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55 per cent of UK SMEs unable to access all funding needed to grow

Research from Liberis, a leading small business finance provider, published today, 21st February, revealed that over half of UK businesses are unable to access the funding needed to grow; with the main hindering factor being a lack of education or understanding of their funding options. With falling SME confidence in the economy and mounting concerns over costs given the relative weakness of the sterling, Liberis strongly urges the UK to better support its small business community.

The lifeblood of the UK economy, SMEs contribute more than £200bn a year; with this number expected to grow by almost 20 per cent by 2025. Yet, without a vital cash injection, this 2025 vision will be severely stinted.

Hindering growth opportunities, this lag in SME development may in turn negatively impact the economy. Liberis therefore believes it is crucial to ensure better understanding on how to navigate the perceived minefield of funding options. Small business education is desperately required to increase awareness levels of the process; greatly benefiting both businesses and economy alike. Such movement has been reinforced in a recent report from the British Business Bank, in which the UK Government backed organisation pledges its dedication to a more targeted educational campaign on the topic of SME finance.

While 62 per cent of UK SMEs said they need funding to grow and expand, but 57 per cent of SMEs were unsure which provider to obtain funding from and 53 per cent did not have a set amount in mind when looking to access finance.

Liberis found 22 per cent of businesses require funding to maintain business as usual, while 5 per cent need funding to survive past the first year of business. Speed of funding has been identified as integral to achieving this growth. Other findings of the report showed an increase in the popularity of crowdfunding as a source, with 10 per cent of UK SMEs looking to use this as a means for funding in the next two years.

Commenting on the report, Rob Straathof, CEO at Liberis, said: ‘These findings have opened our eyes to a lack of confidence and awareness among SMEs in how to correctly secure the funding they so desperately need. Funding will continue to be a hot topic for the small business community, but urgent action and collaboration is crucial to prevent resulting damage to the UK economy. Without sufficient financial education and support, the UK’s business ambitions will be severely affected but by ensuring they have the correct financial understanding, we can help secure and strengthen their livelihood; fast-tracking their ambitions.’

Source: London Loves Business

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Small firms look askance at bank borrowing as alternative finance models rise

Smaller British businesses are increasingly wary of bank borrowing even if it means forgoing growth, according to new data to be published today.

Some 70 per cent of small British firms are willing to avoid borrowing money, even if it means giving up on growth, the data from the British Business Bank will show.

Demand for bank loans from smaller firms fell to its lowest since comparable data was first collected in 2011, with only 1.7 per cent of small firms seeking new loans.

However, Keith Morgan, head of the government-owned BBB, said the UK has a “thriving start-up and growth culture”, but that firms need to be able to access finance to be able to move to a higher gear of growth.

“They do have to have access to long-term, patient capital,” Morgan said. “We certainly can’t be complacent in our current position and we need to invest in these companies.”

The BBB recently stepped in to offer support to the small firms which were contractors of the collapsed construction and outsourcing firm Carillion. At the start of the month it said it will work with private-sector lenders to enable them to offer £100m in loans.

“We can point very firmly to evidence that this type of intervention works,” Morgan said.

He also hailed the “encouraging growth” in alternative finance models to the traditional banks as a sign of increased choice for smaller firms.

“Small businesses are prepared to shop around more”, he said, with the internet and the recent proliferation of non-traditional lenders aiding the increase in competition.

Peer-to-peer lending surged by over 50 per cent in 2017, while asset finance enjoyed double-digit growth for the fifth year in a row.

Firms are also seeing increased success for equity fundraising, with a 79 per cent jump in the first three quarters of 2017. While the amounts raised were skewed towards the biggest start-ups, the number of equity fundraising deals also rose by 12 per cent, after dipping in 2016.

Source: City A.M.

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National investment bank needed to boost SME lending, think tank says

Britain should set up a state-backed investment bank to focus on small business lending as part of efforts to tackle poor productivity, a think tank has urged.

A new report by Civitas argues that the creation of a new “national investment bank” will address the “market failure” that has led to a lack of long-term investment in SMEs.

The new lender could be independently financed at no ongoing cost to the taxpayer, Civitas claims, while boosting current low levels of investment and helping to raise productivity.

