Funding agencies to collaborate on pioneering venture

TWO West Midland funding organisations are coming together to trial a new model for financing business growth in the region.

ART Business Loans is joining forces with peer to business lender ThinCats to pilot a unique scheme – in effect a mini regional growth fund – aimed at raising £500,000 to support the development of local firms.

The move is designed to improve access to finance for SMEs in the region, enabling them to create and preserve jobs.

Based at Innovation Birmingham Campus in Aston, ART lends £10,000 to £150,000 to businesses unable to access the finance they need from the banks.  

Working with Tamworth-based peer lending platform ThinCats, it is pioneering a new approach to raising money to lend on to businesses. The usual model is that investors choose individual businesses in which to invest through ThinCats.  

ThinCats founder Kevin Caley has dubbed the platform ‘Community Chest’, claiming it is the UK’s first peer-to-peer funding offer for good causes such as social enterprises.

The initiative is part of ART’s continued planned expansion to meet the finance needs of growing West Midland businesses.

The new proposition echoes comments made by ART chief executive Steve Walker earlier this year when he said funding bodies were being encouraged to seek finance locally.

The move follows a third record year of loan delivery by ART in 2015/16.

“We have seen an increase in applications in the first quarter of this financial year, with loans delivered in excess of £900,000,” said Mr Walker.

“We fully expect to see further increased demand in the months ahead.”

ART Business Loans, a social enterprise and member of Responsible Finance, has worked with other Responsible Finance members across the UK to develop the ThinCats Community Chest offer.  

Under the pilot scheme, investors will have the opportunity to make a loan to ART for a five-year term, which will benefit from Community Investment Tax Relief at a rate of 5% p.a. of the amount lent for five years.  

Mr Walker said the two bodies had striven to make the proposition as attractive as possible to investors.

In a win-win scenario, investors stand to make a return of 8.2% per annum for a higher rate tax payer, with the social benefit of helping to support jobs in the local economy.  

All of the money raised will be lent to businesses in the West Midlands.

Mr Caley, who chairs ThinCats, said: “Community Chest is breaking new ground by providing a unique and tax-efficient way of investing in P2P, which I believe will be popular with investors, while delivering a vital new route to funding for social enterprise right across the UK.”