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News - 25 April 2013

Funding For Lending Scheme Given Makeover

The Funding for Lending Scheme (FLS) to boost the economy has been extended and reworked in an attempt to help get more credit to small firms. The Bank of England and the Treasury said a new phase of their flagship FLS would be heavily skewed towards smaller firms.
 

Banks taking part in the programme will also now be able to lend to alternative providers of credit - such as leasing firms which often work with small companies - as well as mortgage and housing credit corporations.
The scheme was launched last summer to offer banks and building societies funding at low interest rates on condition they are passed on to households and businesses.

But while it has been helping the home loans sector, it has failed to make an impact on small businesses which have complained of remaining starved of credit.

Bank figures last week showed net lending to companies had slumped by £4.8bn in the three months to February.

Under the new deal, every pound of additional lending to small and medium-sized enterprises (SMEs) next year will allow the lender to access £5 of discounted funding from the Bank. The ratio in the rest of the scheme is 1:1.

Lavinia Newman, founder of ABDS comments:
“The Bank and the government see a lack of credit to small businesses as a major factor behind Britain's very slow recovery from the financial crisis. In a bid to speed up the flow of much-needed credit into the system, each pound lent to SMEs for the rest of this year will allow a draw-down of 10 times that in 2014.”

The Treasury said there was "no upper limit to the scheme" and the move was hailed by the Chancellor George Osborne, who said: "This is a big boost for the small and medium-sized businesses that are at the heart of the British economy.

"The Funding for Lending Scheme has already reduced the costs of household mortgages and loans for businesses. This innovative extension will now do even more for small and medium-sized businesses so that they can play their full part in creating new jobs."

Adam Marshall, policy director at the British Chambers of Commerce said:
"What a lot of SMEs (small and medium-sized enterprises) will be looking for is money actually getting to the front line on reasonable terms, and not just to the safe bets."

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“Employers groups want more competition in Britain's banking sector as a way to spur fresh lending. Those hopes suffered a blow on Wednesday when the planned sale of 630 bank branches by Lloyds to the Co-Operative Group fell through. But the 10-to-1 ratio to increase bank lending to small firms this year would help banks such as Royal Bank of Scotland and Lloyds, which are Britain's biggest business lenders.”

If you need any help and advice for your business on financing, cash-flow, management accounts, business development or any other business related matter contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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