29th June 2016 By Katy Ford in Current Affairs

In a week witnessing much turmoil within the UK, with many businesses pressing pause on development projects until the economic climate is more settled, Foundation East has witnessed an increase in applications for loans by local entrepreneurs being turned away from mainstream finance.

 A report released today reveals that the very banks that have benefitted hugely from public money are withdrawing from less affluent areas of the country. MPs will be debating this in parliament today.

 The main points of concern are:

  • SME lending growth will reduce by 63% in postcodes that lose a bank branch
  • Postcodes that lose their "last bank in town" will suffer a 104% drop in SME lending growth, pushing net lending negative 
  • "Last bank in town" closures will see those postcodes lose an average of £1.6m in business lending over a year - usually in the poorest areas
  • There is widespread accusations and evidence that banks are intentionally targeting poor areas for closures - even though they need banks most

Simultaneously, the Treasury and BIS are currently preventing Responsible Finance Companies such as Foundation East from lending recycled capital to more SMEs. Funds accrued from repaid loans are being held in bank accounts across the country. This is money that could be lent to SMEs in your region, SMEs such as Foundation East’s client Ultimate Care, a domiciliary care provider based in Ipswich.

Ultimate Care first came to Foundation East’s attention in 2007. The business owners, Nicola and Marc Rowland, fuelled by frustration with the level of care and working practices in the care industry, set up their own domiciliary care business serving the Ipswich community. Core to their idea was taking the time to sit and chat and build a trusting relationship with their clients. It worked.

Their business grew month on month through word of mouth alone. To grow, Ultimate Care needed to attain accreditation in order to bid for social service contracts, however, they needed to have been trading for at least six months before they could apply for accreditation. To continue growing required recruiting and training staff, which cost £600 per new recruit. To do so, they needed a loan. Due to lack of trading history and security, mainstream banks refused to help, but Foundation East, upon meeting them, reviewing their loan application and business plan, were able to.

The business grew from strength to strength, overcoming significant challenges, including changes in statutory funding mechanisms. So when they came to us with a request to extend the loan, because they had been offered an opportunity for the leasehold of a local residential care home within the community they served, it was not a difficult decision for Foundation East to make.

 Now up and running, the Ultimate Care team has created more than just a new care home in an underserviced area of Suffolk. It has created a much needed, much celebrated, affordable new option for local authority healthcare providers, freeing up hospital beds. It’s created 19 fulltime jobs and safeguarded 3 jobs on the domiciliary side and its ‘integrate, don’t segregate’ care policy is delivering positive social impacts on the well-being of residents and the associated peace of mind for their family members.

 It has never been more vital to support the growing number of businesses, like Ultimate Care, which are unable to access mainstream finance. Doing so boosts the local economy by saving and creating jobs and associated savings on the public purse. Together, with other members of Responsible Finance, Foundation East is lobbying for the urgent release of recycled capital to enable us to fund more new and growing businesses across the East of England and we strongly encourage everybody who cares to write to their MP about this issue too.

Ultimate Care is just one recent success story we’ll be sharing with our local MP in order to increase pressure for the release of capital so we can help other businesses to achieve their dreams, provide employment opportunities for local people and deliver other positive social and economic impacts too. You can read more about their journey here. Marc, who strongly believes in the need for Responsible Finance Providers has this call to action for any of you out there who share his belief:

“We could not have become a viable business without the support of Foundation East. The knowledge that, when we repay our loan, the funds are re-lent back into our local community to help other businesses like ours thrive.  Responsible Finance Companies like Foundation East see beyond tick boxes, they treat people as people, and so long as there is a viable business plan, or they can help you make your plan viable, they will support you. This will boost your local economy and have trickle down effects. I urge anyone moved by this idea to become a member, your investment helps business like mine to start up, grow and flourish Foundation East’s funding has proven gold dust to us and we are proud to be associated with them.”

As the CEO of the East of England’s only Responsible Finance Provider, I urge the BIS (Department of Business Innovation & Skills) and the Treasury to release the repaid capital to enable others to benefit too. It has never been more important to boost local economy than now. The current volatile and uncertain economic climate coupled with the withdrawal of the banks from less affluent areas, brings with it a likely increase in demand for loans to help small businesses, small businesses, such as Ultimate Care. 

  • About the Author
    Katy Ford

    Katy Ford

    Katy’s knowledge of community finance is extensive, having worked for Foundation East since its inception in 2004. She is recognised locally as an influential business leader by the Suffolk 100 and nationally, as a founding member of AskIf, an online network of community-based lenders. Previous to moving across to community finance, Katy was the treasury manager for a large insurance company. She also has experience as a SME owner, having run a small hotel.

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