A multibillion-pound scheme designed to unclog the flow of credit to Britain's businesses and homebuyers took another step forward today as Lloyds Banking Group became the first lender to draw funds from the initiative.
The taxpayer-backed bank has taken an initial £1 billion from the Bank of England after it launched its Lloyds Funding for Lending product last week, which will allow applicants to benefit from reduced funding costs.
The 40% state-owned bank expects to make further withdrawals in due course, depending on demand from homebuyers, small and medium-sized enterprises (SMEs) and mid-market companies.
Last month, the Bank of England and Treasury launched the £80 billion Funding for Lending scheme (FLS), which offers lenders funding at low interest rates over a four-year period on condition it is passed on to businesses and households.
The latest initiative comes as the UK is mired in the longest double-dip recession in more than 50 years.
Chief executive Antonio Horta-Osorio said: "This initial £1 billion is just the start. We are committed to helping Britain prosper by encouraging investment and supporting businesses and households with the best possible terms through Lloyds Funding for Lending."
The Lloyds Funding for Lending product will allow interested parties to apply for new business loans and hire purchase with a 1% reduction in the interest rate, a discount for the full term of the loan, and a minimum loan amount of £1,000 with no maximum limit.
Fellow part-nationalised lender Royal Bank of Scotland has offered products under the Funding for Lending scheme since early August.
Last week, the 80% state-owned bank said it will target mid-sized businesses for the first time, which typically have a turnover of £25 million to £500 million and are seen as a key source of future growth, often referred to as "gazelles".