Published: October 6, 2021
Comment from Jason James, Relationship Manager, Unity Trust Bank, on responsible finance.
Supporting businesses to survive, stabilise and prosper, through responsible finance
At a time when SMEs need greater access to better tailored finance than ever before, I am pleased that responsible finance providers, otherwise known as Community Development Finance Institutions (CDFIs), have become more widely recognised for the vital role that they play in the UK’s finance system.
Their “superpower”, before and during the pandemic, has been their ability to provide much needed finance to social enterprises and SMEs that have not been supported by high street banks. This is great news for a sector that has, for some time, been highlighting the urgency and importance of ethical, not-for-profit, affordable finance.
Statistics recently published by membership body, Responsible Finance, reported that CDFIs provided more than £250 million of loans before and during the pandemic. This economic fuel has meant that many businesses and social enterprises have been able to survive, stabilise and even prosper during the pandemic, in spite of the challenges thrown at them.
As the journey towards financial recovery and stability continues for many businesses, I want to reflect on how Unity Trust Bank has been working closely with CDFIs to help channel much needed finance into local businesses and communities.
The financial impact of the pandemic was felt by SMEs across different sectors, regions and communities. Many businesses lost revenue, experienced cashflow disruption, even faced the threat of closure, while, at the other end of the spectrum, some were inundated with demand for their products or services – all of them sharing a common need for accessible and affordable finance. Research by Responsible Finance found that an incredible sum of £263m was lent to nearly 6,000 businesses and social enterprises during a nearly two year period spanning 2019 and 2020. Of that £263m, £115m was lent to 1,900 small and medium sized enterprises, which ultimately helped to create and safeguard nearly 9,000 jobs.
I have been working closely with CDFIs over the last two critical years and have seen for myself the impact they have made as they strive to get much needed finance to SMEs and social enterprises. Driven by a strong mission and place-based lending, their ultimate goal is to build stronger, more inclusive economies and to create employment opportunities and wider socio-economic benefits.
One of the ways that Unity has been able to expand its support to CDFIs has been through lending to accredited responsible finance providers of the government’s Coronavirus Business Interruption Loan Scheme (CBILS), which resulted in Unity distributing loans to CDFIs totalling £12.5m.
In the West Midlands, we were pleased to provide £900,000 funding to ART Business Loans – a pioneering CDFI – which enabled it to support more than 25 businesses across a wide range of sectors in under-served areas and communities – businesses that had been declined financial help from mainstream banks.
In the South and South East, Unity has been working with Let’s Do Business Finance since 2012, and built on that relationship to lend £1.5m in order to provide affordable on-lending to 20 SMEs in the region. We were also very proud to support the Business Enterprise Fund in York and the North East with £7.5m of lending, which helped more than 150 businesses during the pandemic.
What was clear is that whilst some businesses were in need of a financial rescue package, without which they would not have survived, others seized the opportunity to establish themselves as financially stable and sustainable businesses, whilst adapting their operational models and finding new opportunities to expand.
As a socially motivated bank, I’ve been proud of our twin-track approach during the pandemic of both lending to CDFIs, and providing increased funding and support direct to a range of organisations making social impact. Although we are a commercial bank, we are different to mainstream banks as we only lend to businesses, charities and organisations that share our values and mission of helping to create a better society.
Our specialist knowledge across healthcare, education, employment and housing, our deep understanding of local communities and our relationship-based approach means that we know our customers and understand the challenges they face. Ultimately, our values and interests are closely aligned with theirs, because we are all committed to making a positive difference to the economy, local communities and the environment.
As a result, we are ideally placed to advise and help them to identify appropriate funding options, and then to provide access to funding through a tailored approach which is flexible enough to accommodate different business models and borrower profiles.
As the furlough scheme comes to an end, there will inevitably be further financial pressures, as businesses resume full responsibility for staff costs and postponed creditors are able to consider and take debt or recovery action. In the short to medium term, some businesses will need to consider funding solutions to manage delayed business requirements or take advantage of opportunities to enhance their services and capabilities, as the effect of the pandemic recedes.
It is truly satisfying to be part of a bank which is helping to deliver great support and impact across regions, sectors and communities, and to know that we are providing critical access to funding that will enable social enterprises to grow, both through our strong relationships with CDFIs and directly. I know that our CDFI partners and our customers will use that funding to make a difference at a critical time for our communities as we build back from the impact of the pandemic.
To speak to Jason about your business requirements, contact jason.james@unity.co.uk.
