September 06, 2013
However, the increase has been largely fuelled by a rise in mortgage lending. Business lending actually fell by £2.3bn during the three-month period to the end of June.
Dr Adam Marshall, director of policy at the British Chambers of Commerce (BCC), said: "The acid test for the Funding for Lending scheme has always been whether it can improve the flow of credit to younger, fast growing companies that could end up being the wealth creators of tomorrow. Unfortunately the door often remains shut for many of these businesses."
Lack of awareness of the scheme could also be a contributory factor, according to the Federation of Small Businesses (FSB). Its figures show that 61% of firms haven't heard of Funding for Lending.
John Allan, FSB national chairman, said: "Only when the banks tailor their packages specifically to certain sectors and improve the way they advertise those products to small businesses, will small firms get the finance they need."
Phil Orford, chief executive of the Forum of Private Business (FPB), said: "Businesses are under the impression that the banks are still not willing to lend and this perception gap risks disabling the access to finance that is vital to support growth and getting Britain trading at pre-2008 levels."
Many SMEs have already gone elsewhere for finance using peer-to-peer and asset-based lending instead of approaching their banks. Duncan Kreeger, director of West One Loans, said: "Most SMEs have already dismissed this scheme as largely irrelevant – instead, they are powering forwards on their own momentum, supported by new forms of finance."
Other Government lending schemes are faring better. According to Rockpool Investments, 95% of small businesses have got the green light from HMRC to raise funds through the Enterprise Investment Scheme (EIS) – up from 91% in the previous year.
Rockpool also reveals that 96% of companies applying for pre-approval under the new Seed Enterprise Investment Scheme (SEIS) were successful in 2012/13.
In total 4,075 businesses applied for pre-approval to raise funds through EIS and SEIS in 2012/13 – a 90% jump on the numbers applying the previous year.