The ART of providing something completely different
By Dr Steve Walker, chief executive of ART Business Loans
As CEO of a business loans company, my usual topic when ‘putting pen to paper’ is access to appropriate finance for small businesses and social enterprises.
ART Business Loans (ART) has been providing finance for over 20 years where the banks have been unable to meet the full loan needs of their customers. Substantial numbers of new sources of finance have come into existence, particularly over the last 10 years, but while they have provided in the most part more choice, many have been in competition to the banks and have not truly provided an additional source of finance for businesses and social enterprises.
So what is completely different? This time I want to draw your attention to ART’s quest for capital and an opportunity to invest in our new Community Shares Offer to help us support more businesses across the West Midlands.
We currently lend around £2.5m a year, but know that the demand is there for more. With this share offer, we are looking to raise an additional £500,000.
Why would anyone invest in the local economy? Because putting their money to work, helping businesses to access the finance they need to survive and grow, protect and create jobs has to be good for the long term future of those of us who live and work in the region. Investments in ART also qualify for Community Investment Tax Relief (CITR), which offers 5% per annum of the sum invested in tax relief (on income tax or corporation tax liabilities) over five years. At the end of that time, investors can choose to withdraw their money or reinvest in ART.
In Pythonesque terms, raising money from social investors is not ‘completely different’ for ART – just a bit different.
When we started in 1997 we raised funds through a share offer as a start-up social enterprise. At that stage all we had was a plan, plenty of experience and enthusiasm but no funds to lend or even to pay the overheads – quite similar to lots of micro, small businesses and social enterprises. We had no track record, there was no financial return of any kind and we were looking to lend only in Inner City Birmingham. Thanks to the generosity and vision of private individuals and the corporate sector, we raised the initial lending capital we needed – and were then able to leverage more as match funding and loans.
Over the years, ART has been supported by a variety of public sector sources and also raised private sector capital to lend. For the past eight years ART has been able to borrow successfully from Unity Trust Bank.
The difference with our current share offer is:
- Investors in ART now receive a financial return in addition to a social return, through a tax relief (CITR);
- ART now has a strong track record and balance sheet and has lent over £25m to date;
- ART has an existing loan portfolio in excess of £5.5m, original social share investors’ share funds are still safe and for over eight years ART has generated sufficient income to cover all overheads;
- Through the British Business Bank ART now has a public sector guarantee that can cover bad debt cover of up to 15% of the loans made;
- ART now lends throughout the entire West Midlands, although it still targets underserved sectors and communities;
- With substantial regulation introduced to protect investors, ART’s new offer is made through the social investment platform ETHEX.
Of course, the world is now a very different place. Do private and corporate philanthropists exist in the same way? Will a new generation of investors, with a wider range of investment choices, still choose to support their local economy? We certainly hope so, and that the differences in our offer have kept pace with the differences in society. It will be interesting to see what happens. Watch this space over the next two months.
Full details of ART’s Community Share Offer can be found at www.ethex.org.uk/ART2019
Dr Steve Walker
Chief executive, ART Business Loans
Responsible Finance Leader of the Year.