Funding for Lending Scheme will be extended for two more years

Bank of England to retain initiative which encourages banks to offer low rate lending to small businesses and entrepreneurs

The government’s Funding for Lending Scheme (FLS) has been extended for another two years as official figures show that lending to small and medium-sized enterprises has picked up following several years of decline.

Launched in 2012 by the Bank of England and HM Treasury, the FLS provides commercial banks with cheap loans to encourage low rate lending to small businesses and entrepreneurs.

Although its initial remit was to boost mortgage and business loans, the scheme turned towards lending to small businesses in 2014.

Originally due to expire at the end of January 2016, the facility will now be gradually phased out over the next two years with banks losing their drawdown allowance over the period.

Earlier this year, Growing Business reported that the scheme’s future was in doubt after lending to small firms through the scheme had continued to fall every year; decreasing by £810m in the final quarter of 2014 alone.

However, in August credit to small businesses went flat and then began to pick up throughout September – growing 3% and then rising 7% in October.

Mark Carney, Bank of England governer, said: “As conditions have normalised for particular sectors over the life of the FLS, we have consistently reduced the scope of this temporary scheme and focused support where it is needed most.”

“The announcement today continues that tapering, supporting continued improvement in small business credit conditions as the economic recovery takes hold, while gradually withdrawing that support over the next two years.”

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