Member Article

Bank cuts rates for SMEs

From August, the Royal Bank of Scotland (RBS) is set to make use of the funding for lending scheme, in a move which will allow small businesses to benefit from improved borrowing terms.

RBS is set to use the Bank of England’s £80 billion funding scheme to help reignite bank lending, cutting rates by 1% on average for £2.5 billion of £2.5 billion of loans.

The smallest businesses could see borrowing costs fall by up to 1.6%.

The Bank of England has offered UK banks finance, on the conditions that they pass on the benefits to businesses and households through cheaper loans.

Many SMEs are keen to grow but have been unable to do so due to a lack of available finance.

Business leaders across the UK have welcomed the move, including British Chambers of Commerce director general John Longworth. He said: “The real test is whether funding for lending will reach those parts of the real economy that need it most: the fast-growing and new businesses that we rely on for jobs and exports.

“We hope RBS and NatWest will lead the way by backing them, too, through their welcome new initiative.”

Over the life of the funding for lending initiative, RBS believe that borrowing costs will be cut by up to £100 million, while a further £40 billion in upfront costs will also be saved through the removal of arangement fees on £2.5 billion in loans to smaller businesses.

Thanks to the scheme, the average SME is set to save around £4,000 on the average loan, through £1,500 in arrangement fees and £2,500 in interest.

It could also cut costs by more than £10,000 on a £250,000 loan fixed over five years for small businesses.

Funding will be split across regional teams at Natwest and RBS and managed at a local level to ensure that all interested businesses can benefit.

This was posted in Bdaily's Members' News section by Ruth Mitchell .