A new scheme designed to deliver cheap credit to banks in order to boost the economy was launched by the Government and the Bank of England on the 1st August.
Under the Funding for Lending Scheme (FLS), banks and building societies will be able to borrow funds at cheaper rates than normal, and then lend this money to help businesses and individuals access more credit. Up to £80 billion will be available to institutions over the next 18 months, and the lenders will have to meet lending volume targets in order to take full advantage of the scheme.
Banks will be given the incentive that if they lend more, they will be able to borrow more from the FLS and at further lower cost. Because the Scheme gives lenders greater benefit the more they lend, it is hoped that some of this benefit will now filter through to the business community and to households.
Early indications are that the FLS has already prompted some mortgage lenders to offer cheaper rates on long-term loans.
It is anticipated that another recent Government initiative - the National Loan Guarantee Scheme (NLGS) – is likely to be phased over the coming months, as FLS becomes fully embedded. NLGS was introduced in March but figures suggest it has failed to achieve the desired increase in lending to businesses.
As with other Government lending schemes, the FLS is available through the major High Street lenders. If you have any questions or would like help approaching a lender for business finance give us a call.
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