So often that moment of inspiration, that great idea for a business venture and the excitement that goes with it drifts away as you start thinking about
how you can make it happen At one level starting a business right now is about attitude. It takes courage, determination, self belief and the drive but for the practicalities of making that inspirational idea a reality you need a business plan, premises, possibly machinery and equipment, a way of marketing your business etc. and, oh, some finance.
So where can you turn when many financial institutions are reluctant to lend and risk adverse. For those budding entrepreneurs here in Suffolk and indeed the rest of the East of England FOUNDATION EAST is your funding destination.
For people starting up there are two routes to a Foudation East Loan
THE START UP LOAN PACKAGE
For those entrepreneurs aged under 30 START UP LOANS of up to £2,500 are available at 6% for up to 5 years and come with the support of a business mentor. Although only available for those aged 30 and under, however today Lord Young has proposed that this age cap should be removed. www.bbc.co.uk
THE BUSINESS LOANS PACKAGE
For any entrepreneur needing a larger loan this package offers loans of up to £50,000 (and in some circumstances more) available at 19% for up to 5 years. One of our Business Loan Managers will be there to support you through the application process and throughout the term of the loan and we also insist on Start Ups also having a Business Mentor.
Its worth remembering that over 92% of start up businesses we have lent to over the past 3 years that have received mentoring are still trading.
SO – We have the money if you have the drive!
Visit our web site at www.foundationeast.org for more information Foundation East, these loans for Start Ups and the other financial products we can provide.
The pro-active support and advice that HMRC has given to the public in general and to business people in particular over recent years via their customer facing staff has been excellent. The courses that they have run have been extremely useful and most informative. They have been a God send for many people starting up in business, especially if it is that person’s first ever time as a self-employed person or as a business newly employing other people.
By taking stands at exhibitions and seminars HMRC has been humanised. A modern government department that is keen to assist, advise and support has been displayed rather than one aimed at catching people out, penalising businesses and increasing revenue by a system of fines.
HMRC has done a grand job of educating business people as to what it required of them.
Why, oh why therefore scrap proactive face to face advice and retreat to offering advice via the internet and a web site? I know it is down to cost. I’m not totally naïve.
We saw the face to face support and advice offered by BusinessLink scrapped in favour of all such government assistance coming in the form of an all encompassing website that holds all the information about business that anyone could possible want (supposedly). The fact that it is unwieldy and almost impossible to use is dismissed. The idea that someone might just want to ask another person a question is not considered. It was a regressive step.
Now all face to face pro-active advice offered by HMRC is to be scrapped and be replaced again by an internet based service.
Until now your average “one man band” start-up business person could have gone on a useful course to learn how to register their business or determine what tax they might have to pay. They could have approached the friendly HMRC face at the local business drop in session to ask how their partner’s situation might affect them in going into business. Now, do you really think that they are going to be able to find that information on the HMRC website? I don’t mean to suggest that we are not a bright enough society to deal with finding out something for ourselves. We can – if we can find that information in the on-line jungle.
To many people HMRC is scary. They are the bad guys. They take our money from us.
Having a human face on HMRC has really helped business. Shame that it has been scrapped.
SupportingU is a specialist environmental engineering company, based in St. Albans, Herts. The company, which was established in 2005 by David Mackay installs, refurbishes and maintains air quality monitoring equipment.
The advantages for SupportingU are that they are one of only six suppliers in the UK and their strict internal control procedures and independence enable them not only to be competitive but also maintain a very high and distinctive service, offering their clients a variety of product and services.
In 2012 the company identified an opportunity to expand, which required external funding and upon receiving little support from his current banking provider, David approached Foundation East:
‘Working closely with our clients enables us to identify ways in which we can save them money. We identified an opportunity to streamline our processes and service in order to become much more operationally effective, plus an insight into new products and services we could offer in the future. Such diversification required the formation of a dedicated sales team and the employment of additional apprentices in our workshop’.
‘Foundation East were very effective and helpful’ says David, ‘and once I had sent my application through, my local Business Loans Manager, Bob Shimmon visited me in order to go through everything and explain the next part of the process and what additional information was required to support my proposal’.
Bob Shimmon explains:
‘For Foundation East one of our Key Performance Indicators is jobs created and jobs saved. The application from SupportingU was professionally presented, well researched and it was clear that this company had the potential, with our assistance, to bring new jobs to St. Albans’.
Since receiving a £45,000 loan from Foundation East, SupportingU have employed a full-time Sales and Marketing Manager and a sales support assistant, started its workshop apprentice scheme in partnership with a local college. Developed a new website and invested in a bespoke customer relationship package. There are still further plans to engage a further apprentice and develop further our web presence.
