Help for small businesses in deprived areas » Communities » 24dash.com

Small businesses and social enterprises in deprived areas or working with hard to reach groups that are unable to access high street backing will be able to grow because of a new long-term financial scheme that offers loans to enterprises across the East of England.

The East of England Development Agency (EEDA) is investing £750,000 in a new region-wide loan scheme available to businesses and social enterprises with viable business propositions that wouldn’t normally be able to get funding from banks.

EEDA has awarded the contract to deliver the service to Foundation East, a community development finance institution (CDFI).

EEDA has taken the unprecedented move in awarding a five-year contract in order to show confidence in the longevity and sustainability of the programme and offer security to private sector investors. The contract will help to create more jobs and opportunities where there is currently low economic participation.

Loan repayments will be ploughed back into the scheme, encouraging private commercial investment into the fund.

John Wilkinson, community manager of EEDA, said: “The community development finance forms part of EEDA’s access to finance portfolio, focusing on stimulating new business start-up and business growth.

"The £750,000 investment in Foundation East along with the security of a five-year contract will mean social enterprises and businesses operating in deprived areas or within hard to reach groups will have access to loans”

The decision to develop a region-wide service was taken by EEDA, after it became apparent that there were discrepancies in the coverage available through the existing patchwork of CDFI’s across the region.

Working with consultants EEDA concluded that with the right combination of deal-flow, interest rates, loan terms and levels of bad debts, a single branded regional CDFI was the most effective way to create a long term sustainable business model.

Bob Marchant, chief executive of Foundation East, said: “Securing the EEDA tender to expand our services across the region is a testimony to what Foundation East has achieved over the past four years.

"With the help of key partners such as Business Link and the banks, working with the other EEDA access to finance programmes as well as a wider network of introducers, we are confident that we can make a real difference to the enterprise landscape of the East of England – making it without doubt, the place to start and grow a business”

Foundation East have in the past four years created more than 120 employment opportunities and saved over 80 jobs by investing in private and social enterprises that have been unable to secure mainstream funding.

Acknowledging the higher risk clients pose, the interest costs of the loans is at a small premium to High Street rates. However, this premium is often negligible when additional costs are taken into account.

A typical loan of £10,000 over three years will cost about £10-£15 a month more than that of a High Street bank loan, assuming that applicants would have been able to secure one.

Foundation East was awarded the contract after demonstrating its ability to provide full regional access and coverage, a network of contacts and links to specialist business support. EEDA’s investment into the fund will be matched by commercial funding raised by Foundation East.