Today’s budget included welcome measures of emergency financial support for SMEs and microenterprises vulnerable to an economic downturn as a result of the coronavirus outbreak and Covid-19.
The Chancellor Rishi Sunak described measures as “a bridge for businesses: temporary, timely and targeted” in a speech whose themes were “getting things done” and “doing whatever it takes.”
Theodora Hadjimichael, chief executive of Responsible Finance, said:
“Our message to the Chancellor is not to waste an opportunity to get things done – and if he’s truly serious about doing whatever is necessary, ask responsible finance providers to help deliver these emergency financial support measures.
“The new and temporary Coronavirus Business Interruption Loan scheme, providing working capital loans to small businesses, is set to be delivered through banks, backed by an 80% government guarantee. But banks cannot and will not reach every small business needing help through this scheme.
“Community development finance institutions, also known as responsible finance providers, must be part of the delivery of this emergency financial support. These ethical lenders are trusted within their communities and have reach into regional micro, SME and start-up markets that are not served by mainstream banks, whose need during this time will be acute. Acting through the responsible finance network will ensure that the government reaches all microenterprises and SMEs that need emergency funding and that regions that traditionally lag behind in investment are supported.
“The Chancellor also announced an additional £200 million for the British Business Bank to invest in scale ups and an additional £130 million to extend the Start Up loans programme. We welcome this investment. Many of our members are tried and tested StartUp loan delivery partners and many are key partners for British Business Bank programmes. They are already providing access to opportunity to people otherwise excluded, so we look forward to increasing our impact.
“The Budget also included a £500m hardship fund for local authorities to support vulnerable people in their areas. Responsible finance providers, which also work with financially-excluded and vulnerable people and households, must be used to help deliver this fund to where it is needed most.”
What next?
- Media outlets are welcome to quote Theodora’s comments. If you would like more information or to arrange an interview with Theodora, please contact the Responsible Finance office on 020 7520 9215 or call Jamie Veitch on 07904 272 200.
- A notable omission to the budget – and another missed opportunity – was the extension of community investment tax relief to apply to personal-lending responsible finance providers. Read about what we have to say about this.
- The scale and scope of the UK’s responsible finance sector:
- In 2019, responsible finance providers lent £171 million to thousands of credit-worthy businesses and social enterprises rejected by or unable to access finance from mainstream lenders.
- 3,400 businesses were created thanks to this lending.
- 13,800 jobs were created and protected in businesses and social enterprises.
- Responsible finance providers, otherwise known as community development finance institutions, lend to viable but under-served businesses and social enterprises (and to financially excluded individuals).
- The average size of a responsible finance loan for an existing SME was £44,950 over 4.1 years, and businesses borrowing from enterprise-lending responsible finance providers reported an average £320,000 increase in turnover.
- Transparency and affordability are key to these FCA-regulated providers, which will not lend to businesses or social enterprises unless it will increase the business’ chance of success.