FUNDING
Local community finance experts explain why the region’s smaller enterprises need more support accessing finance – and how you can help
overnment-led banking innovations supporting SMEs have been hitting the headlines.
to spare – investing in its Community Investment Tax relief (CITR) shares. The purpose of Responsible Finance Providers is clear: to support job creation and job sustainability, and to strengthen communities by providing loans and associated services. However they’re financed, their economic impact is clear: in the case of Foundation East, £15 of local economic value is created with every £1 spent supporting enterprises that banks won’t. Social impacts include: improved business and personal finance skills; fulfilment of personal ambition; and less reliance on state benefits and inappropriate, unethical credit methods. Katy Ford, who has worked for Foundation East from day one and as chief executive since 2009, echoes Belinda’s point. “In many ways, our region is privileged. Home to the tech corridor, we are not without private investors. Perhaps because of this, the wider region, largely rural, has missed out on large- scale public funds enjoyed by SMEs in the North, Midlands and South West. We do our best to help enterprises with viable business plans that cannot find funding. So far, we’ve lent £10m to over 600 small businesses, creating or saving 1250 jobs. However, without further funding, meeting demand will be tough.” Cambridgeshire companies that have relied on Foundation East include social enterprises Arjun Technologies, BeeBee Wraps, Cambridge Community Arts, Harry Specters, PlayPhysio, Repositive and Sunflowers Care, and micro-businesses Ginibee and Barefoot Pools. “In the case of BeeBee Wraps, the loan enabled a kitchen table start-up to expand production of its plastic-free food wraps, creating one full-time and seven part-time jobs. In the case of Ginibee, an online job-
In April, the British Business Bank announced a £300m funding pot to support high-growth firms. In May, the Banking Competition Remedies Fund announced £425m in grants to help challenger banks and FinTech companies establish banking services for SMEs. Just two examples. Good news, right? Not exactly, according to community finance experts Dr Belinda Bell and Katy Ford. “Of the region’s 264,000 enterprises, 99.6% are SMEs and 98.1% are micro and small businesses. They are the lifeblood of our local economy and it’s vital that even the smallest can access funding if they need to,” explains Dr Belinda Bell, programme director for Cambridge Social Ventures, part of Cambridge Judge Business School. “Recent funding initiatives are welcome. Their focus, though, is on high growth, high turnover SMEs. When you consider that 90.6% of East of England businesses turn over less than £1m annually, it’s clear there is still a massive funding gap. Expecting existing or challenger banks to service this market is unrealistic.” Belinda has worked tirelessly on addressing this gap since 2004, when she played a key role in setting up Foundation East. Back then, Foundation East was categorised as a Community Development Finance Institution (CDFI), now more commonly known as Responsible Finance Providers (RFPs). Back then Foundation East was financed by central, regional, local and EU investment. These days it’s increasingly financed by local people and companies with a sense of social justice – and cash
Of the region’s 264,000 enterprises, 99.6% are SMEs and 98.1% are micro and small businesses. They are the lifeblood of our local economy and it’s vital that even the smallest can access funding if they need to”
sharing network, the loan provided working capital to support its founder through the initial trading period, creating a job and saving a job,” Belinda explains. “In spite of diminishing funds, we’re doing all we can to support local SMEs,” concludes Katy. “Local bank branches continue to refer those businesses that they can’t help, usually due to lack of collateral, to us. Also, more and more businesses and individuals who recognise the positive social impact of enabling micro, small and social enterprises to set up and grow in the Eastern region are stepping up to help by investing in our CITR shares. Investors can claim 25% tax relief on their CITR investment over five years. While not risk free, it is less risky than alternative SME lending options, including SEIS, EIS and SITR. It also ensures that the social impact they enable is on the doorstep.”
To read Foundation East’s investment prospectus or apply for a loan, visit foundationeast.org
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