5.10.2012
New figures on business lending from community finance providers show they are lending to more businesses unable to access finance from banks than ever before – but demand outstripped supply by over seven times.
Community finance providers have been active for over 10 years in the UK and are the ‘unsung heroes’ of the financial sector. They provide an ethical, local service and particularly focus on the markets that banks find hardest to reach: start-ups, sole traders, informal and unincorporated ventures, and micro-enterprises employing fewer than ten staff. Collectively, these make up 95% of the UK’s businesses. More recently larger, previously bankable SMEs, have sought community finance as they too face challenges in securing bank credit – enquiries from SMEs with 10-500 employees increased by 150% last year.
Community finance providers make loans in more traditional ways, meeting clients face to face, visiting the business premises and working out flexible loan terms that work for both the business and the lender.
For example, www.cycle-clothing.co.uk turned to a local community finance provider when it was turned down for a loan by its high street bank. The business, which specialises in affordable cycle wear, needed help when its overheads began to spiral and so turned to Yorkshire-based Business Enterprise Fund (BEF, a CDFA member). BEF issued a loan of £18,000 within four weeks, and recommended moving premises and suppliers creating a saving of £14,000. After reducing overheads, Managing Director Carlton Nash, has increased profitability overnight and now has the cushion of a cash injection.
Umbrella organisation the CDFA (Community Development Finance Association) today released new research showing that in 2011/12 community finance providers:
- received around 13,000 enquiries from businesses requesting £231m
- lent £30m to over 2,600 businesses
- created and safeguarded over 8,300 jobs
With 65% of all loans made to start ups and 48% to individuals who were previously unemployed, community finance providers are reaching the people and businesses that are not served by others, creating jobs and wealth in underserved communities.
Ben Hughes, chief executive of the CDFA, said:
“Community finance providers offer a lifeline of affordable financial products to businesses – and individuals – in the UK. With enormous growth in demand, they need infrastructural support to enable them to scale up and deliver tailored financial products to support more businesses.
“This week Business Secretary Vince Cable launched a Regional Growth Fund programme which will provide £60m in capital investment to community finance providers. 2012 has seen a spike in enquiries and, whilst the RGF programme is significant and very welcome in the short-term it accounts for less than one year’s worth of projected demand. The programme is a great model of public-private partnership (involving RGF, Unity Trust Bank, the Co-operative Bank and CDFA) which we need to replicate, to help more businesses to start-up and grow.”
What next?
- Case studies about community finance providers specialising in business lending are available on request
- More about the £60m Regional Growth Fund programme here
- New figures are also available here about a significant increase in community finance lending to, and demand from, households and individuals
- Ben Hughes, chief executive of the CDFA, and Harry Glavan, head of policy and communications, are available for interview / comment. Contact Jamie Veitch on 07904 272 200 OR Sam Collin, Communications Officer [email protected], t 020 7430 0222 x207 m 07866241087