Lending to SMEs increases through Bank of England scheme » SMEInsider

Lending to SMEs increases through Bank of England scheme

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The Bank of England has released new figures regarding its Funding for Lending scheme (FLS), in which net lending to small and medium-sized businesses rose by £490m during the second quarter. Find out which bank lent the most to SMEs in the past three months.

‘Loosening credit conditions’

According to the group’s usage and lending data statistics, net lending to SMEs from banks and building societies increased by £490m, with 34 organisations participating in this quarter’s FLS Extension.

Net lending to small and medium-sized businesses rose by £648m in the first quarter of 2015. The bank claimed that a ‘‘a loosening in credit conditions for SMEs’’ is the biggest contributing factor towards the increase in business lending.

‘‘Banks are using the Funding for Lending Scheme to lower the cost of borrowing for businesses. This means that lenders are offering a range of highly competitive deals at a time when interest rates are already at a record low,’’ explained Irene Graham, director of business finance at the British Bankers’ Association.

The scheme, which was first launched by the Bank of England in 2012 and will run till at least January 2016, is gaining serious attention from British banks. Lloyds came out on top as the biggest lender to SMEs this quarter, with its net lending increasing by £527m.

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Challenger bank Aldermore followed Lloyds, as it increased its net lending to SMEs by £122m.

Low small business confidence

The Bank of England used the Federation of Small Businesses (FSB) Voice of Small Business Index as evidence to detail the loosening in credit conditions. The FSB found that credit availability for small businesses increased slightly in 2015 Q2.

Apart from credit conditions improving slightly, there wasn’t much in the way of good news within the FSB’s latest index.

Small business confidence has lowered significantly during the recent economic quarter, with confidence levels at +20.3 points, down 17.6 points from last quarter. According to the FSB, ‘‘this is lower than this time 12 months ago (+41) but shows confidences still in positive territory.’’