‘The Foundation East loan has enabled the expansion of the business in terms of sales and personnel. We are adding to the local economy and helping the local college in the development and aims of their current apprenticeship scheme’.
Foundation East is a finance organisation based in eastern England which aims to assist companies that have been unable to obtain funding from traditional sources. They make their decision on the viability and potential of the business rather than using a pre-set criteria or credit scoring system.
Limited liability companies are such a fact of life, both in the UK and around the world, that one does not often stop to think about why that is, and whether it is unarguably a good thing. This may sound slightly heretical but recently I have been doing just that. For me it has been rather like my approach to the concept of free markets: people of my generation have grown up being taught of free markets as a more or less unalloyed force for good, or at least as the ideal to be aimed for, and it is only in more recent years that I have started to see that this may not actually be true. When the instances of market failure seem to outnumber those of market ‘success’ and when the markets which we are presented with as being most ‘free’ (e.g. the financial markets) are actually riddled with structural biases and imbalances, one does start to wonder. But that is a subject for another post …
Limited liability does not in fact have as long a history as one might think – the concept emerged in England earlier but was rare until the 19th century, from when it caught on in a big way so that by the end of that century it was common practice throughout the western world. It is often said to have been a (or even the) key enabling factor in the shift towards large-scale industrialisation (a proposition that obviously can never be tested).
The most oft-quoted, and most readily understandable benefit of limited liability to society at large is that it encourages entrepreneurship – in fact this is not obviously and always a good thing per se – if it allows the entrepreneur to take bad risks at the expense of his creditors then the net benefit to society may be negative. This is one of the areas which first prompted me to think about this subject – successful entrepreneurs (especially before the internet age) typically have many failed ventures behind them; in addition, for each successful enterprise in a given field there will be numerous failed ones; all of these failures will have resulted in losses for bank, trade and tax creditors and sometimes employees too – might the aggregate losses in fact outweigh the gains of the one success? The direct effect of limited liability really is only to transfer risk and cost from investors to creditors and a further problem with this is that not all creditors are dealing as equals. Trade and bank creditors tend to make sure they are well protected, whether by charges or personal guarantees – whereas the largest unsecured creditor in a bankruptcy is very commonly the public purse. And there is another type of potential creditor who does not even have the opportunity to negotiate terms – a third party who is harmed by the corporation’s actions, whether a single person when something falls on them in the street or all of us when serious environmental damage occurs.
The more closely thought through argument in favour of limited liability concerns capital efficiency, where there are a number of factors at work:(i) limited liability facilitates aggregation of the capital of many small investors who wouldn’t want to be on the hook for a large enterprise’s potential losses, (ii) it allows the small investor to diversify his own portfolio and therefore accept a lower return on his capital, (iii) it removes the costs to the investor of having to monitor management and fellow shareholders behaviour and actions, and (iv) it enormously improves transferability of shares, as without it the company’s creditors would want to assess each new shareholder based upon their private resources. All these together undoubtedly result in more efficient allocation of capital, although you may notice they apply really only to large scale public corporations – they are largely irrelevant to closely-held companies which are of course, by number, far the most typical case of limited liability corporation.
I think that the lesson from my musings here is that all of us who benefit from the limited liability regime, from the window-cleaner all the way to the hedge-fund manager, should learn to think of it much more as a privilege than a right, and therefore seek to conduct ourselves with the utmost probity in all of our business dealings.
In researching this blog post I have relied very heavily on David Millon’s 2007 article in the Emory Law Journal, which you can read in full here.
When former professional cyclist Matt Rump, then unemployed, decided to repair some old bicycles rusting at the bottom of his garden and sell them for spare parts on eBay, it was the first step towards him setting up a successful business in Kessingland, Suffolk.
Two years later and as a sole trader running a full service cycle shop,CycleRecycle, which sells upcycled and recycled bikes and spare parts, as well as offering a repair service and bike hire, the 40-year-old admits he was “underwhelmed” by the budget, and disappointed it contained no practical measures or incentives to help him expand.
As well as small high street premises Rump has an online store selling more than 10,000 parts and accessories, and has been seriously considering taking on a member of staff to help him. “When I hear regularly on the radio that there are 2.5 million unemployed people in the UK, and I probably get a couple coming in every week asking for work, it makes me wonder why the government can’t offer some incentives.
“It is a huge leap and lots of extra responsibility to make that move and become an employer. There’s nothing here that will help me.”
