Banks may be offered 10 times increase in access to cheaper loans as an incentive to extend loans to smaller firms in a revamp of the Funding for Lending Scheme (FLS) that has been extended for a year to January 2015.
Leasing firms and other finance houses have also been included in FLS, a scheme that was launched last summer to offer banks and building societies funding at low interest rates on condition they are passed on to households and businesses.
The chancellor said the changes to the FLS, first introduced last summer to try to inject more credit into the ailing economy, would be a “big boost for the small and medium-sized businesses that are at the heart of the British economy”. He said there would be “no upper on the scheme” – which is being altered the day before the release of figures that will show whether the UK has plunged into an unprecedented triple-dip recession and as Osborne comes under pressure from the International Monetary Fund to ease the pace of his austerity measures.
The business secretary, Vince Cable, had been lobbying for the FLS, which has provided a fillip for the mortgage market, to have a more direct focus on small businesses.
“More credit for small businesses is essential to building a stronger economy,” Cable said.
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