Business lending remains stagnant despite the economic recovery and a push for higher lending, the Bank of England’s Funding for Lending Scheme (FLS) recently reported.

The scheme, which was designed to give companies greater access to finance, recorded another poor performance in the second quarter of the year. Net lending by banks fell by £3.9 billion between April and June.

Net lending to small and medium-sized enterprises (SMEs) fell by £435 million between April and June, following a decline of £719 million in the first quarter, the official figures show.

The British Chambers of Commerce (BCC) described the figures as disappointing.  John Longworth, director general of the BCC, said:

“Despite the welcome re-focus towards SME lending, the real test for the scheme has always been whether it is able to get credit flowing to young and fast-growing businesses. Unfortunately many of these firms remain frozen out when it comes to accessing the finance they need to fulfil their potential.”

Under the FLS, banks are able to access cheap loans on the condition they lend to businesses and the disappointing figures come despite the FLS now applying solely to business loans.

A third of small businesses (37%) seeking business loans were turned down by banks and unable to find alternative funding, a survey by the Forum of Private Business found.

Chris Bryce, Chief Executive of PCG, the representative body for independent professionals and the self-employed, said:

“The approach to lending to SMEs needs to be re-examined. Small businesses are driving the economy forward and banks urgently need to recognise their value and give them the support they need to flourish.”

Photo by Mike and Annabel Beales