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News - 28 September 2012

Doubts linger over the Funding for Lending Scheme (FLS)

Major Lenders have cast doubt on whether a new scheme will boost lending to small businesses, although mortgage seekers may benefit. The Bank suggested it had already started to free up the mortgage market.

The increase in the availability of mortgages hit a five-year high in the third quarter of the year, according to the Bank of England's Credit Conditions Survey. However, applications for these home loans were largely restricted to those who could offer a hefty deposit.

The availability of credit to firms was flat in the third quarter of the year and lenders expect it to remain unchanged by the end of 2012.The Bank of England's Funding for Lending scheme aims to kick-start lending and the economy.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
"Unfortunately, the bulk of the loans being made available has been focused on mortgages, Company loans can be secured but not by the companies that need them most, namely the start-ups and SMEs that drive the economy."

The Funding for Lending scheme, run by the Bank of England, is designed to stimulate the economy by making cheaper loans available to firms and individuals. Some 13 institutions have signed up, including five of the big six UK banks. The exception is HSBC. The institutions can borrow the equivalent of up to 5% of their loan books immediately, and more if they meet certain conditions over the next year.

However, the Credit Conditions Survey found that the availability of credit to the corporate sector was reported to have remained unchanged for small, medium and large companies in the third quarter of the year.

And lenders said credit was expected to remain unchanged for firms of all sizes in the final three months of the year.

Figures released on Tuesday by the British Bankers' Association (BBA) found that mortgage approvals for house purchases were down 13% in August compared with the same month a year earlier. However, the Bank's survey found that lenders expected the trend of greater availability of mortgages to continue in the final three months of the year.

This access may also be available to those with smaller deposits.

If you need any help and advice for your business on the implications of Government Funding initiatives and or starting up a new business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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See also  Government launches funding for lending scheme 
                  The Funding for Lending Scheme (FLS).

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