and clear intercreditor arrangements may be needed before a blended proposal can complete.
A Decline Should Produce Better Information, Not Random Applications
If a bank declines an application, the next step is to understand why. The issue may be affordability, sector appetite, limited trading history, weak information, adverse credit, insufficient security or simply a mismatch between the requested product and the funding need. Approaching several more lenders without resolving that point can waste time and create an untidy application trail.
Some businesses can improve the case by updating management accounts, reconciling the debtor ledger, documenting contracts or clarifying the repayment route. Others need a different product. If the underlying business cannot support the proposed debt, alternative finance does not make that weakness disappear.
Open Finance and Digital Verification Could Reduce Friction—Later
The FCA’s next steps include prioritising SME lending as a use case for open finance. In principle, permissioned data could help a business share relevant financial information with providers more efficiently and allow products to be assessed against a richer picture than a static application form.
The regulator is also monitoring industry work on voluntary digital verification that could reduce duplicated customer checks while maintaining financial-crime controls. Consumer Credit Act reform is intended to support a more modern, proportionate framework while retaining key protections.
These are direction-of-travel measures. They do not remove credit judgement, security requirements, verification or the need to understand the product. A company seeking finance now still needs accurate information, a credible purpose and a suitable route.
The Accountant Partnership Opportunity Is Practical
Willow’s accountant partnership model can operate as a funding triage desk behind the professional relationship. The accountant identifies the capital requirement and supplies the financial context. Willow assesses routes, market appetite and lender fit, then returns with an explanation of what appears available, what it costs and what conditions matter.
That can be useful for recruitment firms, manufacturers, construction businesses, professional-services firms, exporters, acquisitive companies and asset-rich businesses experiencing poor cash conversion. It is equally useful when invoice finance is not the answer: the value lies in reaching that conclusion before the client spends weeks pursuing it.
How Willow Private Finance Can Help
Willow can review a business’s funding requirement without assuming the answer in advance. We consider the purpose, cash-flow cycle, debtor book, assets, commercial property, existing debt, security, directors’ position and expected repayment source. We can then compare relevant invoice-finance, asset-finance, property-backed and other business-lending routes.
For invoice finance, we compare factoring, invoice discounting and specialist facilities on usable availability, fees, restrictions, customer concentration, recourse and operational control. For a wider requirement, we assess whether a single facility or a coordinated structure better matches the business.
No publication from the FCA determines whether finance will be offered. Terms depend on the applicant, lender, financial information, sector, purpose, security and due diligence. The objective is a clear, evidence-based route to the right part of the market—not a promise that capital is available.
Your Business Needs Capital. Start With the Problem, Not the Product.
Tell us the amount, purpose, timing, turnover, debtor position, available assets, existing facilities and expected repayment source.
Willow can identify which funding routes deserve comparison and explain the usable cash, full cost, security and restrictions before the business proceeds.
Explore Invoice & Business Finance →Frequently Asked Questions
Practical questions for business owners and accountants considering SME finance.
Did the FCA say its regulation is preventing SMEs from accessing finance?
No. The FCA says it found no evidence that its regulation is a major barrier to SME access to finance. It identified wider market, information and capability challenges, including limited awareness, complex applications, duplicated checks and difficulty finding products for businesses with limited collateral or largely intangible assets.
Does a business need to know which finance product it wants before making an enquiry?
No. A useful first enquiry explains the amount required, purpose, timing, cash-flow position, debtor book, assets, existing borrowing and repayment source. Those facts can then be used to compare invoice finance, asset finance, property-backed borrowing, term debt or a blended structure.
When might invoice finance be appropriate?
Invoice finance may suit a business that sells to other businesses on credit terms and has eligible unpaid invoices. The review should examine debtor quality, concentration, disputes, credit notes, invoice terms, facility limits, fees, recourse and whether factoring or invoice discounting fits the business.
What should an accountant provide for an initial business-finance review?
Useful information includes the funding amount and purpose, latest accounts and management figures, turnover, gross margin or EBITDA, aged debtor and creditor reports, customer concentration, asset and property details, existing facilities, cash-flow pressure and the intended repayment route.
Can an accountant refer a client without recommending a finance product?
Yes. The accountant can identify that capital is needed and provide relevant financial information without selecting a product or lender. Willow can assess credible funding routes and explain the structure and costs, while the accountant, solicitor and other advisers remain responsible for advice within their own professional scope.