Civitas economist Justin Protts also derided the Government-backed British Business Bank, which he said does “incredibly little” to support business when compared with development banks in Europe, and is “not fit for purpose”.

He added: “The UK economy is not operating as it should. The output of each worker is barely increasing and failure to increase our productivity since the financial crisis has been holding back growth.

“There is no doubt that low investment, particularly in enterprise, is a cause of the UK’s current economic woes and a significant part of that problem is the failure of the banks to lend to SMEs, which make up 99% of businesses in the UK.”

“If the Government is going to seriously tackle the challenges of low investment and productivity then they must go further and create a new UK investment bank which can be mandated to provide the longer-term finance needed by SMEs to invest, grow and increase the UK’s productivity.”

The think tank pointed to figures showing that investment in the UK has fallen from about a quarter of GDP in 1990, in line with other developed economies, to just over 16%, well below that of most advanced countries.

Civitas said this is in large part driven by banks failing to invest in SMEs, even when there is demand from creditworthy businesses, with lenders favouring easier returns from alternative investments.

Loans to business by banks as a proportion of their domestic lending have declined from 31% in 1988 to 8% in 2016, according to the report.

Mr Protts highlighted the success of similar initiatives in Germany and the US.

“The experiences of institutions elsewhere, particularly of Germany’s KfW and the US’s Small Business Administration, show that government-owned investment institutions can play an important role in providing the sort of business investment the UK is lacking and at no ongoing cost to the taxpayer.”

The British Business Bank’s automated phone system did not allow the Press Association to request comment.

Labour welcomed the report, with the party’s shadow chief secretary to the Treasury Peter Dowd saying: “This report… helps build the case Labour has been making for a new National Investment Bank. The creation of this new bank will be crucial for targeting lending at smaller businesses who are being let down by our current financial system.

“Labour is committed to setting up a new National Investment Bank alongside a network of regional development banks to build a high-wage, high-productivity economy.”

A Department for Business, Energy and Industrial Strategy spokeswoman said: “This Government’s Industrial Strategy is building a Britain that invests in the skills, industries and infrastructure of the future.

“With over a thousand businesses starting everyday in Britain, the British Business Bank has provided over £4bn to SMEs, and is unlocking a further over £20 billion of new investment for small businesses.”

Source: Hereford Times

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Small Businesses Are Optimistic About the Future

The overwhelming majority of small-business owners (84%) are confident in the future of their business, according to a new study produced by the National Small Business Association and ZipRecruiter. More than half (53%) of the 1,633 small-business owners surveyed said that their revenue has gone up. That’s the first time since 1997 that the majority of companies reported an increase. The results are largely encouraging, though owners weren’t without worry.

“In the past two years, the number of small-business owners who say they expect to see an economic expansion in the next year has more than doubled,” said NSBA President Todd McCracken in a press release. “Unfortunately, the ever-rising cost of healthcare remains the biggest challenge small businesses face.”

The state of small-business jobs

Jobs and hiring practices were a major focus of the report. One of the key findings — that automation does not necessarily mean fewer jobs — differs from what’s expected to happen at many large companies.

The survey showed that only 9% of the small-business owners who plan to implement some type of automation believe that doing so will allow them to employ fewer people. Almost 1 in 4 (24%) said automation will cause them to need more workers and the majority (67%) said it will not impact their employee count either way.

In addition, small-business owners believe that the gig economy will not impact how many full-time employees they hire. While 37% have added part-time employees, 70% of them were new hires, and only 17% were current full-time employees who were reduced to part-time.

The survey also had some good news for employees. Over half (58%) of small-business owners said they raised wages in 2017 and 64% said they expect to in 2018. Nearly a third of those surveyed (32%) noted that they were having trouble finding qualified applicants due to the tight labor department.

“We tend to think of corporate America when we think of career ladders, however small businesses have ample opportunities for career growth,” said ZipRecruiter Chief Economist Cathy Barrera in the press release. “66% of all small businesses offer opportunities for promotion, and at companies with more than five employees, that number rises to 85%.”

What does this mean?

Strong small businesses are good for the economy and good for workers. They give people options and create opportunities that otherwise may not exist.

