The FCA's March 2026 Call for Input: What It Signals

On 18 March 2026, the Financial Conduct Authority launched a formal call for input seeking views on regulatory and market barriers affecting small and medium-sized enterprises' access to finance. This is not a pre-emptive investigation with predetermined findings; instead, it represents an acknowledgment that friction points exist—and the FCA is actively soliciting evidence from founders, lenders, advisors, and fintech operators to understand the landscape before proposing any regulatory adjustments.

The timing matters. UK founders are navigating what many describe as the tightest funding environment in five years. Bank lending to SMEs has plateaued, venture capital deployment remains selective, and alternative finance channels (peer-to-peer lending, invoice financing, crowdfunding) have contracted as regulatory scrutiny has intensified. For early-stage operators and scale-ups alike, understanding what the FCA is listening to—and why—can help you build a stronger pitch and anticipate shifts in available funding pathways.

The FCA's call will run through May 2026, with a summary of insights and an update published later in 2026. This means real change to regulatory frameworks is not imminent, but the conversation is opening now.

The Funding Access Problem: Data and Scale

While the FCA has not yet released 2026-specific comparative data on SME finance barriers, recent reports highlight persistent structural challenges. According to the BVCA (now Equity for Growth), UK early-stage funding (pre-seed and seed rounds) has seen tighter ticket sizes and longer fundraising cycles in 2025–2026. Traditional bank lending to SMEs remains conservative; Bank of England monetary policy tightening in prior years has left many high-street lenders cautious on unsecured lending to businesses with less than two years of trading history.

What we do know from recent filing data and founder feedback:

  • Debt availability gap: SMEs report difficulty accessing term loans under £100,000 without personal guarantees or significant collateral. Many high-street banks have withdrawn or scaled back dedicated SME lending teams, pushing borrowers toward alternative lenders with higher costs.
  • Equity timing: Early-stage fundraising (seed to Series A) typically now takes 12–18 months versus 9–12 months pre-2023. Founders report higher diligence requirements and more investor hesitation on first-time founders or non-tech verticals.
  • Regional variance: Access to growth capital remains concentrated in London and the South East. Northern and Midlands founders often report narrower local investor networks and reliance on remote fundraising.

The FCA's call for input is seeking to understand whether these friction points stem from excessive regulation, insufficient market competition, or misaligned incentives between lenders and borrowers. Early indicators suggest the regulator is interested in whether rules around affordability assessments, consumer credit regulations, and alternative lender licensing are inadvertently blocking legitimate SME finance products.

Late Payment Culture and Cashflow Strain: The Hidden Leverage

One of the most pressing issues facing UK SMEs—and a likely focal point in the FCA's engagement—is late payment. Late invoices are a leading cause of working capital stress for founders, especially in B2B sectors like manufacturing, construction, and professional services. When a major customer delays payment by 60 or 90 days, a young business can face severe cashflow distress, forcing costly borrowing to meet payroll or supplier obligations.

The UK has statutory frameworks to address this: the Late Payment of Commercial Debts (Interest) Act 1998 and insolvency law provisions. However, enforcement remains weak. Many SMEs avoid invoking late payment clauses for fear of damaging relationships with larger clients. This power imbalance is particularly acute for startups and early-stage suppliers.

The connection to finance access is direct: when cashflow is unreliable, SMEs struggle to meet affordability criteria for bank loans or demonstrate stable revenue to investors. The FCA's review is likely to touch on whether regulations around consumer credit or lending affordability rules inadvertently penalize businesses with legitimate seasonal or customer-concentration patterns.

The Insolvency Service's monthly statistics and Companies House filing data provide real-time signals on financial distress across sectors. As a founder, monitoring insolvency trends in your sector can serve as an early warning signal for broader funding tightness or customer payment risk.

Insolvency data is one of the most reliable barometers of SME financial health. Rather than relying on outdated forecasts, cross-reference current Insolvency Service data releases and Companies House filing trends to understand sector-specific stress.

Key patterns to watch as a founder:

  1. Sector concentration: If insolvencies spike in your vertical (e.g., hospitality, retail, professional services), it signals tighter margins and customer payment discipline across the board. Lenders and investors will price in higher risk.
  2. Regional variation: Some regions show higher insolvency rates, often reflecting weaker regional economies or sectoral concentration. If you're based in a higher-stress region, expect longer fundraising timelines and stricter terms.
  3. Company age: First and second-year company insolvencies are leading indicators of founder overconfidence on cashflow or underestimation of early costs. This is why lenders and investors now demand longer operating history before offering growth-stage debt or equity.

