AFCA highlighted that not all small business lenders are required by law to be members of the authority. Consequently, businesses that secure loans from non-AFCA member lenders may find themselves without recourse to external dispute resolution services if issues arise.

For small and medium-sized enterprises (SMEs), this situation underscores the importance of due diligence when selecting a lending institution. To mitigate potential risks, SMEs should consider the following steps:

• Verify whether a prospective lender is a registered member of AFCA, ensuring access to dispute resolution services if needed.
• Thoroughly review loan agreements, paying close attention to terms, interest rates, and any hidden fees.
• Seek professional financial advice to understand the implications of engaging with non-regulated lenders.

By taking these precautions, SMEs can better protect themselves from potential financial disputes and ensure they have access to appropriate channels for resolution. In an increasingly complex lending environment, informed decision-making is crucial for the financial health and sustainability of small businesses.