SME access to finance still an issue

Net lending under the Funding for Lending Scheme (FLS) was three times higher in the third quarter of this year than it was in the second, the latest data from the Bank of England has shown.

The report states that:

  • Lending increased by £5.8 billion over the quarter, up from £1.62 billion in Q2
  • £5.1 billion was lent to households 
  • £3.6 billion was lent to private companies.

The report admits, however, that small and medium-sized enterprises (SMEs) are still having difficulties accessing credit, despite an increase in lending and falling interest rates. Paul Fisher, executive director for markets at the Bank of England, said that the credit supply to businesses remained "relatively subdued, especially to SMEs."

In acknowledgement of this, the Bank has recently announced that the FLS will be re-focused to provide added incentives for banks to lend to SMEs.

John Longworth, director general of the British Chambers of Commerce, said:

"It is really encouraging that overall lending is rising, as this will boost the confidence of businesses across the UK. However, the real litmus test for the Funding for Lending scheme is whether it can really get finance flowing to SMEs, and unfortunately the improvement in credit availability is still mostly being felt by the usual suspects in the mortgage market and among large firms.

"The re-focusing of FLS towards business lending plus the announcement that the British Business Bank will receive an extra £250m are both positive steps in the right direction. Both are evidence that policymakers are listening to SMEs about the continued difficulties they face in accessing finance."