The Chief Executive of Lloyds Banking Group has committed to lending £5bn this year to small and medium-sized enterprises (SMEs) under the Government’s Funding for Lending Scheme (FLS).
In an open letter, António Horta-Osório said that small and medium-sized businesses are the bedrock of the UK economy and that he is determined to get 100,000 start-ups off the ground in 2013.
The Funding for Lending Scheme is designed to reduce banks’ funding costs so that borrowing for customers comes down. However, it has been used more for mortgages than business loans and since its launch in August last year only six banks have accessed the scheme and only for £4.36bn, which is far short of the total of £80bn hoped for by the Treasury and Bank of England.
Mr Horta-Osório wrote to the million SME customers on Lloyds books and said that they have his personal commitment to supporting them and also promised that all of them will get a 1 per cent discount on their interest rates for the life of their loans under the scheme, regardless of the sector in which they operate.
The second largest UK lender to SMEs, with a 22 per cent market share, Lloyds is reducing its share of the mortgage market from 28 per cent to 25 per cent, but it is increasing its small business lending. In the last two years, it has boosted net lending to the sector by 7 per cent against a market decline of 8 per cent.
His pledge comes ahead of the bank’s full year results later today (March 1st), when it is expected to increase the provisions it has taken against payment protection insurance and interest rate swaps mis-selling by around £1.5bn. The additional costs will take the total money the bank has set aside to cover the two consumer scandals to about £6.7bn.
As an accountant, Simon Rowe, specialises in corporate finance, business turnaround and insolvency.