The Autumn Statement has come to a close, and one of today’s many announcements was around the Funding for Lending campaign. It’s a scheme that was launched by the Bank of England (BoE) and the government back in July 2012 with a view to lend banks money cheaply in order to encourage more of them to to provide business loans at a lower rate – ultimately, jumpstarting the economy.
It has received mixed reviews, however, with SMEs still being refused loans by banks, while some companies are hesitant to begin borrowing.
During his statement, George Osborne noted: “The government has succeeded in making Britain the most entrepreneurial economy in Europe.”
With a view to keep that trend ongoing, he revealed plans to ensure growing SMEs have the opportunity to access funding, saying: “With the governor of the Bank of England, I am extending the Funding for Lending scheme by a further year – and focusing it exclusively on smaller firms.”
The announcement claims the 2015 edition will run until 29 January 2016 and that the funding mission will continue even in the face of banks encountering strain.
Also contained within the government’s entire business funding announcement was an extra £400m to extend Enterprise Capital Funds, the government-backed venture capital funds, as well as £500 million of new bank lending. The £500 million will be allocated through the Enterprise Finance Guarantee Scheme, an initiative first set up by the Labour government.
In 2015, participants of the Funding for Lending scheme will be able to draw £5 of funding for every £1 of net lending to small businesses.
That said, these plans have already been met with resistance by the industry. Ross Cocker, corporate partner at accounting firm Clement Keys, said: “Not sure why the chancellor thinks it is worth persisting with this scheme.
“While a good idea in theory, getting access to loans is still a frustrating area for many businesses and SMEs have long since started to vote with their feet by opting for alternative lending such as crowdfunding. The bottom line is that fewer companies are using traditional bank loans and many firms still feel they are hard to come by.”
Read more on crowdfunding:
- Taking the Seedrs crowdfunding platform to the slowly-adopting US
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- Actress Sadie Frost turns to crowdfunding for her film company
Jervis Rhodes, head of corporate banking at BLME, added: “It looks as though the wishes of SMEs have been granted in the chancellor’s Autumn Statement this afternoon. The government’s proposed near-uffe11bn package for SMEs is welcome news and will help meet the aim of unlocking uffe110bn of SME financing by 2018.”
The FLS is still flawed though, as Rhodes went on to reveal the company’s mid-market research shows 74 per cent of business owners want the government to do more to support lending to mid-sized companies.
Rhodes, continued: “Whilst today’s announcement will go some way to helping this, we still run into the problem of mid-market firms being lumped under the ‘SME’ label.
“The funding needs of small and medium sized companies differ heavily and a one-size fits all approach simply does not work. Mid-sized companies need to be treated separately in order to effectively service their funding requirements, supporting their growth ambitions and in doing so also support one of the UK’s most important economic sub-sectors.”
Read more on the Autumn Statement:
- New protection for peer-to-peer retail investors
- Extension of business rates relief
- Full transcript of George Osborne’s speech
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