Funding for Lending fails to address speed issues

Funding for Lending fails to address speed issues




The Funding for Lending Scheme has failed to reduce the amount of time it takes for traditional banks to make a lending decision, according to business e-lender Everline.

The Funding for Lending Scheme has failed to reduce the amount of time it takes for traditional banks to make a lending decision, according to business e-lender Everline.

Russell Gould, COO at Everline, believes there are still issues that need to be addressed even though the government recently extended the scheme for two years.

He said: “While we support anything that makes it easier for SMEs to gain access to finance, the failure of the Funding for Lending Scheme is clear.

“Today’s small business environment is fast-paced and this scheme didn’t tackle the fundamental problem of traditional lenders taking weeks or even months to make a lending decision and get funding to the businesses that need it.

“What’s needed is investment in awareness schemes so that small businesses are empowered to choose the right finance product for their specific business needs.”

The scheme has also been criticised for making it difficult for new lenders to enter the market.

Rishi Khosla, CEO of OakNorth Bank, told Bridging & Commercial: “The Funding for Lending Scheme was previously useful for banks with an established and stable lending history, but it put new banks at a disadvantage as they generally couldn’t access the scheme.

“It is great news that this has now been extended and that the focus remains on SME lending – but unfortunately, in a manner which still significantly limits the ability of new banks to participate due to collateral requirements.”

Rishi added that the extension has removed some of the barriers for new banks, and said OakNorth is planning to make use of the scheme next year once it has completed the application process.

However, problems with SME funding are not just confined to the Funding for Lending Scheme.

In its Summer Budget, the government announced an 8% surcharge on banks’ profits above £25m which will have an adverse impact OakNorth’s lending power.

Rishi added: “OakNorth has ambitious plans to lend over £1bn to growth businesses and entrepreneurs within the next couple of years, but ramping up taxation on profits means that we will have less capital to reinvest in our business and less retained capital to lend.

“As a new entrant, we already face significant barriers to compete effectively against the incumbent banks and ensure SMEs have the finance they need to grow, and to get the best deals, due to the significantly higher capital we need to hold.” 

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