New fund launched to help Birmingham start-ups secure finance

A new funding stream to help fledgling businesses in Birmingham has been officially launched.

The fund sees Birmingham City Council team up with ART Business Loans (ART) and peer-to-peer platform ThinCats to help provide the start-up capital for new businesses.

The fund is hoping that it could generate around £3m to help improve access to finance for start-ups and existing businesses – provided local investors give the idea their support.

In its first day of fundraising yesterday, organisers managed to secure almost £70,000 and hopes are high that the positive momentum will continue.

ART and the city council will jointly underwrite loans of between £10,000 and £150,000. The average loan is expected to be around £33,000.

The partnership has set a fund-raising target of £1m a year over three years and is appealing to companies and individuals to invest in the scheme.  They can do that in the first instance by registering with ThinCats and taking advantage of a two-week window (ends February 9) to invest in ART Business Loans with a minimum investment of £1,000.  There is no upper limit.  ART will then lend the money raised to Birmingham businesses.

Steve Walker, chief executive of ART said: “There are many reasons why a viable business may not fit the banks’ lending criteria, including because the bank has already lent all it can.  We’re here to ensure that businesses can access the loan finance they need to support cash-flow, invest in new premises and equipment, survive and thrive.”

Birmingham City Council leader John Clancy has urged investors to back the scheme.

He said: “This is a pioneering local investment opportunity and a chance for people to not only get a financial incentive in the form of a tax relief, but also a social return.  SMEs are the life blood of the local economy and their ability to grow, create inclusive economic growth and preserve jobs impacts on everyone who lives and works in Birmingham.”

Investors will be able to claim Community Investment Tax Relief (CITR), which reduces investors’ tax bills by 5% of the loan value per annum over a five-year period.  This equates to a 6.25% return for standard rate Income Tax payers, 8.3% if you pay 40% tax and 9.1% for higher rate tax payers.  The tax relief also applies to businesses who get Corporation Tax relief, providing an income equivalent to 5.8%.  To take full advantage of the tax relief the money must be left invested for five years.  At the end of that time it will be returned.