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BoE extends Funding for Lending scheme for small businesses

The Bank of England in its infinite wisdom has decided to extend its Funding for Lending scheme to provide more opportunities for small businesses.

If you’re not familiar with the FLS, it’s an initiative designed to provide “easy access” financing to small businesses, sole traders, entrepreneurs, and even some contract workers and freelancers in certain instances. The scheme involved providing incredibly low-cost capital to banks at wholesale interest rates; High Street in turn was supposed to pass on the savings to SME owners and sole traders looking to finance their operations through likewise attractive interest rates.

FLS was, on the outside, likely a good idea. Then again, Communism looked good on paper as well, didn’t it? The truth of the matter is that most banks would take the cut-rate capital and “offer” it to those it felt qualified for an FLS business loan. The problem is that High Street was often accused of making the qualifications so blasted high that not even those with spotless credit histories could gain access to lending in many cases. In other words, the last few years of the programme were viewed as less successful in putting working capital or investment capital in the hands of those who would most benefit from it. Banking officials denied any such behaviour of course, which surprised no one; in the end, Funding for Lending was supposed to come to an end at the beginning of 2016.

However, the Chancellor of the Exchequer has convinced the Bank of England to somehow, keep FLS alive for two additional years. Now, the scheme will end in the early days of 2018, providing two more years of opportunities for High Street banks to stuff their coffers full of low-cost wholesale funds and continue to not lend it out to those who need it.

I really don’t know what to think of this. Honestly I had forgotten all about FLS, sort of dismissing it as one of those failed grand experiments the Government engages in from time to time. I suppose I’m gratified to hear that it will still be around for another two years, as perhaps there will be some budding entrepreneurs who will actually be able to convince High Street banks to part with some of that dosh. Am I holding my breath for it to happen, though? Absolutely not. But then again I’m more than a bit of a misanthrope and a curmudgeon, so I expect the worst. Your mileage, of course, may vary – but I doubt it.

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