City council and lending platform join forces to help start-ups

New funding boost for Birmingham businesses.

Birmingham City Council leader John Clancy is appealing to Brummies to support a fund-raising scheme that could generate £3 million to help small businesses get off the ground.

The council is joining forces with the Aston Reinvestment Trust and the ThinCats Community Chest peer lending platform to assist start-up firms and social enterprises from the poorest parts of Birmingham that find it difficult to obtain loans 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.

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 tax relief because ART is a Community Investment Tax Relief scheme. An investment of £10,000 will attract an income tax rebate of £2,500 for a higher rate taxpayer spread over five years – equivalent to £500 a year.

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. One of ART’s best known beneficiaries is Birmingham Michelin-star chef Glynn Purnell who took out a loan to open his first restaurant.

Based at Innovation Campus, Birmingham, ART has lent over £20 million since its launch, helping small firms to grow and creating 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 cashflow, invest in new premises and equipment, survive and thrive.”

Kevin Caley, Founder and Chairman of ThinCats said: “Peer to peer finance has the potential to provide significant funding to Birmingham businesses if local individuals and businesses choose to invest in their City. Apart from offering them an opportunity to ‘put something back’, this loan offers investors a low risk opportunity with an attractive return for UK tax payers and could be a useful way to diversify an investment portfolio.”

ART and BCC will provide the shared underwriting support to raise a target of £1million a year from individuals and companies using Community Investment Tax Relief. CITR is available to individuals and companies that invest in accredited intermediary organisations, called Community Development Finance Institutions, which in turn on-invest in enterprises that operate within or for disadvantaged communities.

ART is the only CDFI currently in Birmingham. An individual who pays UK income tax will receive five per cent of their investment value as a discount on their income tax or corporation tax liability over the five-year term of the loan – the loan cannot be withdrawn before five years.

The average loan is £40,000, reflecting a gap in the business funding market for smaller loans.