CITR fund on the up, whilst other funds close doors
Foundation East is bucking the trend when it comes to tax efficient fundraising. Whilst higher profile Enterprise Investment Schemes (EIS) funds have stopped offering investment opportunities, Foundation East continues to offer its lesser known Community Investment Tax Relief (CITR) shares. CITR shares are a low risk tax efficient investment opportunity. Socially responsible investors seem to agree, as, since launching our CITR offer on Ethex at the beginning of April, we have raised £125,000 of our £500,000 target for the year.
SMEs are the lifeblood of the UK economy. Yet, access to finance remains a key barrier for the UKs legions of SMEs. And with the recent news that Oxford Capital, one of the biggest backers of EIS, a government scheme designed to stimulate investment in start-ups, has suspended fundraising due to changes in EIS rules, things do not look to be getting any better.
It’s not all bad news though. Thanks to widening the promotion of our CITR shares via the ethical funding platform, Ethex, our funding pot for SMEs, microbusinesses and social enterprises is on the up. Foundation East is also accredited to utilise the British Business Bank’s Enterprise Finance Guarantee (EFG) to underwrite the risk of the investments it makes in small businesses, thereby reducing the risk that share investors take when investing in their CITR shares.
“In the East of England, microbusinesses and SMEs account for 99.6% of the region’s 264,000 enterprises. Of these, 98.1% are micro and small businesses, with 90.6% producing an annual turnover of less than £1million. Too many of these businesses struggle to access finance to both start up and to grow, in spite of having viable business plans. We are a not-for-profit finance company that helps such organisations with loans and business support,” advises Katy Ford, Foundation East’s chief executive.
“We have, though, been looking for ways to ensure we can continue to support businesses at the level we’ve been able to for the last 15 years, in spite of the uncertainty of traditional sources of finance for ourselves, such as EU grants and regional growth funds. Following the success of ART Business Loans, our responsible finance equivalent in the Midlands, we decided to launch a CITR share offer via the ethical trading platform, Ethex. Unlike EIS, the government is making no changes to CITR investment rules, so it’s business as usual. Our offer on Ethex launched at the beginning of the tax year and we’ve already achieved £125,000 of our target £500,000 for the year.”
All money raised by Foundation East CITR shares will be loaned directly to SMEs, microbusinesses and social enterprises in the East of England with viable business plans, helping to create economic resilience across the region. Those investing can claim five percent per year of their investment for a period of five years.
“Where else can you earn 25 percent on your investment over 5 years, whilst bolstering economic resilience and changing the lives of people in your community for the better?” asks Katy.
Foundation East has lent £10m over the last 15 years to over 600 small business across the East of England. For every £1 it lends, it creates £15 local social and economic impact. The businesses it has lent to have created 1250 jobs to date and include:
• Bedfordshire birthing pool delivery service, Barefoot Birth Pools
• Cambridgeshire award winning chocolate-making social enterprise, Harry Specters
• Essex eco-brand, Cabello Hair & Beauty
• Hertfordshire young entrepreneurs, Fabio’s Gelato
• Lincolnshire award winning community gym, Boston Body Hub
• Norfolk-based renewable energy solution provider, Miller Installations
• Northamptonshire Cookies Bakers & Confectioners
• Suffolk Future50 company Your Telemarketing
When people or businesses purchase Foundation East CITR shares, 100% of their investment is lent to SMEs like these. For every £1 Foundation East lends on to such businesses, it creates £15 in social and economic impact, as explained in this short animation and this economic impact report. Individuals (or sole traders) can invest a minimum of £50 and a maximum of £100,000. Incorporated business can invest a minimum of £250 and a maximum of £100,000.
To find out more, download an investment prospectus. To invest, visit www.foundationeast.org/invest.