By Daniel Hunter
Responding to the changes announced by the Chancellor to the Funding for Lending Scheme (FLS) the Forum of Private Business has expressed the need for it to actually help the smallest of firms.
The employer support organisation said while today’s development of the BoE’s flagship scheme was good news for cash starved SMEs, it described the fine tuning as an essential change.
“While Funding for Lending may have worked to boost mortgage markets, to date it’s not worked as well for small businesses. Anecdotal evidence suggests smaller firms and start-ups are the ones really struggling to source affordable credit so a heavier incentive to finance those businesses is welcome," Alex Jackman, the Forum’s Head of Policy, said.
And with the BoE only recently saying UK banks are still short on capital, it’s not unlikely lenders will continue to shrink business lending as they seek to shore up finances.
“Ultimately, we need to see the FLS getting more cash to those businesses who need it most. But these schemes must be simple to use for finance providers and their availability to small businesses must be well communicated for it to be a success.
On the extension of FLS to financial leasing corporations and factoring corporations.
“While asset finance will be of help to some micro-businesses, smaller firm with fewer assets are less likely to benefit, while many organisations who deal in this kind of loan product demand turnovers in excess of a million. Appeal could be limited for the smallest employers.”
On the extension of the scheme
“Many will see this as the last throw of the dice for FLS to maintain confidence in the SME lending market so government really needs to make sure it is working for both businesses and banks, otherwise it will be small firms that yet again suffer. You can’t keep fine tuning something and continue to get it wrong.”
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