The Bank of England and HM Treasury has announced a 2 year extension to the Funding for Lending Scheme (FLS).

The FLS scheme provides further funds to support improvements in credit conditions for SMEs.

Credit conditions for SMEs have been improving with SME lending volumes increasing by £2.1 billion in 2015. Net lending by FLS participants was positive in the first two quarters in 2015,

FLS will remain open until 31 January 2018. Current participants will be allowed to draw against existing unused borrowing allowances after 31 January 2016, but will not be able to generate additional allowances from lending beyond the end of 2015.

Further conditions from the extension include:

• participants will retain full access to draw against their borrowing allowance from 1 February 2016
• allowances will reduce by 25% after 6 months and by the same amount every 6 months until the end of January 2018.

John Allan, national chairman for the Federation of Small Businesses, said:

“Providing smaller lenders and newer entrants to the market with greater access to the scheme is a sensible move. It should help them compete with the bigger banks and over time, provide businesses with a wider range of finance options.”