Even the proposed employment allowance, allowing small businesses and charities to reduce the cost of hiring staff through a £2,000 per annum employment allowance to go towards their employer National Insurance Contribution bill from April 2014, is not a sufficiently attractive incentive for a small operator like him, he says.
Similarly, vouchers which enable him to get business advice sound “tokenistic”. “I got a £3,000 business loan from the local community finance organisation Foundation East and that’s where I go to get advice.”
The chancellor’s decision to scrap the fuel duty increase planned for this autumn is good news for hard-pressed motorists, but potentially bad news for Rump’s business – when fuel goes up in price, he traditionally feels the benefit.
“I have been trading from this shop for nearly two years, and in that time I have noticed a lot of people turning to bicycles. In general they fall into three categories: cyclists who love cycling; people who have lost their jobs and sold their car and need cheaper transport; and people who simply cannot afford to run a car. So I will potentially lose new customers.”
One glimmer of good news is the raising of the personal allowance for under-65s to £10,000 from next year, not from 2015 as previously planned. “That will give me a bit of wriggle-room and a bit of extra disposable income,” he says, “although unfortunately I am not a beer drinker …”
Nick Clegg has spoken this week of the need to extend the Funding for Lending scheme and “put it on steroids”. George Osborne, Vince Cable and the Bank of England are also desperate to get the scheme working for small businesses. In the last quarter of 2012 bank lending slumped by £2.4bn.
But do we need our banks to be more pumped up and aggressive, with hairy chests?
I think not. I think what we need is to open up the FLS to other providers – providers that can reach the businesses that banks can’t.
Community development finance institutions (CDFIs) do just that. They fill gaps in the market but do so with a social mission – to help families and businesses, local communities and economies.
They would get the money out of the door. They exist to lend. Ad they lend in a responsible, fair and affordable way. Our members experienced a 150% increase in demand from SMEs last year. As the Federation of Small Businesses has pointed out, there is demand from businesses for finance, and the inability to access finance is holding back growth.
The same goes for CDFIs – if they had more access to finance they could develop and grow, and thus help far more businesses get the credit they need.
CDFA research revealed that the unmet demand for finance from viable businesses stands at £1.3bn per year. Meeting this demand would have a huge impact on UK jobs and growth. To meet the demand, CDFIs need sustained and strategic support as part of the financial services arena. They need to be brought into the Funding for Lending scheme.
Our recent experience of the CDFA’s Regional Growth Fund programme shows that CDFIs are agile – they lent millions to small businesses as soon as they got the capital. Now they’re hungry for more, and are perfectly placed to deliver on the coalition’s goals.
Ben Hughes, CEO of The Community Development Finance Association.
‘Keep up’ dear; those words will remain with me forever.
Being the youngest of three and by far the smallest, I was constantly trying to ‘keep up’ with my elder siblings. Be that walking, running, cycling, swimming, eating or any of those basic things in life. However, it certainly made me learn quickly, adapt and adjust even quicker.
What a shame the likes of Woolworths, HMV or Jessops did not learn to ‘keep up’. Not only that but they so obviously ‘missed the boat’ or were not able to see the writing on the wall. It makes me wonder how that happened. Were they too distanced from their market, did they not see how their customer’s needs were changing?
It is all too easy to become complacent. Many businesses, which start up successfully, have a period where they forget to ‘keep up’. Their initial success is wonderful and they often feel that they have ‘cracked it’. That is the very time to be checking what your target market are doing. Why are they buying from you? Even more importantly why are the others not buying from you?
In today’s busy and fast paced world things change even quicker and the need for constant change and adjustment is required. The closer you are to your customers the more you will learn about their preferences and choices. More importantly, because we have busy lives, we also need accessibility; nothing is more accessible than online.
But was it due to competition, poor management, the growth of online trading or was it due to poor customer service. Speaking specifically about Woolworths, John Lanchester wrote ‘Pricing and competition from the internet have been blamed too – but again, I’m not so sure that was the crux of the matter. When children want/need something, the net often isn’t an immediate solution. The problem was more that the shops were so chaotic, so prone to not having the stuff you’d expect them to have, to selling out of precisely the things everybody wanted, and above all to having chronically de-motivated, deskilled staff. The staff were hard to find in the first place, and if you did find someone, they never knew anything – where it was, what it was, who might want it, where it might be if it wasn’t right on the shelf where it was supposed to be, and why any of this was supposed to be of interest to them. I gather, anecdotally, that this wasn’t true of every Woolworths, but I suspect it was true of enough of them to be a big issue.’
