Interest rates on new bank loans under £1 million rose from an average of 3.76 per cent in Q2 to 3.85 per cent in Q3, according to findings from Syscap.
This suggests that Funding for Lending, launched on August 1, made little impact on the cost of borrowing for small businesses, says the organisation.
In contrast, average interest rates on loans over £20 million for large businesses did benefit, falling from 2.48 per cent to 2.34 per cent over the same period.
Syscap says that while the figures show that Funding for Lending may be having a positive effect on borrowing costs for larger businesses, it is failing to help smaller companies, those most in need of improved access to finance.
Philip White, CEO of Syscap comments, ‘While Funding for Lending seems to be having a positive effect for some, small businesses are still struggling to get loans at commercially viable rates.
‘After more than four years of serious attempts to stimulate bank lending, no scheme has managed have a substantial impact on lending to small businesses.’
White adds that the Enterprise Finance Guarantee and National Loan Guarantee schemes have already tried, and failed, to make finance more widely available to SMEs at affordable rates. ‘The government must ensure that Funding for Lending does not turn into a missed opportunity like they did.’
Syscap says that the government should open the Funding for Lending scheme to the leasing sector. Independent leasing companies that are not bank-owned are currently not eligible for cheap loan funding under the scheme.
White explains, ‘The leasing sector is currently locked out of Funding for Lending, despite its track record of getting much-needed finance to the UK’s small businesses. Funding for Lending already needs a boost, and this would be an effective way of getting loans to those who need it most.’