Good news for SMEs! Chancellor George Osborne has extended the £80bn Funding for Lending scheme (FLS) to January 2015.
For every £1 of net lending in 2014, banks will be able to borrow an extra £5 from the scheme. To encourage a quicker uptake of the FLS, for every £1 banks lend before the end of 2013, they will be able to draw £10 from the scheme. Leasing companies will also be able to access the cheaper funding through the FLS.
Osborne expects that the extension of the scheme will boost investment in SMEs and build confidence in the economy.
“This is a big boost for the small and medium sized businesses that are at the heart of the British economy,” Osborne said.
“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.”
In a press statement, the Bank of England said that the extension would help improve credit conditions for SMEs compared to last year.
Sir Mervyn King, BoE Governor, said: “The changes announced today build on that success by broadening the scope of the scheme and ensuring that it will continue to support the supply of credit, especially to small companies, into 2015.”
Matthew Fell, CBI director for Competitive Markets, said: “Funding for Lending is already making a difference in the housing market and there are signs that it is starting to lower the cost of finance for businesses.
“The additional incentives for banks should accelerate activity in the small business financing market.
“But we need to be realistic – Funding for Lending is only one piece of the finance jigsaw. Boosting firms’ confidence by raising awareness of the various funding schemes available is critical.”
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