I have to agree with John. There was a Woolworths near me and the customer service was just as described above.
High on my agenda is great customer service hence; I am a lover of Amazon and more recently Homebase – well done to the guy who found the very tin of paint I required. Nothing was too much trouble for him.
My point is, be it your customer service or your target market changing the way they purchase goods and services, you need to know about before it is too late. So remember ‘keep up’!
Valerie Jarrett, Business Loans Manager for Norfolk and Suffolk
Affordable homes for local people are a step closer thanks to a new scheme that is giving communities a chance to plan, own and manage their own housing associations in ways that will be locally accountable, keep rents down and bring wider benefits to their neighbourhoods.
Like many villages, Stretham near Ely is facing tough challenges over access to affordable homes, shared amenities and local jobs that are vital to a sustainable community. So residents have taken matters into their own hands and are planning the first new housing development in Cambridgeshire that will be built on the Community Land Trust (CLT) model.
Assisted by Foundation East, the regional CLT support organisation, residents formed the Stretham & Wilburton Community Land Trust (SWCLT) – a not-for-profit Trust run by local volunteers that anyone living in Stretham can join. The group has earmarked its first site at Manor Farm and has invited everyone in Stretham to say how it should be developed for maximum community benefit.
Foundation East helped secure Design Council funding so that the SWCLT can fully research how best to develop Manor Farm as a mixed-use site that, as well as homes, could include work units for local jobs, community buildings and recreation facilities. Questionnaires were circulated, open meetings held and workshops run with children, teenagers, businesses and older residents to ask what would be on their ‘shopping list’ for the new site.
Based on the responses, the SWCLT is defining strict criteria so that the development fulfils local expectations, is commercially viable and embodies good design that complements the village. Key requirements will include a suitable range of house types and sizes; a balance between the new development and capacity of existing local facilities; better cycle and walking routes; improved traffic management; and construction contracts for local suppliers and apprentices.
At each stage the development plans will be presented to local people, giving them the chance to comment. The preferred option will be exhibited for final feedback before submission of a formal planning application, which is expected in late spring 2013.
Local County Councillor Bill Hunt said: “The Community Land Trust approach has been very well-received. Local people have really welcomed having a genuine chance to get involved and have their say about the kind of place they want to live. Talking to everyone from schoolchildren to our senior citizens has helped tease out the priorities and concerns. From the outset, the professional expertise provided by Foundation East has been invaluable. We’re all hoping that the outcome will be a high quality development that benefits to our whole community both in the short term and for generations to come.”
Phil Rose, Community Land Trust Development Manager of Foundation East, said: “Across the UK Community Land Trusts are proving an effective way for local people to develop affordable housing, work space and shared assets that their communities need to thrive. In contrast to conventional developments, the model is cleverly structured to give people ownership over how local land is developed. Profits are reinvested back into the community to make improvements that benefit everyone. Where Stretham is leading, Foundation East can help other communities anywhere in the East of England to follow.”
Stretham & Wilburton Community Land Trust has the support of East Cambridgeshire District Council plus the parish councils in Stretham and Wilburton. In addition to Foundation East, partners include Design Council Cabe, a charity that funds neighbourhood design for public benefit; Community Spirit Partnership which is helping to shape the development brief; and Cambridge-based architects Haysom Ward Miller.
For more information about setting up a Community Land Trust anywhere in Essex, Hertfordshire, Bedfordshire, Cambridgeshire, Suffolk and Norfolk, please contact Phil Rose, Community Land Trust Development Manager at Foundation East on 01284 757777 / 07753 741740 / email: firstname.lastname@example.org / web: www.clteast.org
Phil Rose, Community Land Trust Development Manager
When Matt Rump decided to refurbish some old bikes at the end of his garden and sell them for spare parts on eBay he never expected to turn that into a full service cycle shop in Kessingland, Suffolk. His business has since grown from this simple beginning to a shop that sells bikes, spare parts and a repair service as well as hiring bikes to the local community and tourists.
Matt explains the start of his story:
‘The bikes were going to be thrown into the local landfill and I just thought that with a bit of work I could restore the bikes and sell them as spare parts and at the same time reduce the impact on the local environment.’
With the spare parts selling on eBay quickly, Matthew decided to develop on this success and started asking people through the website Freegle to donate old bikes that he could refurbish and sell for spare parts on his eBay Store.
‘It soon got to the point where I could see this becoming a successful business. Where as many stores would only sell new parts or bikes, I was able to offer customers, through the recycling and refurbishment of bikes a cheaper alternative and it was at this time that I needed the finance to expand the business.’
