|Alternative Funding Network|
I had the pleasure of attending the breakfast launch of the London Loan Fund (held at Lloyds HQ) – it deserved a bigger turnout, but wasn’t the only event I attended on 30 April that was knocked by the Tube strike!
The London Loan Fund is £5million of cash provided by Lloyds Bank, supported by the European Investment Fund (EIF). GLE will lend this to over 270 small businesses in London, as long as they find the right ones! Loans will be in the form of unsecured business loans of up to £20,000 with interest rates of 12% to 16%. Seems that the money can be used for any business activity, though to secure the funding you have to evidence that you have been UNABLE to secure finance elsewhere.
It’s a further addition to the growing range of alternative finance that is available to small businesses, and GLE have access to other funds that might convert the £20,000 to as much as £70,000. £5m doesn’t sound much in the context of the London market, but the vision to grow the fund to a much larger scale…..and this is unsecured lending to those who can’t find support elsewhere, which is the biggest challenge in the SME market.
I have a couple of observations.
First, and it’s not exclusive to this particular project, there is some serious effort going into this type of thing. The event had the following speakers:
· Sir Michael Snyder, Senior Partner, Kingston Smith LLP and chairman of the fund*
· Tim Hinton, Managing Director, SME & Mid Markets Banking, Commercial Banking, Lloyds Banking Group;
· Peter Thackwray OBE, Managing Director GLE Enterprise Development;
· George Passaris, Head of Securitisation, European Investment Fund;
I high powered bunch…….and they all knew the details about this fund, and were clearly giving it personal as well as corporate backing rather than too much marketing flannel. This senior level attention to the detailed challenges SMEs face was rather lacking not that long ago.
My second observation (question actually) was “how on earth can this work”? We know from our own research at Knowledge Peers that lending to SMEs is simply too expensive for established banks to run profitably – unless they were charging Wonga type interest. It’s why efficient web platforms will increasingly have their place, with risk ultimately being charged into the cost for the SME.
In the case of the London Loan Fund, SME’s are put through a full assessment process and still don’t get charged the earth. In fact, they get personal support and attention…….so enter the support of the UK tax payer and the European Investment Fund which effectively covers the cost and allows Lloyds to make a commercial return.
Seem like a pretty good result for Lloyds, and also for London SMEs if the whole scheme scales up further…..though I’d prefer to see the amounts involved per company going up to the £100,000 level
We’ll keep watching.
This link will take you to more details about the loan fund: http://gle.co.uk/finance/london-business-loans.php, or phone 0845 603 2820; or email firstname.lastname@example.org;