The Funding for Lending Scheme (FLS) is to be extended for a further year to give banks greater incentive to lend to SMEs.
The Bank of England and the Treasury confirmed the extension in a statement yesterday (24 April 2013) and said the initiative would now run until January 2015.
FLS is designed to encourage banks to lend by offering them cheap loans on the condition they pass them on to customers.
The FLS, they said, was also being opened up to non-bank lenders such as invoice finance houses and leasing firms that provide around £20bn of working capital to small firms.
"This is a big boost for the small and medium sized businesses that are at the heart of the British economy," said Chancellor George Osborne.
"The Funding for Lending Scheme has already reduced the costs of household mortgages and loans for businesses. This innovative extension will now do even more for small and medium sized businesses so that they can play their full part in creating new jobs."