Small businesses and first time buyers are to receive access to cheaper funds after the Bank of England and HM Treasury’s launch of a brand new scheme aimed to kickstart the property market.

The Funding for Lending Scheme (FLS), announced on 13 July, is designed to incentivise banks to lend to both businesses and individuals by allowing banks and building societies to borrow from the Bank of England for up to four years.

The scheme will increase the availability of business loans and mortgages and lower interest rates, ultimately boosting lending.

Banks and building societies will provide assets, such as businesses or mortgage loans, as security for the funds borrowed from the Bank of England. The funds will need to be loaned during the 18 months from 1 August 2012 until 31 January 2014.

The scheme provides additional incentives to the banks which utilise the most funding as the more they lend, they more they are able to borrow from the Bank of England.

The amount the banks pay for the funding is similarly adjusted accordingly; those who increase their lending will pay a lower fee whilst those that reduce their lending will pay more.

For more information on the scheme, including working examples, visit the Bank of England website.