In order to continue this strong market for small business, it’s important that the government address healthcare. That was named by 32% of those surveyed as their biggest challenge to their future growth and survival. That was tied with economic uncertainty and followed by lack of qualified workers at 26%.

Still, despite those concerns, small business is thriving and confidence among owners is high.

Source: Yahoo Finance UK

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UK tech driving SME growth forecasts

Days after official documents were leaked claiming that the UK will be considerably worse off in 15 years’ time regardless of which deal is signed with the EU, small business confidence continues to hold firm for the fourth consecutive quarter – according to new data from the British Business Barometer by Hitachi Capital Business Finance.

The new data suggests that small business outlook has remained bullish over the last 12 months, despite the huge uncertainty over Brexit negotiations, customs union and the countless reports warning of imminent economic doom. Overall, 39 per cent of small business owners predict growth for the next three months – a slight rise on the final quarter of 2017 and little change on this time last year.

At a time when Britain is becoming a world leader for tech innovation – spanning the FinTech, P2P and Insurtech sectors – the Hitachi research revealed that SMEs from the tech and telecoms sector were the most confident and most likely to predict growth for the months ahead (52%).

Small business outlook for the three months to 31 March 2018: Comparison of results over 3 and 12 months respectively.

Q1 2018 Q4 2017 Q1 2017 12 month change
Significant expansion 6% 7% 6% 0
Modest / organic growth 33% 31% 34% -1
Stay the same / no change 47% 48% 46% +1
Contract / scale down 8% 9% 7% +1
Struggle to survive 4% 5% 5% -1

Sector findings

Whilst predictions on growth remained largely unchanged for small businesses as a whole, by sector the picture was quite different. Confidence levels by industry sector varied widely between 52 per cent and 28 per cent.

The most confident: Business confidence was highest in the IT & Telecoms sector, which saw the highest rise in confidence since the final months of 2017 (up 8%) and growth predictions have continually risen over the last 12 months. It is also the sector most likely to be hiring staff (24% – up 2% since Q3 2017) and 17 per cent planned to invest in new equipment – up 8 per cent since Q3 2017.  The proportion of business owners planning to expand into new or overseas markets has also increased by 2 per cent over the period.

The biggest rise in confidence over the last 12 months was noted in the Transport and Distribution sector – up 13 per cent to 35 per cent.

The biggest fall in confidence: In contrast, the Finance and Accounting sector saw the biggest drop in confidence (down 9% to 42%), perhaps influenced by recent concerns over the post-Brexit role of the City of London on the world stage and reports of significant job losses.

The least variation in outlook: Real Estate and Media were the sectors where small businesses seemed to feel least affected by the context of Brexit uncertainty, with business leaders most likely to predict no change whatsoever to their business outlook for the months ahead (46% for Media and 45% for Real Estate).

The lowest level of confidence: Agriculture and Construction where the sectors where fewest small businesses predicted any form of growth in the next three months (28% respectively) and in both sectors confidence has fallen since the final quarter of 2017.

The percentage of small businesses that predict growth in the 3 months to 31 March 2018 by industry sector. 

Comparison of results over 3 and 12 months

Q1 2018 Q4 2017 Q1 2017 12 month change
IT & Telecoms 52% 44% 43% +9
Media & Marketing 49% 46% 45% +4
Legal 47% 42% 0%
Manufacturing 45% 36% 49% -4
Finance & Accounting 42% 44% 51% -9
Real Estate 41% 45% 42% -1
Education 40% 40% 45% -5
Medical & Health Services 39% 39% 39%
Retail 35% 40% 34% +1
Transport & Distribution 35% 20% 22% +13
Hospitality & Leisure 31% 37% 39% -8
Agriculture 28% 23% 31% -3
Construction 28% 35% 32% -4

Regional highlights

An assessment by region also suggests the gap is closing between businesses in the north and south – specifically London which is often seen to be an engine room for small businesses. For example, the biggest regional rise in the proportion of businesses looking to hire staff happened in the North (7% rise to 16%) and Wales (8% to 13%). The North also saw the biggest quarter-on-quarter rise in the number of SMEs looking to expand into new or overseas markets (up 5% to 15%). Conversely in London, where the proportion of small businesses looking to expand into new markets, hire new people or invest in new equipment is higher than most other regions, planned activity in all these areas fell for the months ahead.

