The Bank of England’s announcement that it is providing a two-year extension to the Funding for Lending Scheme (FLS) has given a boost to the growing number of challenger banks and SMEs on hunt for cheaper finance and access to funding.
The FLS was launched in 2012 at the height of the credit crunch and was designed to provide banks with a cheaper source of funding which in turn would be passed onto SMEs in the form of cheaper loans.
As we have discussed in previous blogs in the years since the scheme was launched it has drawn criticism that its effectiveness was questionable. This may be the case amongst the High Street banks where usage has been patchy (except for part Government-owned Lloyds) but the rising challenger banks have taken advantage.
The latest figures available to the end of June 2015 in respect of the second tranch of FLS funding show how much banks which have accessed the scheme have outstanding. The figures also show that smaller lenders have taken advantage.
Yorkshire Building Society £3b
Virgin Money £2.7b
Coventry Building Society £2b
Skipton Building Society £855m
The extension which has been announced will provide those banks participating in the scheme with additional flexibility to draw any unused drawing allowances up to 31 January 2018. The extension also introduces a gradual phasing out, with borrowing allowances reducing over time. The reasoning behind this phasing is to minimise the risks of a sudden withdrawal of funding support.
The Bank of England has also announced that there will be a separate part of the scheme to allow new banks which are not already participating to draw against new allowances over the two-year extension. This is to ensure that new banks, which may not otherwise have any borrowing allowances under this extension given the lack of a prior lending history, are not put at a disadvantage relative to other banks that have access to the scheme. This will provide newer lenders with a window of opportunity to take advantage of the scheme so widening funding options for SMEs.
Looking at the latest bank lending figures to the end of September SMEs are benefiting from increased bank lending. The figures show that gross lending (new loans and utilised overdrafts) in September amounted to £5 billion. However, set off against this is the amount of loans and overdrafts repaid in the month which came to £4.5 billion and as a result net lending to SMEs was to £500 million to the positive.
An increase in the net lending figure is coming more frequent and in the 12 months to September the growth in amounts outstanding to SMEs (loans and overdrafts) was 0.7%. Doesn’t sound a lot? Compared to historic figures of a fall in amounts outstanding of 3% to 4% this nominal increase is a major win!
There is still way to go but with the FLS extension and a growing range of finance options SMEs are in a far better place than they have been for a long time.
Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.