Chancellor George Osborne has announced an extension of the Funding for Lending scheme, which underwrites loans to businesses, for another year to January 2016.
The Funding for Lending scheme was originally introduced in 2012 as a government initiative to provide the economy with a much-needed boost and give banks the extra support they needed to start lending again.
Phil Orford, chief executive at the Forum of Private Business says, ‘The extension of the Funding for Lending scheme is a welcome measure to address ongoing small business confidence issues around the ability to obtain the finance they need to grow.’
However, Ross Cocker, corporate partner at Birmingham-based accountancy firm Clement Keys disagrees. He says, ‘Not sure why the Chancellor thinks it is worth persisting with this scheme.
‘While a good idea in theory, getting access to loans is still a frustrating area for many businesses and SMEs have long since started to vote with their feet by opting for alternative lending such as crowdfunding. The bottom line is that fewer companies are using traditional bank loans and many firms still feel they are hard to come by.’
Furthermore Xenios Thrasyvoulou, founder of online freelancer marketplace PeoplePerHour, worries that the extension is ‘just another carrot’ for many companies.
‘On the surface, any initiatives that provides support and access to funding for SMEs are welcome. The worry is that this extension… will be tantalisingly out of reach for many businesses that are desperately in need of capital and support.
‘The problem for small businesses has not been that lenders don’t have cash to lend, it’s that there are far too many hoops to jump through and red tape to cut to even get to the front of the line.’
Thrasyvoulous adds that, unless changes are made to the way this funding is accessed, the initiative will have ‘very little hope of doing what the government has earmarked it to do’.