£5m RBS loan fund to make ‘social impact’Posted by Helen Loveless

£5m RBS loan fund to make ‘social impact’Posted by Helen Loveless

Helen Loveless, The Mail on Sunday
16.10.11

 

SOCIAL enterprises, charities and community interest companies will be able to apply for finance from a £5 million business loan fund due to be launched tomorrow.

 

The Community Business Loan fund is being set up by Royal Bank of Scotland with the aim of providing finance to those who ‘do not qualify for mainstream banking lending’. Firms will have to demonstrate that they are financially sustainable and that they can deliver a positive impact to society or to the environment, in order to qualify.

 

Charities, social enterprises, co-operatives and community interest firms can apply for loans of between £30,000 and £500,000. Community Development Finance Institutions (CDFIs), which hand out funds to other businesses, can apply for loans of between £200,000 and £1 million.

 

The move is part of RBS’ ongoing commitment to support ‘businesses of all shapes and sizes’, in particular those in the social enterprise sector.

 

Peter Ibbetson, small business chairman at RBS/NatWest said: ‘As the economy worsens we are seeing a growing appetite for this type of finance. More businesses are starting up which are social enterprises or community-focused firms, often not-for profit, but about making a difference.’

 

According to Ibbetson these businesses are likely to have different needs to many other firms too. He adds: ‘Often those running this type of business may need more time spent with them dealing with balance sheets and accounts, because they do not have a business background. There may be no collateral in the business while they may also need more flexibility when making payments.’

 

However, pricing on the loans will be set at commercial rates. ‘While our objective is not to make a commercial return, we do want to build a sustainable fund that can be used to benefit as many businesses in this area as possible,’ adds Ibbetson.

 

Ibbetson says the bank is seeing a ‘plethora’ of different businesses, who want funding but don’t suit the usual model, from dry stone walling firms to community unemployment services.

 

He adds: ‘We would expect to support about 1,000 businesses through the fund, some of which will be directly and some of which will be through Community Development Finance Initiatives.’

 

Jean Cummings is chief executive of Crisis, a charity in Renfrewshire, Scotland, which provides counselling services to more than 2,000 children, teenagers and adults every year. Set up in 1996, in recent years the charity has provided counselling for many British soldiers returning from the conflict in Afghanistan.

 

Last year the future of the charity looked uncertain after its funding from the local health board was cancelled and it received news that it would no longer receive a grant from a national charity.

 

Jean, 61, says: ‘We were very concerned if we were going to make it. We had more and more people coming from all over Scotland to use our services, but no substantial way to cover the cost of using those services.’

 

But Jean was then referred to an independent charity set up by high street bank RBS to provide loans to businesses with a social impact. The charity agreed a loan of £20,000 over two years to enable Crisis to restructure itself as a social enterprise.

 

Rather than depending on charitable grants and government funding Crisis now markets and sells its range of training and employee counselling services to other businesses. The profits made from these contracts are reinvested into the business, enabling it to keep going.

 

Adds Jean: ‘We are now in a position to offer counselling services to those on a low income for just £5 an hour, rather than the norm of up to £60. We’re working with some really vulnerable people, including returning veterans, who deserve all the support they can get.’

 

She says: ‘RBS have been really helped us and we are much stronger as an organisation now we are structured as a social enterprise. We would definitely consider applying to borrow through the new fund if we needed to do so.’