FCA to Investigate ‘super-complaint’ about small business lending requirements
The Financial Conduct Authority (FCA) is set to investigate a ‘super-complaint’ related to small business lending requirements. This investigation comes after concerns were raised about the hoops small businesses have to jump through to secure loans. Many business owners are feeling the pressure, especially when it comes to personal liability, such as signing a directors personal guarantee.
What is the issue?
Small businesses often face stricter lending requirements than larger companies, with one of the main sticking points being the directors personal guarantee. This means the personal assets of the company’s directors, such as their homes or savings, could be at risk if the business defaults on the loan. Understandably, this can be a huge burden for small business owners who are already juggling the many challenges of running a company.
The ‘super-complaint’ highlights concerns that these guarantees are not only difficult for small businesses to meet but also unfairly shift the risk onto the business owners. The FCA’s investigation will look into whether this practice is reasonable and whether small businesses are being given enough protection.
Why it matters
This investigation is important because many small business owners feel the current lending landscape is stacked against them, while banks and lenders argue that these guarantees are necessary to reduce their risk. The fact is that business owners see it as a big barrier to success; after all, the risk of losing personal assets can be a major deterrent when it comes to seeking finance for business expansion.
By investigating the issue, the FCA could potentially bring about changes that would offer small business owners more protection and better terms when applying for loans. This could include limiting or removing the need for a directors personal guarantee in some cases or offering more transparent information on what signing such a guarantee means.
Final thoughts
The FCA’s investigation into the ‘super-complaint’ could change a lot for small businesses. If you are a business owner, it is definitely something to keep an eye on, especially if you need to borrow money in the near future.
