social impact report & annual statement

Delivering finance for good

The CDFI Way

The COVID-19 pandemic has challenged businesses across all sectors and in all regions and created an unprecedented demand for finance. Brokers and lenders have, with the support of government and the British Business Bank, delivered record levels of lending.

Community Development Financial Institutions (CDFIs) like the Business Enterprise Fund (BEF) have played their part in supporting businesses in need. To date, CDFIs have lent £49 million to nearly 600 Micro, Small and Medium Enterprises (MSMEs) through CBILS.

This has helped protect existing jobs and create new ones while supporting the social and economic wellbeing of communities. CDFIs enjoy close working relationships with businesses within their respective communities and provide critical finance to businesses which remain under-served by mainstream lenders. The aim of CDFIs is to bridge this funding gap with innovative products that support survival and growth even in these, the toughest of times.

Looking forward, CBILS and BBLS will close at the end of January. [1] This places a burden on brokers and lenders to deliver as many of these loans as possible during the coming weeks. CDFIs like BEF are well-placed to assist. They are also looking at innovative ways to support businesses now and, in the months, ahead.

Seeing a clear need for additional, fast and flexible support, CDFIs continue to develop sustainable loan portfolios that deliver finance for good in the communities they serve. This is best illustrated by the Revive and Thrive loans recently introduced by BEF.

The Revive loan provides up to £50,000 on an unsecured basis although personal guarantees are required. It addresses the needs of businesses facing one of two scenarios. First, those businesses who have an existing BBLS loan can now secure additional funds without having to take out a CBILS loan. Second, those businesses who are unable to access a BBLS loan now have quicker access to the finance they need.

While many businesses are simply looking to survive the current pandemic, there are those who wish to grow. The Thrive loan supports these companies with up to £250,000 on a secured basis. The Revive and Thrive loans from BEF are just two examples that illustrate the agile approach CDFIs take in providing finance for good.

In addition, Responsible Finance – the trade body for CDFIs – is calling on government to introduce a post-CBILS guarantee. Based on previous funding programmes such as Enterprise Finance Guarantee (EFG), for every additional £100 million the sector raises, CDFIs support 3,000 businesses and create and protect over 13,000 UK jobs. [2]

To be most effective, any new scheme should take elements from EFG and CBILS. This would enable CDFIs to secure external finance to lend. Importantly, it would support small businesses through the recovery and into the future, when access to finance from mainstream sources may become more difficult as happened after the 2008 financial crisis.

[1] CBILS was extended from December to January after the original publication of this article

[2] Post CBILS Guarantee: The Government Should Act Now to Ensure Businesses can Access Finance After 30 November. Read here.

This article first appeared here.

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