Entrepreneurship
Theme: Innovation
Cross-cutting themes covered: Tailored financial solutions
Name of project: Access to Finance
City: London
What is it? This project supports entrepreneurship through providing access to finance in deprived areas of London, helping entrepreneurs with business plans and informing them about different sources of finance.
Who is it? Access to Finance is run by public and private sector actors across London, including:
Where is it? Businesses located in London’s deprived urban areas (as defined by the European Union, ‘Objective 2’) can access support through this programme. Objective 2 areas face barriers to economic opportunity, suffering industrial decline, urban deprivation , low economic activity and social exclusion.
Who funds it? European Regional Development Fund and the London Development Agency
How does it work? Providing information and advice: Through the project, SMEs obtain the professional advice they require to get them ‘finance ready’. For example, they receive help with producing a comprehensive business plan and finance plan and with sourcing appropriate types of finance. Support with presentation skills – giving people the confidence to present their business plans to financiers – is another way in which the programme can help.
Businesses joining the programme are expected to contribute between 10% and 35% towards the total cost of the support. The private sector organisations contracted under this programme are required to discount their normal charges by 15%.
Anything else? Follow-up support: The programme is also designed to provide post-investment coaching and mentoring to entrepreneurs to help the business meet its vision and objectives once they have achieved the funding they require.
What are the results? Many entrepreneurs supported: The Access to Finance programme has assisted more than 200 entrepreneurs to raise over £14 million (€20.8 million) to start and grow their businesses. There are currently over 600 businesses being assisted by the programme. 80% of SMEs assisted have been successful in raising the finance they required, in comparison to a baseline figure of 14% when the market was researched two years ago.
Any examples? One example of a business that has been supported by the scheme is Capital Dwellings, an SME estate agency that is based in East London. Thanks to funding from the Access to Finance programme, coupled with excellent business support, Capital Dwellings Ltd was set up in July 2002 and the owner is already planning to expand to four branches in the next five years.
Is it successful? ‘Investment readiness’ is the idea that efforts to facilitate SME access to finance should focus on the demand as well as on the supply side. So as well as making sure that adequate financial resources exist for SMEs , policy makers should also work to raise awareness among SMEs of these resources, and help to build their capacity to access finance. The Access to Finance programme was particularly successful as it recognised this idea.
Is the model transferable ? The Access to Finance programme recognised the concept of ‘investment readiness’, that is the idea that efforts to facilitate SME access to finance should focus on the demand as well as on the supply side. So as well as making sure that adequate financial resources exist for SMEs , policy makers should also work to raise awareness among SMEs of these resources, and help to build their capacity to access finance. Investment readiness support is readily transferable to other regions.
Involvement of the private sector is also transferable. The Access to Finance Steering Group consulted widely when developing this programme, with the major accountancy firms, banks, business angel s and private equity providers. Contracting the private sector to deliver the programme has helped to counter criticisms that public sector business support tends to be of poor quality.
Building on local competitive advantages? London has a critical mass of entrepreneurs in need of start-up finance and a concentration of private sector professional advisers. Lack of these factors could pose a barrier to transferability, although it is likely that these elements are also present in most other urban areas. In London 45% of Access to Finance funds came from private commercial sources. This was a significant advantage.
What are the barriers to transferability? The principles of the programme are applicable to any ‘urban’ environment provided that sufficient time is taken to engage with finance institutions and professional advisers. Barriers to transferability could be:
