The Funding for Lending scheme was set up by the Bank of England with the support of the government to make it easier for entrepreneurs to set up a business.
The scheme allows building societies and banks to approach the Bank of England to borrow money at rates cheaper than standard, for up to four years. In turn, the banks and building societies can offer lower interest rates and access to credit to businesses.
It’s not uncommon for small and medium-sized businesses to require a loan during the early stages of the company. Accessing the finance isn’t always that easy though.
What’s changed?
Recently, there’s been plenty of reason for small businesses to be optimistic about what the future holds for their finances. It was announced that the Funding for Lending scheme is now a great deal more centric on small and medium businesses, helping them get access to finance in those difficult start-up years. The scheme will run until January 2015. There’s also the promise of more access to low-interest funding for banks lending to small businesses.
The news that the UK economy has grown by 0.7% means, if someone tentatively, that we are no longer in the grip of a recession. The GDP is still below the level it was before the 2008 financial crisis, but things are still getting better. Nonetheless, now more than ever, small businesses need some financial aid to get things off the ground.
The FLS is now geared at offering more credit at fairer rates to small businesses, thanks to the fact that lending banks are now being offered 10 times more access to the low-interest funding which is so important to SMEs.
Writing for SME energy supplier Make It Cheaper, Kevin Gill writes: “The government’s Funding for Lending scheme has been tweaked and extended – and the UK is not going through a triple-dip recession. They’re both reasons for small and medium-sized businesses to be cautiously optimistic,” writes Kevin Gill.
The Enterprise Finance Guarantee
Set up to help out businesses which do not have a proven track record with which to apply for a loan, and EFG provides a 75% guarantee on each loan, with a 20% limit on claims from the portfolio of the lender. The business pays a premium for this.
The government is also set to work with the British Banker’s Association to further improve the services available to small business owners. This will allow SMEs to directly appeal to the bank if they happen to be refused a loan. It will also give small businesses the chance to ask banks precisely what they lend.
