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How the Bank of England Could Help SMEs

According to some experts, the new Bank of England Governor needs to make more of his current powers in order to help small and medium businesses with access to funding.  With small business lending in need of a boost, there is hope that the new governor will prioritise helping SMEs with their access to funding as well as helping the economy as a whole to grow more positively in 2013. So how are experts saying that the governor could help small businesses?

1) The Bank of England needs to start using its powers under the Quantitative Easing programme to start directly lowering borrowing costs for SMEs. This could be possible by purchasing leases and other bundles of asset backed loans from lenders, letting them provide new funding for SMEs, effectively driving down their costs of borrowing.

2) The governor needs to clarify how long the Bank of England intends to hold interest rates steady for. SMEs will therefore be more confident about investing and expanding their businesses if they know for how long interest rates will be held down. Speculation and uncertainty is holding many businesses back from making important investments which could help them to grow.

3)  Funding for Lending should include all bank lending to leasing companies, opening up the scheme to bank finance provided to businesses through independent leasing companies for ‘finance leases’. At the moment it is not eligible, despite this being one of the most popular ways for SMEs to fund investment in IT, plant and machinery. As it stands, it is unnecessarily expensive and the Bank of England needs to look to improve this.

There are many other things that the Bank of England needs to address, but these points are among the most important for many small businesses.

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