If there’s one problem that hampers fledging businesses and holds back SME expansion plans it’s the access to credit. Accountants are only too well aware that it doesn’t matter how bright your idea might be, or how costed-out your business plan might be; if there’s no one out there willing or able to lend you the funds to pursue your dream, then your plans will ultimately be scuppered. The government’s Funding for Lending Scheme was meant to address some of these problems, and to a certain extent it has met its brief.
Launched in 2012, the scheme was aimed at stimulating economic growth and entrepreneurship by incentivising banks and building societies to boost their lending to SMEs, UK households and non- financial companies. Since its launch in 2012 the Funding for Lending Scheme (FLS) has been redefined on numerous occasions; most recently it refocused towards lending for the UK’s small and medium-sized enterprises. However, the problem was the scheme was temporary, and that time- limited promise and that worried businesses.
The good news is that the Bank of England and HM Treasury have now announced that the Funding for Lending Scheme is to be extended for another two years. This latest pledge/extension promises to provide additional support for SMEs’ credit conditions. Whilst that is good news on the face of it, it’s worth noting that FLS is still almost certain to be phased out in 2018 with borrowing allowances expected to reduce between now and then so as not to hinder economic recovery.
According to the Bank of England, lending volumes to SMEs increased by £2.1bn this year, while net lending to SMEs by FLS participants was positive in the first half of the year. Nevertheless, it warns credit conditions for the small business community remain much tighter than for larger corporations.
Commenting on the announcement, Mark Carney, governor, Bank of England, said:
“As conditions have normalised for particular sectors over the life of the FLS; we have consistently reduced the scope of this temporary scheme and focused support where it is needed most.”
“The announcement today continues that tapering, supporting continued improvement in SME credit conditions as the economic recovery takes hold, while gradually withdrawing that support over the next two years.”
The decision to extend the scheme was warmly welcomed by the Chancellor. He added:
“I am pleased to say that we are extending the scheme until 2018, supporting more loans.”
“Given the improvement we’ve seen in credit conditions for households and large businesses; as our long-term economic plan moves from rescue to rebuild it is right that we continue to focus the scheme’s firepower on the small businesses that are the lifeblood of the economy.”
So how has business greeted the announcement? Well, the response has generally been favourable. Businesses feel that despite plans to phase out FLS within the next two years, there is a feeling within the UK small business community that the improvements to the scheme will help both fledgling lenders and SMEs better compete with the bigger, more established competition.
John Allan, national chairman, Federation of Small Businesses (FSB), said:
“Providing small lenders and newer entrants to the market with greater access to the scheme is a sensible move.”
“It should help them compete with the bigger banks and over time, provide businesses with a wider range of finance options.”
If your SME is having difficulty raising finance, and would like expert help and advice on business planning, raising funding or identifying the most-suitable sources of finance, then why not speak to Steven Glicher’s accountants? For further information call Steven Glicher on 0161 405 8007 or email firstname.lastname@example.org .