The £80 billion Funding for Lending Scheme, launched by the Bank of England and the Treasury at the start of August, has been hailed for handing out billions to the UK's businesses, but some SMEs still struggle to get their business plans heard.
Figures released over the past few weeks have shown loan and mortgage approvals for high street lenders involved in the scheme increase.
The number of loans approved for house purchase rose by 2,103 to 50,024 in September, while the number of loans approved for remortgaging increased by 1,860 to 28,343, the Bank of England said on 29 October.
Meanwhile, unsecured consumer credit rose £1.2bn in September, the sharpest rise since February 2008, including an increase of £307 million in credit card borrowing.
More than 20 banking groups, including the five largest lenders in the UK, have now signed up to the FLS, while funding costs have fallen by around one percentage point.
But Sir Mervyn King, governor of the Bank of England, warned the initiative was temporary and lenders would have to accept further losses and writedowns if normal banking services are ever to return.
What the banks say
Most of the banks contacted by Huffington Post UK were unable to offer exact lending figures, as they will be featured in the Q3 statements, due out in the week commencing 5 November.
However, Santander UK - which has participated in the first tranche funds - told Huff Post UK it had increased its SME lending by an average of more than 20% a year over the past three years.
"The Funding for Lending scheme enables us to benefit all our customers from across the wide range of sectors and turnover," a spokesman said.
The Lloyds banking group has previously gone on record with its £1.4bn allocation for SME lending, offering a 1% reduction in the interest rate for new business loans and hire purchase, a discount for the full term of the loan, a minimum loan amount of £1,000 with no maximum limit and offers made to all, regardless of the sector that they operate in (provided offer they make no more than £250m in turnover).
In September, it boasted a 4% increase in net lending to small businesses, during a time when net lending growth across the industry has shrunk by 4%.
Lloyds and RBS have lent in excess of £1bn to British business as part of the Funding for Lending Scheme
Barclays was an early adopter of the Funding for Lending Scheme's fore-runner, the National Loan Guarantee Scheme, paying out more than £1.5bn in loans with a 2% cashback incentive to help businesses grow from day one of the loan.
With the Funding for Lending Scheme, it used the money to lower lending rates on personal loans, mortgages and business loans - helped by record low interest rates.
And NatWest and the Royal Bank of Scotland issued a statement on 29 October saying they saw a 15% increase in applications for loans in the past month, and the loans which have been agreed have saved British businesses £25m, or £4,500 on average per business.
In a video released on 29 October, Peter Ibbetson, chair of small business banking for RBS, said: "The objective is to make cheap finance available to businesses, not for businesses that aren't viable, but cheap money so businesses believe this is the best time to borrow and invest.
"We as a bank have lent more than £1bn to businesses up and down the country."
What the SMEs say
Simon Mellin, a founding partner of Roaming Roosters and third generation farmer, has detailed how the Funding For Lending scheme positively impacted upon his business.
"The problem we had is I'm only 26 and my brother's only 23, so as partners in a fast-growing business, not many banks want to stand behind us at such a young age with not a lot of assets behind you. Without the scheme we wouldn't be able to do what we've done."
You can see more of Simon's story and his dealings with RBS below:
However, many businesses - particularly those who are at the smaller or young end of the scale - are still routinely being turned away.
Abigail Letts runs the Fun Fair Brewery Company as well as a small country pub. Last year, she wanted a loan to bring the brewery into the pub's premises and expand the number of barrels she could produce from 20 a week to 60-80 a week.
Defra, the government department for environment, food and rural affairs, agreed to offer a non-repayable £50,000 grant, as the business development would provide employment opportunities and a small tourist attraction to bring money to the local area - the only proviso was Letts would have to find another £50,000 on the private market.
Since she only had a £80,000 mortgage, and a turnover of £175,000 a year, Letts didn't anticipate any problems. However, on arriving at her business bank, Barclays, with a new business plan, she was left horribly disappointed.
Abigail Letts's Newark pub, the Chequers Inn
"Our manager said while the idea was okay, the timing wasn't great - and he didn't even look at our business plan," Letts told the Huffington Post UK.
"He didn't suggest any alternatives, so we were left with no choice but to try and find another bank."
Seeking help through a specialist broker - ASC- Letts was rejected by several other lenders on the grounds that because she was operating in the pub trade, it was too great a risk - despite the fact that the loan was for a manufacturing business, not running the pub, and Letts's offer to be a personal guarantor.
Frustrated, she attended a Federation for Small Business event and met deputy governor of the Bank of England Charlie Bean. Letts asked him to consider her business plan to see if there was any reason behind the banks' routine decision to reject her loan applications.
Having told Letts when they met her business seemed "like a no-brainer", he then followed up with an email after considering her loan application, which advised her to try Handelsbanken, and the Co-Operative Bank as they were less scarred by the financial crisis and have a reputation for being more understanding of small business needs.
But Handelsbanken rejected the application because £50,000 was too small a loan amount, and Co-Op refused to consider a loan on the basis that Letts' credit score - scarred by the multiple footprints left by the various banks she'd previously applied to - was too poor.
Letts's Brewery
"An accountant said he'd help us next, he arranged for representatives of Lloyds TSB and HSBC to come and visit the pub," Letts said.
"The Lloyds banker said he loved the business and the premises, and saw lots of useful equity, and verbally agreed the loan on the spot, and followed it up with an email, saying his manager had sanctioned the lending application, pending the credit department agreeing to it."
But the next morning, Letts received a text message saying the credit team had turned the application down due to the business not having a three-year track record, and therefore they had lost the loan.
"HSBC was a similar story, the two bank relationship managers loved it, but the credit team said no," said Letts.
After almost a year of travelling between high street lenders and having her credit score ripped to shreds, Letts eventually received the money she needed through an asset funding scheme with Lombard - she had to sell her campervan, cash in her Isa and sell all her contingency plans to fund her half of the loan, but eventually she secured the other £26,000 at a 7.9% interest rate.
Sign of the times
Letts' story is not unheard of. David de Koning, head of communications at the Funding Circle, said while there wasn't a lack of appetite for finance, there was a lack of appetite for bank finance, driven by small businesses being put of from even applying for a bank loan - often because the process is too long-winded and inefficient.
“According to the Bank of England, Trends in Lending report, outstanding loans to small businesses fell by 5% in the third quarter of this year; in contrast, September was a record month at Funding Circle with more than £5.3m lent to growing British businesses," de Koning said.
"We’re now helping to lend more money in one week than we were in a month last year and we’re growing at more than 250% year-on-year."
Banks are failing to keep up with modern times and aren't flexible enough to help smaller customers, according to Funding Circle.
Where a small business would have to take time out of their day to walk into a bank branch and apply for a loan, 50% of loan applications on Funding Circle take place outside of the standard office hours of 9am-5pm.
The profile of a business that borrows money through Funding Circle fits this bracket - typically they have a turnover of between £100,000 and £25m a year, employ eight people and are seeking loans for growth and expansion.
High street banks should offer more flexible arrangements for small businesses
Philip Venn, commercial director at online accountancy Boox and former RBS credit origination expert, told Huffington Post UK there was no doubt that gaining access to debt was still hard for SMEs.
"Banks are looking for a track record, viability - they can only make an assessment on the information available," he said.
"You have to be able to show that your projections are realistic - banks will want to see you justify your assumptions. They'll want to see signed contracts for guaranteed business coming through your accounts for the next year.
"If you're struggling to gain access to high street lenders, it might be worth considering how much control you need in your business and whether an option might be to give away some of the equity in return for cash."