4 August 2012

£80bn Funding for Lending Scheme Now Available to Businesses

The previously announced £80bn scheme designed by the Bank of England and Treasury is now active and available to all qualifying businesses based in the UK, it started operating officially on the 1st of August 2012. The main purpose of this scheme is to facilitate money lending by banks by offering their customers competitive loans.

It was stated by the UK Chancellor George Osborne that the purpose of the scheme is to provide businesses with an easing of credit conditions available to them. In this context, this new scheme in operation now, marks the end of the previous scheme of £20bn named "National Loan Guarantee Scheme" with the same purpose in mind.

The UK Chancellor George Osborne stated: "This more generous FLS (Funding for Lending Scheme) has officially opened for business and will in time effectively take over from the National Loan Guarantee Scheme, delivering credit easing to the whole economy".

The way it works is by providing British banks with funding at low interest rates over a four year period.  The amount of  funding available to Banks is directly linked to the lending performance to be measured by the amount of credit provided to their qualifying customers.

This new scheme may be welcomed by UK businesses as the availability and cost of credit are important considerations so that the conditions are favourable for economic growth. Nevertheless, Eurozone uncertainty does affect business confidence and future plans, in this context, businesses ultimately will decide whether this is the right time to borrow and further invest in the economy from this scheme or if it does suit their particular concerns.