New backing for CDFIs will enable more businesses to grow

• Capability and capacity building programme announced, backed by Lloyds and the Department for Culture, Media and Sport (DCMS)
• MP visits Yorkshire entrepreneurs growing businesses with CDFI funding

14 November 2024: More businesses will be able to access the finance they need to grow thanks to a new programme to bolster our members, the UK’s community development finance institutions (CDFIs).

Responsible Finance and the Impact Investing Institute, an independent non-profit working to transform capital markets so they support a fairer, greener, more resilient future, have announced a new programme to support the growth of the CDFI sector which lends to businesses, supported by Lloyds and the Department for Culture, Media and Sport (DCMS).

In 2023, CDFIs lent £221m to businesses and social enterprises which would otherwise have been excluded from affordable finance, creating and safeguarding over 12,000 jobs. 99% of the businesses which borrowed from CDFIs in 2023 had previously been declined by another lender, and 98% are based outside London.

However, the demand for affordable finance from businesses which can’t yet meet traditional lenders’ criteria is much greater. CDFIs create and nurture banks’ future business customers and were backed by a record number of new investors and partners in 2023. But they have historically struggled to access enough capital to meet demand.

The Impact Investing Institute will deliver a programme engaging more institutional investors in the sector, lead a research project exploring innovation in establishing and financing new CDFIs, and convene a cross-sector forum to facilitate collaboration.

Through a capacity building element of the programme, eligible CDFIs will secure grants of £10,000 to £25,000 to cover recruitment and training, data management, upgrading CRM systems or loan management software, and investment in Al to streamline and expedite their application processes.

The programme, backed with £220,000 from Lloyds and £100,000 from the Department for Culture, Media and Sport (DCMS), follows March 2024’s announcement of Lloyds’ £43m investment into three CDFIs through the £62 million Community Investment Enterprise Fund (CIEF), which aims to invest in around 800 small businesses, supporting around 10,500 jobs. DCMS will also continue to support the sector in this critical stage in its growth.

Stephanie Peacock, Minister for Sport, Media, Civil Society and Youth, said:

“Through our continued partnership with the Impact Investing Institute, we are supporting social enterprises and small businesses to access the finance they need to grow and thrive. By unlocking access to essential funding, Community Development Finance Institutions create new economic opportunities in underserved communities across the UK and build stronger local economies.”

Theodora Hadjimichael, chief executive of Responsible Finance, said:

“Many great businesses struggle to get the funding they need, so Community Development Finance Institutions (CDFIs) are a lifeline. They have a long history helping businesses to grow and create jobs but have not always had enough funding themselves to meet demand. This programme will enable CDFIs to expand and support more small firms.”

Bella Landymore, Co-Chief Executive of the Impact Investing Institute, said:

“Community Development Finance Institutions (CDFIs) play a critical role in supporting small businesses that are unable to access finance from mainstream banks. Historically, one of the key challenges has been the lack of large-scale investment in CDFIs, limiting their ability to support more small enterprises across the UK. This continued support from the Department for Culture, Media and Sport and Lloyds Bank will enable us to engage more institutional investors in the sector and explore innovative approaches to help the sector expand its reach and impact.’’

Elyn Corfield, CEO, Business & Commercial Banking, Lloyds Bank, said:

“We recognise the value that SMEs bring to the economy so as one of the biggest financial organisations in the UK, it’s important that we do all that we can to support them. Whether that’s through the lending we provide directly or through investing in CDFIs, this latest funding underlines our commitment to ensuring local businesses – and, consequently, local communities – flourish.”

The announcement coincides with a November visit by Sally Jameson, MP for Doncaster South, to CDFI Finance for Enterprise.

Jameson met three Yorkshire entrepreneurs growing their businesses with the support of CDFI funding – Dominic Barnes and Kate Bawson from Biobax and Kevin Wheatly from AmbiSpace.

Doncaster-based sensory room design and installation specialist AmbiSpace secured £50,000 in funding from Finance for Enterprise to grow the business, relocate and install new machinery and equipment. It is now producing fibre optic carpets and light guides for sensory, aviation, medical, commercial, and industrial clients in the UK and internationally.

Meanwhile, Huddersfield-based manufacturer BioBax received funding from the CDFI in June to scale production of its innovative range of microbiological cleaning products.

Sally Jameson, MP for South Doncaster, said:

“Finance for Enterprise is giving small businesses the funding and confidence they need to thrive. CDFIs are a great example of how innovative approaches to funding can drive growth in local communities and I’m excited to see the impact Andrew and the team are having across Yorkshire.”

Andrew Austwick, Managing Director, Finance for Enterprise, added:

“A vibrant community of small businesses is the backbone of our local economy. The lending that we have provided for businesses has generated over £280m for the Yorkshire economy over the last five years.”

Mark Burton, Group ambassador for Yorkshire and the Humber at Lloyds, said:

“It’s hard to overstate the contribution of small businesses to the economy. Here in Yorkshire I see their vital role as employers and incubators for innovation every day. As one of the country’s leading financial organisations, it’s essential that we continue to support them, be that through direct lending or our support of CDFIs. This latest grant funding underlines our commitment to ensuring local businesses and the communities they serve continue to flourish.”