A Lending Standards Board (LSB) review has highlighted the need for stronger small and medium enterprise (SME) lending protections.
The review identified 102 instances where registered companies did not meet the standards of lending practice for business customers.
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These standards serve as the best practice framework for SME lending.
Recognised by the Financial Conduct Authority (FCA), the standards ensure companies deliver better outcomes for SME customers with independent oversight.
The LSB’s review encompassed 16 UK lenders, including major banks, fintechs, and challenger banks.
LSB CEO Emma Lovell said: “Registered firms’ performances in this review are encouraging both for the absence of ‘severe’ findings and the progress they are making towards addressing the issues we identified.
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By GlobalData“These firms’ commitment to delivering better SME outcomes is welcome – registered firms are holding themselves up to scrutiny by signing up to the Standards and are taking SME lending protections seriously.”
At the time of publication, 59% of the findings had been addressed, with ongoing efforts to resolve the remainder.
Entities have been specifically highlighted for their need to focus on customer treatment in financial difficulty, governance and oversight, and processes for identifying and supporting vulnerable customers.
Issues primarily arose from implementing the standards, employee adherence, information systems, and customer journey policies.
The report suggests improvements in supporting SMEs in financial difficulty, including better signposting to support mechanisms, enhanced affordability assessments, and improved customer communications.
Of the 102 findings, 35 were minor, 60 moderate, and seven major, with no severe findings.
Governance and oversight issues showed higher severity, with 79% classified as moderate or major.
The FCA’s regulatory perimeter limits its oversight of lending above £25,000 to businesses or lending to limited companies.
However, the business standards cover business customers of companies with turnovers of up to £25m.
Lovell added: “A significant proportion of UK SME lending is not subject to statutory regulation and, as a result, the business standards are the only protections available to many UK SMEs.
“It is vital that SMEs check their lender is registered with the business standards if they want to ensure there is independent oversight of how their lender treats them.”
