The Royal Bank of Scotland has announced that they will take full advantage of the lending scheme from August onwards in a move that will give small businesses a chance to borrow with a new set of terms. The £80bn funding scheme is the result of venture set up by the Bank of England to help kick start lending again.
The idea is to help reduce rates on average of about one percent for every £2.5b worth of loans. This would allow SMEs to see their borrowing costs reduce by about a percent and some smaller businesses by even more.
In order to receive the discounted finance from the Bank of England UK banks have to pledge that they will pass on the rate reduction to households and businesses by offering the lower rates. Most SMEs are willing to grow but are unable to do so because they cannot get the right amount of financing to do so. Many UK business leaders have already welcomed the new funding opportunity.
John Longworth, the British Chambers of Commerce director general stated that the real test is still forth coming and will be in regards to whether funding for lending is going to be able to help out the parts of the economy that actually need help such as the new businesses and fast growing businesses.
He added that hopefully with NatWest and RBS leading the way by providing backing other banks will jump in and offer their new finance options as well. RBS believes that they will be able to take advantage of the scheme and reduce their borrowing costs by about £100m.