RBS announces cheaper loans for businesses

Group Business Correspondent

Monday 10 September 2012

ROYAL Bank of Scotland will today announce plans to use the new Government-backed Funding for Lending (FFL) scheme to provide cheaper loans for some manufacturers.

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mark williamson

The bank, which is 82%- owned by taxpayers, will use the scheme to boost lending to mid-sized manufacturers in the £25 million to £500m turnover bracket.

Led by chief executive Stephen Hester, Royal Bank claims it will be able to use the cheap finance it can access under the FFL scheme to offer loans to manufacturers on the best terms it has provided for years.

For example, manufacturers will be able to borrow over three years at a fixed rate of 2.75%, compared with 3.45% previously.There will be a 0.5% arrangement fee for all loans, compared with a typical 1%.The bank will make £250m available to manufacturers across the UK in the first tranche of the scheme. Businesses in Scotland will be able to apply. Many Scottish businesses in areas such as engineering have been performing well against a tough backdrop, but may have had to limit their ambitions because of difficulties raising funding.The plan was welcomed by the Confederation of British Industry. Matthew Fell, CBI director for competitive markets, said: "Support for medium-sized companies continues to be an important issue as they represent 30% of the UK's manufacturing base. We believe that, if their potential is fully unlocked, these companies could help to rebalance the economy."Mr Fell said RBS had swiftly put the FFL scheme into action to offer mid-sized manufacturers more accessible rates of borrowing.Launched in July, FFL allows banks to borrow from the Bank of England for up to four years. Banks that use the funding to increase lending to customers will pay a lower interest rate on their borrowings from the central bank.RBS said small and medium-sized manufacturers with turnover below £25m can already access cheaper loans under the group's SME FFL offering. The bank claimed this has cut interest rates on £2.5bn of SME loans by an average one percentage point since it was launched on August 1, 2012. Peter Russell, head of manufacturing for RBS, said: "Mid-sized manufacturers are key in helping the UK grow and export out of recession."

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RBS announces cheaper loans for businesses

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