Birmingham City Council leader John Clancy is appealing to Brummies to support a fundraising scheme that could generate £3 million to support local businesses
The council is joining forces with Responsible Finance member ART Business Loans and ThinCats peer lending platform to assist small to medium sized businesses (SMEs) in Birmingham that are unable to obtain any or all of the finance they need from high street banks.
ART and the city council will jointly underwrite loans of between £10,000 and £150,000.
The partnership has set a fund-raising target of £1 million a year over three years and is appealing to companies and individuals to invest in the scheme. They can do that in the first instance by registering with ThinCats and taking advantage of a two week window to invest in ART Business Loans – from Thursday 26th January to Thursday 9th February – with a minimum investment of £1,000. There is no upper limit. ART will then lend the money raised to Birmingham businesses.
Councillor Clancy said: “This is a pioneering local investment opportunity and a chance for people to not only get a financial incentive in the form of a tax relief, but also a social return. Small and medium sized enterprises are the life blood of the local economy and their ability to grow, create inclusive economic growth and preserve jobs impacts on everyone who lives and works in Birmingham.”
Investors will be able to claim Community Investment Tax Relief (CITR), which reduces investors’ tax bills by 5% of the loan value per annum over a five-year period. This equates to a 6.25% return for standard rate Income Tax payers, 8.3% if you pay 40% tax and 9.1% for higher rate tax payers. The Tax relief also applies to businesses who get Corporation Tax relief, providing an income equivalent to 5.8%. To take full advantage of the tax relief the money must be left invested for five years.
ART was founded in 1997 by its first chairman Sir Adrian Cadbury with the objective of providing finance to businesses and social enterprises that were unable to access loans from banks. The average loan is £33,000, reflecting a gap in the business funding market for smaller loans.
One of ART’s best known beneficiaries is Birmingham Michelin-star chef Glynn Purnell who took out a loan to top up bank funding and open his first restaurant.
Based at Innovation Campus, Birmingham, ART has lent over £20 million since its launch in 1997, helping small firms to grow and create thousands of jobs. Loans are available for any purpose including supporting cash-flow.
Dr Steve Walker, Chief Executive of ART said: “There are many reasons why a viable business may not fit the banks’ lending criteria, including because the bank has already lent all it can. We’re here to ensure that businesses can access the loan finance they need to support cash-flow, invest in new premises and equipment, survive and thrive.”
Founder and Chairman of ThinCats said: “Peer to peer finance solves two problems at once; it provides businesses with the funding they need to grow at a time when banks are reluctant to help and it also provides investors with a way to earn returns on their capital well above the rate of inflation. This unique partnership between ART Business Loans, Birmingham City Council and ThinCats highlights the way that investors from Birmingham can invest in the economy of their own City.”