Matt approached NWES to seek advice about taking his business further. Having put him on a five day training course to help with business planning, they then put him in touch with Foundation East’s Business Loan Manager, Peter Wood. To take his business to the next stage Matt required a small business loan of £3000 to help purchase new equipment for his office at home and additional stock to help with the high demand.
‘Working with Foundation East and Peter have been brilliant, they understood my idea and the plan and appreciate how difficult it can be for Start-Up businesses. Peter Wood was great, he never told me how to do it but always gave me great advice when I needed it.
‘I was confident that I had a great business from the results of the test trading that I had done online , but Foundation East agreeing to help finance the next stage of the business confirmed everything for me. They believed that I could succeed.’
Since taking the Foundation East loan CycleRecycle has now expanded into its own shop in Kessingland, Suffolk. From this store Matt is able to sell new and used bikes, spare parts and provide hire bikes to the local community and tourists. The company’s mission statement of promoting cycling in the region, saving customers money and providing excellent customer care and reducing the impact on the environment led CycleRecycle to win Start-Up Business of the Year for Lowestoft and Waveney.
‘It was brilliant to be nominated let alone win the award’, concludes Matt. ‘We always felt that the business could have a positive effect on our local community and environment and this award showed the impact that we have made. The future for the company looks promising and we are investigating how we can take this to other towns across the country and start challenging the larger high street stores.’
Earlier this month at the World Economic Forum at Davos there was much talk of ‘ethical capitalism’, reflecting the increasingly widespread recognition that capital can be used for social good. Using financial capital to make social impact is Foundation East’s bread and butter of course and here in the UK it is not alone. There’s a burgeoning social finance field with new products, ideas and organisations that are also doing things differently with money.
Rising up the agenda is Social Investing, also known as Impact Investing. This is the process of investing (either debt or equity) in businesses where that investment is seeking both a financial and a social return. An investment could be a loan to a chain of nurseries to support their expanding through a franchise model (increasing the availability of affordable childcare places across a region) or it could be taking a stake in a manufacturer of water sterilisers sold to ‘bottom of the pyramid’ markets in the developing world (saving lives through increasing access to clean water). The crucial thing is that the business has a social impact that will be increased by the investment and that the investment will pay a financial return (albeit potentially sub-commercial) at some stage (it could be a long wait and impact investments are often of ‘patient capital’).
The growth of the social investing field over recent years is the beginnings of a big story. This is genuinely about using money differently. Some of the biggest social investors to date are charitable foundations. Previously charitable foundations with endowments have tended to maximise their income from the endowment, by investing it in traditional markets, and then distribute grants to fulfil the organisation’s mission. It’s taken a surprisingly long time for even a very small proportion of those charitable endowments to be used directly in such a way as to contribute directly to the social mission. Esmee Fairbairn Foundation in the UK, for instance, has used some funds to invest directly into organisations that fulfil the Foundation’s mission. They expect a lower financial return but a higher social return than on a regular investment.
For pioneering mission-focused investment and other innovations the UK social finance sector is considered to be the most innovative and advanced in the world. In 2012 Big Society Capital was launched – effectively the world’s first social investment finance institution – it is backed by £600m of dormant funds in bank accounts and further funds directly from high street banks. Its mission is to innovate new forms of finance and amongst its early investments it’s supported Social Impact Bonds, a new method of encouraging private capital to unlock public good. Last month saw the launch of Ethex, an online platform for trading shares in social ventures, a move that should help to allay investor’s fears around illiquidity of shares in social organisations. Meanwhile, on the demand side, there are intermediaries working to increase the flow of investment-ready organisations. Active in that space are UnLtd and the Young Foundation, for instance, with their Big Venture Challenge and Accelerator programmes, respectively.
Nevertheless there is certainly more noise than action, more talk than deals, and social investment is still very hard to do. Structuring and pricing deals, undertaking due diligence, setting and using social impact metrics are all throwing up new challenges. Using existing resources differently is harder than it looks!
As an organisation Foundation East has always recognised that capital can be used for social good. The business’s track record stands testament to the fact that financial capital, used well, can make positive social impact. Foundation East doesn’t just do things differently with money though. The same underpinning approach and pioneering spirit applies to its work with other kinds of capital and assets. By viewing property assets through a social paradigm Foundation East has helped develop Community Land Trusts, which use physical assets for community benefit. Our own mutual structure allows us to work with our members to create, further and use social capital within our region. As a Director it’s great to work with an organisation that is not just about ethical capitalism, but about an ethical approach to capital and assets across the whole spectrum.