Birmingham City Council is joining forces with ART Business Loans and P2P lender ThinCats to assist Birmingham SMEs that are unable to obtain any or all financing needed from high street banks, reported the Birmingham News.
“Peer to peer finance solves two problems at once; it provides businesses with the funding they need to grow at a time when banks are reluctant to help and it also provides investors with a way to earn returns on their capital well above the rate of inflation,” opined ThinCats Founder and Chairman Kevin Caley. “This unique partnership between ART Business Loans, Birmingham City Council and ThinCats highlights the way that investors from Birmingham can invest in the economy of their own City.”
ART and the city council will jointly underwrite loans of between £10,000 and £150,000. The partnership has set a fundraising target of £1 million a year over three years and is appealing to companies and individuals to invest in the scheme.
“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,” Councillor John Clancy indicated. “Small and medium sized enterprises 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.”
Interested parties must register with ThinCats to invest a minimum of £1,000 in ART Business Loans during 26 January and 9 February. ART will then lend the money raised to Birmingham businesses. According to the Birmingham News, 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 receive 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.
“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,” ART Chief Executive Dr. Steve Walker explained. “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.”
Founded in 1997 with the objective of providing finance to businesses and social enterprises that were unable to access loans from banks, ART’s average loan is £33,000, reflecting a gap in the business funding market for smaller loans. Based at Innovation Campus, Birmingham, ART has lent over £20 million since its launch in 1997, helping small firms to grow and create thousands of jobs.