While the media reports that we are still within the grip of a financial crisis, there’s reason enough for small businesses to be optimistic.
One good reason for this is the Funding for Lending (FLS) scheme. Set up to support business start-ups and young companies, the FLS works by offering building societies and banks cheaper rates to borrow money from the Bank of England. By extension, banks will be able to offer lower interest loans to businesses.
Since it’s not uncommon for young companies to require loans at the start-up stage, this comes as a ray of light in an otherwise bleak economy for SMEs.
While the FLS was previously open to large and small businesses alike, recent changes have made it more focussed on the latter. The scheme offers simpler access to finance thanks to the additional low-interest loans banks can now lend to small businesses.
FLS is geared towards offering fairer credit rates to small businesses. Lending banks and building societies are being offered ten times more low-interest funding access.
The future is bright
According to Sky News, GDP was struggling at -0.3 per cent at the end of last year. A growth of 0.6 per cent in the first quarter of 2013, however, has left the economy at a promising 0.3 per cent. So, while the UK economy has certainly seen better days, companies are cautiously optimistic about the future of the economy.
A spokesperson from Make It Cheaper commented: “It’s a sign that things are gradually improving, but the GDP is still 2.6 per cent below the level it was at before the financial crisis in 2008. A healthy economy grows by ten to 12 per cent over a five-year period. So it’s clear that we’re still living in challenging times.”
While there’s still every reason to be cautious, it’s an improvement that was sorely needed.
The Business Bank Investment programme and EFG
To encourage smaller lender growth, the government has agreed to invest £1bn into the growth of SMEs as part of the Business Bank programme’s first phase. Hoping to encourage businesses to look somewhere other than the high-street for loans and investment, the Business Bank programme will encourage new businesses to apply for loans during those tricky starting months.
The Enterprise Finance Guarantee (EFG) was designed to help out businesses who wish to apply for a loan but do not yet have a proven track record to do so. The EFG provides a 75 per cent guarantee on each loan. There is, however, a 20 per cent limit on claims coming from the portfolio of the lender – the business in question pays a premium for this loan.
Kevin Gill is a business writer and regular contributor to MakeItCheaper.com, which helps businesses get a better deal on a range of overheads.
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