Santander to launch £500m funding package

Santander has announced that it will attempt to alleviate the cash-flow woes of small and medium-sized enterprises with the launch of a £500m funding package.

The new financing activities will be funded through the government’s Funding for Lending (FL) scheme. This aims to boost lending by allowing banks and building societies to borrow from the Bank of England up to 5% of the total aggregate amount they have lent out to the UK non-financial sector – hence the more they lend out, the more in turn they are themselves allowed to borrow from the BoE. However, the potency of FL has been undermined, amongst other reasons, by the failure of banks to lend to new customers, a condition not imposed by the scheme.

Santander alleges the scheme has allowed it to reduce business lending rates, though businesses owners in general remain sceptical of the practical results of FL.

Another scheme announced by Santander is supply-chain finance, which allows suppliers to collect an advance when its big clients inform a bank that the invoice has been approved. In 2013, Santander will provide £500m to companies aiming to use credit or leasing facilities as a source of finance for purchasing business assets.

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