The drivers of growth

The bullish confidence of small businesses in an uncertain climate is partly explained by the fact that many are focusing on factors within their control and putting in place specific initiatives to help achieve growth and financial strength. Overall 70 per cent small businesses identified strategies they were pursuing to secure growth in the months ahead. Most prevalent were a range of financial tactics: A focus on keeping costs down (36%), whilst 19 per cent were looking to improve their cash flow and 13 per cent were planning to invest in new equipment. Almost one in five enterprises (18%) were looking to expand into new markets and 15 per cent planned to hire new staff.

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance commented: “A day barely seems to go past without warnings about the UK’s economic future: Brexit seems to have created an entire industry selling doom. The day-to-day reality with small businesses is quite different. Many are fully aware there will be a Brexit ripple that affects them at some point but the majority of small business owners are being very pragmatic, planning ahead and focusing on what is within their control. Some sectors see market uncertainty as an opportunity, many businesses are already looking to open up new markets and, across the board, SMEs are key for employment and job creation. Access to finance is key to helping all these plans happen and at Hitachi Capital Business Finance we will be broadening our range of finance solutions in 2018 to help more small businesses secure the funding they need to power growth, invest in equipment and fulfil their potential.”

Source: London Loves Business

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FSB launches new FinTech funding platform for SMEs

The Federation of Small Businesses (FSB) has launched a new fintech platform to provide small businesses and self-employed people with greater access to funding to help them grow and develop their enterprise..

The FSB Funding Platform is fully regulated by the UK Financial Conduct Authority (FCA) and developed by business finance platform Finpoint. It aims to help potential borrowers get access to funding by matching them with more than 100 money providers. A wide range of funding options will be provided for businesses and self-employed communities through the platform. This includes peer-to-peer lending, with Assetz Capital, RateSetter, and Funding Circle.

The platform will help businesses and self-employed people to fund business growth, with research from a pilot of the platform showing many firms are being held back as a result of high costs. The average amount a small business applies for from an alternative finance provider was found to be £39,000 in the survey, with equipment purchases and working capital for short-term operations or late payments being among the top reasons for businesses seeking finance.

The service will be free to FSB members with fees only payable in some cases for arranging lines of credit.

Speaking about the launch of the platform and how it will benefit small businesses, FSB London Chair Michael Lassman said:

“We’re pleased to be able to offer this exciting platform to our member base. Although it’s harnessing the latest innovations in tech it offers a very simple way to access finance, as well as access to human financial advisers. It will transform the business funding market and is a real step change for small businesses.”

Source: Tamebay

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Getting the appropriate loan for your small business

There are countless good people out there who would love the opportunity to start their own small business, and that’s a fact. However, this isn’t always possible due financial constraints that prevent them from saving up enough capital to achieve their dreams. If you’re one of these people, then you most probably know that you have the option of financing your venture through a loan. The problem is that you may not know much about such loans meant for small businesses.

You want to know what to go for when you’re looking to take a loan from a lender. You want some insights regarding the kind of lender you need and the appropriate loan for your business. This applies regardless of whether you’re starting up a new small business or looking for additional capital to finance your enterprise’s expansion. In that case, you could find the information here quiet helpful in that sense. Here is what you should look for when sourcing for the most appropriate loan for your small business:

It should be easy to get

If you’re setting out to look for a good bad credit guaranteed loan, the smartest move would be to look for one that’s offered with fewer restrictions on factors like age, gender, type of business or location. Also, it’s much better if you can find a lender who doesn’t place too much weight on credit scores.

In essence, the best loan for a small business should be easily accessible. You don’t want a lender who throws out people’s loan applications based on minor stuff like their age. Nobody wants that.

Flexible payment period

The worst mistake you can make is deal with a lender who doesn’t offer a good length of time for you to effectively pay back the loan. That’s always a trap especially used by shylocks in the streets out there. Avoid that.

A good loan agreement should provide for you to pay back the principal amount plus the interest in installments over a given period of time, and these installments should be appropriate enough not to hurt the business.

Have a good grace period

A loan given without a grace period is a total trap! There’s no wisdom in acquiring a loan for a business only to start paying it back the next day even before you invest. Who even does that?

