The new Funding for Lending program aims to encourage banks to lend to small businesses – however, will this actually work? Some experts believe that this program is aimed more at supporting the UK economy than supporting small businesses.
Some experts have said that we can’t expect every bank that is taking part in the scheme to increase its stock of lending over the next year and a half. Under the scheme, banks can borrow for as little as 0.25% a year so long as they maintain or increase the amount that they lend.
Bank of England figures show that 13 banks and building societies have signed up for the scheme. In total, these institutions have current outstanding lending to householders and businesses of £1,211bn, including mortgages and business loans. However, of the five big banks, only HSBC has not signed up for Funding for Lending, claiming it doesn’t need the extra funds.
Figures from the British Bankers’ Association show that lending to non-financial businesses continues to fall, with net lending decreasing by £1.5bn last month. For businesses looking for extra funding this isn’t good news – for most, the banks are still the first port of call. It’s still questioned whether Funding for Lending will actually be used to help small businesses, or whether the scheme will be used to boost profits for the banks.
If your business needs extra funding then it’s worth looking into all your options, including alternative finance outside the banks. Though government schemes such as Funding for Lending could make a real difference for SMEs, there are still doubts over the real benefits that will be felt by the businesses themselves. So, if your business needs help with funding, it’s worth being proactive and exploring all your options – such as invoice finance.