The FCA's 2026 call for input is partly a response to visible stress signals in these datasets. The regulator wants to ensure that regulatory barriers are not turning temporary cashflow strain into permanent inability to access emergency financing.

Current Funding Pathways: SEIS, EIS, Loans, and Alternatives

For UK founders in 2026, understanding the available finance routes—and their regulatory context—is essential:

SEIS and EIS (Tax-Advantaged Equity)

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) remain the primary tax incentives for UK early-stage fundraising. However, HMRC administration has tightened, and some early-stage investors have pulled back due to compliance complexity. The FCA is not directly overseeing these schemes, but tax-related friction can reduce investor appetite.

Bounce Back Loans and Recovery Loans

Post-pandemic loan schemes have wound down, leaving a gap for small ticket unsecured lending (under £250,000). The FCA is likely exploring whether regulatory rules on consumer credit or lending conduct are raising the cost of delivering small-ticket loans, effectively pricing young SMEs out of the market.

Alternative Finance and Fintech

Invoice financing, asset-based lending, and revenue-based financing have grown, but regulatory scrutiny of these channels (particularly around consumer credit definitions and affordability) has increased compliance costs. This, in turn, raises pricing for borrowers. The FCA's call is partly seeking to understand whether current frameworks are future-proof for non-traditional lenders.

Bank Lending and Relationship Managers

Traditional high-street bank lending to SMEs remains the largest source of external finance, but availability is tight. Many banks have consolidated SME relationship teams, leaving founder access points fewer. The FCA's Competition & Consumer Protection powers may be relevant here—the call could explore whether market concentration among lenders is reducing choice for SMEs.

What Founders Should Do Now

While the FCA's March 2026 call for input unfolds, early-stage operators should take concrete steps to strengthen their funding resilience:

Build a 12-Month Cashflow Forecast

Lenders and investors will scrutinize cashflow more carefully. Use Innovate UK tools or accounting software to model seasonal dips, customer concentration, and late payment scenarios. This demonstrates financial maturity and helps you identify funding needs early.

Understand Your Credit Terms

Review customer payment terms. If you're routinely granting 60+ day terms to win contracts, you're transferring cashflow risk to your business. Consider invoice financing or supply-chain finance to bridge gaps without relying on overdrafts or equity dilution.

Engage with Your Sector Body

The FCA is actively seeking input from industry bodies, trade associations, and founder networks. If you have direct feedback on funding barriers in your sector, share it with your industry representative. The FCA's listening period extends through May 2026.

Explore Regional and Specialist Lenders

Community development finance institutions (CDFIs), regional venture firms, and specialist sector lenders (e.g., green finance, life sciences) may offer better terms or faster turnarounds than high-street banks, particularly for underrepresented founder demographics or regional businesses.

Plan for Multiple Funding Sources

Rather than betting on a single debt or equity pathway, layer funding: a small overdraft facility plus invoice financing plus retained earnings, for example. This reduces dependence on any single lender and buffers against regulatory or market shifts.

Forward-Looking: What to Expect Later in 2026 and Beyond

The FCA's call for input will close in May 2026, with findings published later in the year. Based on the regulator's stated priorities and the visible market stress, a few outcomes are likely:

Regulatory clarification on affordability rules: The FCA may issue guidance clarifying that certain SME lending products (particularly invoice finance and asset-based lending) should not be subject to the same affordability tests as consumer credit. This could lower compliance costs for lenders and improve availability.

Competitive analysis: The FCA may refer data on SME lending concentration to the Competition and Markets Authority, potentially triggering a review of whether market consolidation among high-street banks is limiting choice.

Innovation sandbox expansion: The FCA's sandbox for regulated innovation testing may expand to include more fintech SME finance solutions, particularly in supply-chain finance and alternative underwriting models.

No rapid legislative change: It is important to note that even if the FCA identifies barriers, changes to primary legislation (e.g., the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974) take years. Regulatory guidance and sandbox approvals are more likely near-term outputs.

For founders, this means the funding environment will likely remain tight through 2026, with gradual improvement in specific niches (green finance, tech, life sciences) where investor appetite remains strong. Building financial resilience now—through cashflow management, diversified funding sources, and relationship-building with specialist lenders—is the most pragmatic response.

The FCA's call for input is a recognition that the system needs adjustment. It is not a guarantee of rapid change, but it signals that regulators are listening. Founders who engage with this process—by responding to calls for evidence, joining sector bodies, and demonstrating how regulatory barriers affect real businesses—can help shape the funding landscape for the next generation of UK startups.