Lending to small businesses under Funding for Lending falls £435m
Net lending to small businesses under the Funding for Lending scheme, the government's attempt to persuade banks to lend to businesses cheaply, fell £435m in the three months to the end of June, figures from the Bank of England have shown.
Although the net lending figure does not show a total – instead, it shows payments made to small firms less the repayments they made on loans under the scheme during the quarter – figures published by the Bank of England in June suggested banks lent a total of £4.8bn to small firms.
The government launched the Funding for Lending scheme two years ago as a way to encourage lending to small businesses, but it has been widely regarded as a failure. Although it was popular as a way for banks to lend to mortgage customers, in November 2013 the Bank of England scrapped that part of the scheme to focus on small businesses.
So far, though, that has proved unpopular among banks, with total net lending falling by £3.9bn.
In January, the scheme was extended for another year, although today's data showed only nine of the 36 participants in the extension drew funds from the scheme during the second quarter.
Lloyds Banking Group, which is still part-owned by the government, was the biggest borrower under the scheme, drawing £2bn worth of cash during the quarter, and a total of £14bn since it was launched, while Virgin Money borrowed £600m, bringing its total to £1.8bn.
James Meekings, co-founder of peer-to-peer lending site Funding Circle, said:
Funding for Lending is failing to help the thousands of British businesses that need finance but can't access it. It is time to accept that these types of support facilities, using banks as the primary distribution channel, are no longer the answer.