RBS Cuts Interest Rates for Small Business
The Royal Bank of Scotland (RBS) has announced that it is using the Bank of England’s Funding for Lending Scheme (FLS) to reduce interest rates for small businesses.
The £140 million Funding for Lending, Bank of England and Treasury backed, scheme offers money to the high street banks at a lower rate of interest that can then be passed on to business customers.
RBS has said it will cut borrowing costs by 1% on average and by up to 1.6% for some of the smallest businesses. In addition, the bank will be removing arrangement fees on £2.5 billion of new loans to small firms. Looking at an average £100,000 business loan, the saving will be around £4,000 – made up of a £1,500 arrangement fee and £2,500 in interest. This could amount to an estimated £40 million total in interest savings to businesses.
Chris Sullivan, Chief Executive of RBS and NatWest Corporate Division, said of the new lending terms:
“This is our best ever offer for SMEs, and the best available in the UK. RBS and NatWest are determined to play their part in supporting the economic recovery. The clearest and strongest way we can do this is by letting people know that we are open for business and ready to support their ambitions on the best terms available.”
After the problems with their IT system last month, which saw many customers in trouble, this could be seen as a positive move for RBS as it takes advantage of the Funding for Lending Scheme.
John Cridland, the CBI’s Director-General, also appreciated the timeliness of the move, saying:
“This is a welcome move from RBS and NatWest, swiftly putting the Funding for Lending scheme into action to offer business customers more accessible rates of borrowing. Many small and medium-sized companies are poised to grow and create new jobs, but have been put off doing so because of the rising cost of finance, so this move should make a positive impact on the ground.”
The Federation of Small Business (FSB) welcomed the news, with National Policy Chair, Mike Cherry adding:
“We are especially pleased to note there will be no ‘up front’ arrangement fees coupled with the additional reduction to the actual cost of the loans. To really instil confidence, we would urge RBS to ensure they have robust procedures in place so that those businesses that have a good business plan now get the money they so desperately need to grow.”
An estimated £100 million in will be saved on the total cost of borrowing from the scheme, which will be available at the new rates from the 1st August.