Challenger banks begin meetings aimed at opening up business lending

Representatives of ten so-called ‘challenger’ banks have met with Charles Roxburgh, the Treasury’s director of financial services. The meeting is the first of a new quarterly series of meetings and a number of issues, including the continuation of the Funding for Lending scheme, capital requirements and banking surcharges are all on the agenda.


Challenger banks are the new breed of smaller banks contesting the big, established lenders. The bosses of 10 challenger banks, including OneSavings Bank and Aldermore, were expected to call for an indefinite extension of the Funding for Lending scheme.


The Chancellor and the Governor of the Bank of England announced last month that the scheme would be extended until January 2018. The Funding for Lending scheme, or FLS, aims to stimulate lending to SMEs by providing lenders with access to cheap funds from the Bank of England. By borrowing at a cheaper than usual rate from the BoE, lenders can then pass the savings on to their business customers.


A lack of access to funding is seen as one of the biggest problems faced by many SMEs in the UK. A Conference Genie study found that nearly a third (30%) of new retail businesses stated that their biggest challenge was accessing finance from the banks. External funding is often essential for growth and investment and can sometimes help struggling businesses to survive through challenging periods. Struggling businesses in the UK may end up requiring the advice and assistance of insolvency practitioners in London or elsewhere. The key is to act quickly in such circumstances to limit any negativity that can result from the poor financial situation.


Challenger banks are to get greater access to funds made available under the FLS and would like to make the arrangement permanent. This, they say, would allow them to ramp up lending to small businesses and to provide a viable alternative to the major high street and corporate banks.


Challenger banks are not the only alternative however. As more smaller firms have struggled to access finance via traditional routes, a host of alternative funding platforms have grown to prominence. These include models such as crowd-funding and peer-to-peer lending.


By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.

View all Business Insights