If you’re serious about picking the best deal, look for one that offers a good grace period to allow for the investment to take root and the business to start realizing some profits. The period may be a few months depending on the lender’s policy. You can then use the profits generated as installments to cover the payment. That way, progress is assured.

Favorable terms of servicing the loan

First off, no smart person will do business with any entity that comes across as vague when spelling out their terms of engagement. You need to be in the know so you can be ready in case of anything unexpected.

For example, the lender should clearly spell out what happens when you miss an installment. You don’t want to deal with a lender who slaps you with a 100% fine for missing a single installment. Also, you should know what provisions are in place in the event that you pay back all the money before the agreed period is due – any incentives given or interest reduced? Pick the most appropriate loan with respect to that.

Credible lender

You’re not going to take a loan only to fall into a deeper financial pit. To avoid this, you need to vet the available lenders and pick the most authentic. You would hate to take a loan from a crafty lender that short-changes the terms of contract or gets rude during the debt collection.

There have been cases of some lenders reducing the payment period, slapping the borrower with hidden extra charges and even inflating the installment amounts. You want to avoid those by all means.

Reasonable loan amount

If your business needs $50,000 and a lender can only offer $5,000, walk away. You need a loan that covers your needs without having to involve many lenders. Also, you don’t want excess money that could turn into a liability. If a lender is trying to force you to take $100,000 instead of the $50,000 that you really need, walk away. You don’t need that.

Low or no application processing fee

You understand that a small business doesn’t need a huge loan, and that’s why you can’t allow it when a lender sneaks in some annoying charges into the loan application process. If the processing fee is too much, dump that lender. In fact, it would be best if you could find a loan that doesn’t involve slashing off an amount of it in the name of processing fees.

Reasonable collateral security

What do you think of a loan that requires you to put up your house as collateral security just to get $2,000? Ridiculous!

A fair loan should require reasonable security as compared to the loan amount taken. Don’t take up unreasonable offers.

Convenient

Some lenders get more business than others because they offer convenient loans and processing services. If you’re in business, you obviously want a loan that gets granted quickly and with less bureaucracy. Sadly, some lenders will put you through piles of forms and documents before they can give you the money. That’s not convenient, and definitely not good for business.

You want a loan with a fast application process. The earlier the money hits your account, the earlier you invest and the earlier you start generating profits. Now that’s what convenience sounds like, and that’s exactly what you want.

The points above serve to opine that taking up a loan from a lender may seem easy, but you need to exercise due diligence before you engage in such a transaction. You don’t want to try boosting your financial freedom with a loan only to end up in a stressful situation. Knowledge is power, you know!

Source: London Loves Business

 

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British banks simplify SME account opening process

A group of British banks have come together to simplify the account opening process for small businesses, working with trade body UK Finance on a checklist of details and documents firms will need for their applications.

A Competition & Markets Authority investigation into the retail banking market recently identified the account opening process as a barrier to switching for some small and medium-sized businesses.

In response, 18 business bank account providers have standardised the basic set of information that they require customers to provide when opening or switching an account.

Working with the banks, UK Finance has created an online guide, including a streamlined checklist, outlining the essential details and documents that most small businesses will need when applying to open an account.

Anne Pieckielon, director, product and strategy, Bacs, says: “said: “As operators of the Current Account Switch Service, we welcome today’s announcement and believe it is another important step towards simplifying the account opening and switching process.

“We know that small business owners are busy enough without the need to deal with further layers of time-consuming admin which, in many cases, could deter some from getting the very best deal from their business account.”

Source: Finextra
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Demand for cash flow finance expected to rise in 2018

Demand for invoice finance is predicted to rise by 21% during 2018, according to Hitachi Capital Invoice Finance.

The rise would take the company’s total credit lent to businesses during the year to more than £1 billion, compared to £893 million during 2017.

The predictions, based on funding line data, come as its research shows almost half of all small to medium UK enterprises turned down a contract or order last year because they couldn’t deliver due to a lack of available finance.

Hitachi Capital Invoice Finance research shows that invoice finance demand tends to grow throughout spring and summer, with SME’s most likely to seek funding between May and August.

The company has published a 2018 Cashflow Calendar that identifies key dates and financial events throughout the year that could influence a business’s cash flow and guide business owners to help better manage available funds.

