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Following a consultation on how best to finance small businesses, the Government has committed to supporting Community Development Finance Institutions (CDFIs), like ART, which specialise in lending to businesses that are unable to access the finance they need from the banks.
ART is one of five CDFIs covering the whole of the West Midlands area between them, which offer small business finance, and they all belong to the Fair Finance Consortium. They either lend on their own, or alongside the banks making up the last vital piece of a financial package.
Recognising the role that the not-for-profit CDFIs have been playing in facilitating access to finance, the Government has made four key commitments in a Green Paper called ‘Financing a Private Sector Recovery’ which was published on 1st November. These are: to consider making changes to the EFG (Enterprise Finance Guarantee) to make it easier for CDFIs to lend to a wider range of small businesses; to contribute to the European PROGRESS Microfinance Facility, to which CDFIs can bid for funding; to develop the Big Society Bank, which CDFIs will be able to borrow from; to continue to work through existing financial intermediaries, including CDFIs, and to review the Community Investment Tax Relief scheme, which provides tax incentives for individuals and businesses to invest in CDFIs.
CDFIs are independent, locally-targeted, lending organisations registered with the Financial Services Authority. Their remit is to boost their local economies, supporting disadvantaged areas and groups in particular.
The CDFIs that are members of the Fair Finance Consortium currently make about 300 loans each year, worth around £5m, to viable businesses across the West Midlands area. Interest rates offered to lenders are broadly similar to bank finance and they offer a personal approach to finance.
Andrew Baker, Chief Executive of the Consortium, welcomes the Government’s commitments, commenting: “We are very pleased that the Government recognises the work that CDFIs have done and the contribution they can make to developing the private sector employment that the economy so urgently needs.”
For more information about the Fair Finance Consortium see www.fair-finance.net.