Banks have finally started lending to small and medium sized businesses

Jessica Morris
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Lloyds extended £425m to small and medium sized businesses (Source: Getty)

Banks are finally starting to lend to Britain's small and medium sized businesses new data has shown, suggesting the widely criticised Funding for Lending Scheme (FLS) could be beginning to work.

Net lending to small and medium sized businesses in the first three months of this year rose by £635m, according to the Bank of England.

Today's figure comes after an £811m drop in net lending by FLS participants during the last quarter of 2014, which contributed to a total fall of £2bn for that year.

While the net lending figure doesn't show the total loans extended, it does give the difference between payments made to small firms and the repayments they've made on loans.

The government launched the FLS scheme engineered to boost business loans over two years ago, however it's generally been regarded as a failure.

Most of the first quarter increase in was due to Lloyds Banking Group, where lending under the scheme rose by £425m on a net basis.

Tim Hinton, managing director of mid markets and small and mid-sized enterprise banking at Lloyds, said:

We have seen how successful FLS has been in helping a small business grow with competitively priced funding.

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