Andy Dodd, managing director of Hitachi Capital Invoice Finance, said: “A sound business will match its method of borrowing to the asset being financed and on which the debt is secured. This means cash flow finance represents some of the lowest interest rates and most flexible methods of finance, which rises and falls with fluctuations in turnover.

“Therefore, if the business has sound profit margins, the cost of interest will behave like a variable cost, moving in line with turnover.

“Crucially, a good cash flow finance provider will ensure that the collection of debtor invoices is efficiently and professionally carried out to minimise the amount that needs to be borrowed, mitigating future interest rate rises.”

Source: Asset Finance International

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£6 million in start-up loans for 1,000 Black Country businesses in the last six years

Almost £6 million in Government-backed start-up loans has been pumped into the Black Country over the past six years, helping around a thousand people get their own businesses off the ground.

Another £603,380 was lent to 88 business owners in South Staffordshire by the Start Up Loans Company (SULCo)

Since launching in 2012, the Government-backed scheme has provided a total of £1.6 million in low-interest funding to more than 300 loan recipients across Wolverhampton, helping kick-start local start-up businesses. In total, more than £375million has been provided by The Start Up Loans Company to over 50,000 loan recipients across the country.

The programme has helped 2,115 in the West Midlands who were formerly unemployed or economically inactive, as well as helping an additional 21,151 people across the UK into employment nationwide.

Across the Black Country, £1,275,725 has been lent to 190 business owners in Dudley, £1,668,300 lent to 256 start-ups and new businesses in Sandwell and in Walsall £1,390,354 has been lent to 249 budding entrepreneurs.

Chris Smith, aged 34, is one loan recipient in Wolverhampton who received a proportion of the funding to launch his own business in 2014. Evo Fit, based in Willenhall, is a start-up gym that offers cardio and resistance training, with classes ranging from core blast to HIIT and boxercise.

A former personal trainer in a health and fitness club, Chris felt inspired to take his teaching to the next level by starting a gym of his own.

He approached The Start Up Loans Company for a loan to kick-start his venture, and successfully secured £22,000 of low-interest funding. The loan went towards paying rental premises, as well as purchasing equipment used in the studio.

The business employs five members of staff and services more than 600 customers across the Wolverhampton area.

In 2015, Chris worked with with renowned fitness expert Joe Wicks and his future plans include launching new fitness and cycling programmes at Evo Fit. The business also has its sights on opening another gym in Birmingham city centre in the next year.

Chris Smith, CEO and founder of Evo Fit, said: “As a personal trainer, the best thing about my job is helping people reach their goals and transform their lifestyle in a positive way. But while I’ve always enjoyed that aspect, I realised that I could use my experience to create my own business and do it myself.

“Although I was confident I had a concept that would work, I lacked the right financial support to start-up on my own. The Start Up Loans Company provided me with a loan to help me put my plans into place, meaning I was fortunate enough to avoid any financial stumbling blocks in the early stages. Since launching Evo Fit, I’ve been able to help more people pursue their fitness goalsand continue doing what I love, which is fantastic.”

Joanna Hill, interim CEO at The Start Up Loans Company, said: “It’s fantastic to see how Chris has used his experience to help others become fitter and healthier through launching Evo Fit. Since securing financial backing, the business has gone from strength to strength, and by collaborating with fitness experts, Chris has been able to extend his offering even further.

“Reaching £1.6million of funding for new business ventures in Wolverhampton is a great milestone for us, and highlights the entrepreneurial appetite for new business growth in the area. We’re looking forward to seeing what’s in store for budding business owners as we enter into 2018.”

Backed by the Department for Business, Energy and Industrial Strategy (BEIS, the Start Up Loans Company (SULCo) was formed in June 2012 as an arm of the British Business Bank. SULCo provides personal loans for business purposes of up to £25,000 at a six per cent fixed interest rate per annum, and offers free dedicated mentoring and support to each business.

Nearly half of loan recipients nationwide have been NEETs – not in employment, education or training – but figures show the overall return on investment for the scheme is at least £3 for every £1 invested. Those receiving a loan report estimated average turnover for their new busineses of £44,000 in the first year.

Source: Express and Star