Organisations have questioned whether the extension to the Funding for Lending scheme will have an impact on businesses.
It was announced today that the Bank of England and HM Treasury would extend the scheme until January 2015. It was previously due to finish in January 2014 after 18 months.
Changes include the one year extension, incentives heavily skewed toward small and medium enterprises and expanding the scheme to count lending by banking groups to financial leasing corporations.
For every £1 of net lending to SMEs in 2013, banks will be able to draw £5 from the scheme in the extension period. To encourage banks to lend to SMEs sooner, every £1 of net lending to SMEs during 2013 will be worth £10 of initial borrowing allowance in 2014.
Matthew Fell, CBI director for competitive markets, said: "The additional incentives for banks should accelerate activity in the small business financing market. We need to be realistic. Funding for Lending is only one piece of the jigsaw. Boosting firms' confidence by raising awareness of the funding schemes available is critical."
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John Longworth, director general of the British Chamber of Commerce, said: "We welcome the Chancellor's determination to look at ways to make Funding for Lending work for UK businesses, many of whom still feel frozen out from access to finance.
"Yet the Chancellor and the Bank of England can, and should, go further. Were they to extend the backing of the Funding for Lending scheme's billions to the embryonic Business Bank, they would energise a new and crucial player in the lending market, and help to solve the long-term structural gap in finance that continues to strangle far too many growth businesses across the UK."
Stephen Sklaroff, director general of the Finance and Leasing Association, said: "The extensions to the Funding for Lending Scheme have the potential to boost the use of the scheme for business investment. The new incentives for SME lending, the inclusion of non-bank subsidiaries of participating banks, and allowing participants to lend to non-bank credit providers, ought in principle to help the leasing markets.
"While it is clear a lot of work will be needed to implement these changes effectively, the extended scheme ought to help UK small businesses."

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