Will new Bank of England stimulus make a difference?

When the Bank of England launched the Funding for Lending Scheme in June 2011, it hoped to boost the amount of available funding, particularly for consumers and small and medium-sized enterprises (SMEs).

So far, that plan has failed, but that hasn't prompted the Bank of England to give up on the FLS just yet. According to recent reports, Governor Mervyn King wants to pump another £80 billion into the initiative in an effort to boost lending.

"A strong possibility is that the FLS will be adjusted to specifically favor​ banks that increase their lending to smaller companies," said Howard Archer, an economist at IHS Global Insigh​t, according to The Telegraph.

But what if another stimulus package doesn't boost bank short term lending to consumers and SMEs? Each are in desperate need of funding right now, and the longer they go without securing a loan, the less likely it is for residents and small businesses to improve their credit scores.

According to Euromoney, alternative short term lenders have been more than willing to step up in the place of banks, particularly when it comes to providing finances for SMEs. Regardless of how the FLS situation shakes out, the general consensus appears to be that both banks and alternative lenders will be crucial to the United Kingdom's eventual economic recovery.

"In most cases we would regard these forms of finance as complementary to bank lending," Stephen Pegge, director of SME banking at Lloyds Banking Group, told Euromoney. Pegge noted that "there is £100 billion of SME lending from the big banks out there, and other lenders could never be expected to take the weight of SME financing from the banks."

If and when banks do come around, they will likely remain the party responsible for delving out the larger loans. Alternative lenders, on the other hand, will be vital for serving the unbanked and underbanked consumers and SMEs.

That's because many of these firms use Payment Reporting Builds Credit scoring methods when determining whether or not to hand out a loan. PRBC looks at a variety of financial factors, including utilities payments, in addition to traditional credit scores.

In doing so, these lenders have opened up funding to entirely new groups of people - citizens with subprime credit, for instance, or residents who have no credit at all. And for businesses, alternative finances have helped certain companies pay off smaller expenditures quickly, thus helping them to survive.