RBS slashes interest rates for small firms
1% cut represents ‘best ever’ lending terms
UK banks RBS and Natwest announced on Wednesday that they will use the Bank of England’s new ‘Funding for Lending’ scheme to offer an average 1% reduction in interest rates for small firms, a move that the banks claim represents their ‘best ever’ terms.
The recently announced £80bn Funding for Lending scheme aims to arrest the decline in bank lending to individuals and businesses by making low-cost funds available to banks and building societies. Lending has fallen 16% since its peak in 2008. The RBS Group claim that the new rates will save small businesses £4,000 on the cost of an average loan and will save around £100m in total over the life of the scheme, which will be introduced from 1 August. The group also announced that arrangement fees will be abolished on £2.5bn of new lending, which it claims will save small firms a further £40m in fees. Mike Cherry, National Policy Chair of the Federation of Small Businesses, commented: “This is a welcome move by RBS to reflect some of the problems the smallest businesses have been facing in the cost of finance. We are especially pleased to note there will be no ‘up front’ arrangement fees coupled with the additional reduction to the actual cost of the loans. To really instil confidence, we would urge RBS to ensure they have robust procedures in place so that those businesses that have a good business plan now get the money they so desperately need to grow.”