It is very encouraging to see one of the UK’s largest providers of loans to SMEs, Lloyds Bank, market a fixed rate loan for SMEs, that has known breakage costs from the outset.
The Bank has only just started to do this, and is marketing this heavily. We don’t doubt that the reason for offering this now is because of the intense debate that has been ensuing about Banks providing loans with hidden, embedded swaps.
This is an example of their advert:
We have provided much Expert Evidence on this topic and advised several members of the Government as well the FCA on this topic.
This is a welcome move, and is an implicit admission that that SMEs should have been offered this products earlier. This is course does not assist the hundreds of thousands of SMEs that have already been provided loans with hidden embedded derivatives, which are facing severe mark-to-market breakage costs that they were not informed about.
However, in order to offer this fixed rate loan with known breakage costs, the Bank is likely to be charging a higher rate to account for this from the outset. That is why it remains essential for SMEs to obtain independent FCA authorised advice before entering into such products. We can check the pricing to ensure that it is the most competitive possible, since we have the same pricing software as the Banks to enable you to negotiate the pricing.