By Steve Walker – Chief Executive, ART Business Loans
Down the years there have always been individuals and companies that are prepared to share their wealth to aid those less fortunate either locally, nationally or globally. At this time of global crisis and economic upheaval, Dr Steve Walker, Chief Executive of ART Business Loans, a social enterprise which has always relied on such support, reflects on how the mechanisms and rewards for philanthropy and social investment have changed and the opportunities available right now to those with some money they would like to put it to good use.
Having spent 29 years in a banking career, my own major introduction to philanthropy and social investment came 25 years ago, when I joined an emerging sector – social enterprise – initially as a secondee through Business in the Community.
As a co-founder of Aston Reinvestment Trust (now ART Business Loans), I was mentored by one of Birmingham’s greatest 20th century philanthropists, Sir Adrian Cadbury, and his passion for supporting others less fortunate was very clear in his actions.
Aston Reinvestment Trust (ART) was established in Birmingham in 1997 as one of the recommendations from research conducted by the Aston Commission, chaired by Sir Adrian, into the effect that banks closing local branches was having on access to finance in the most deprived inner city areas. As a targeted local Community Development Finance Institution (CDFI) ART’s mission was, and remains, to provide access to finance for social enterprises and small businesses unable to obtain their full requirements from the banks; the idea being ‘alleviation of poverty through enterprise’.
Picture shows (left to right): Dr Steve Walker, CEO of ART; Cadbury family member investors Caroline and Benedict; Dr Nick Venning DL, Chair of ART’s volunteer board.
Speaking about his investment in ART, Benedict Cadbury said:
“I am pleased to invest in this organisation, which my father supported from the start. This is an investment which pays a substantial community dividend in local businesses and jobs.”
Sir Adrian coined the phrase that we were supporting ‘local jobs for local people’ and he was eager to explore the concept of making loans rather than gifts and recycling the funds. To do this, of course, we needed to raise funds to lend and this was my initial experience of social investment.
We set about contacting individuals and the large well-known companies around Birmingham, including the banks. We were fortunate to find many who were eager to either share their wealth for wider benefit, or were dedicated to trying to establish new mechanisms to help others. Their return was purely ‘social’: the impact their money would have on the local economy, helping small businesses and social enterprises to survive and thrive. There was no guaranteed financial return, but their money could be withdrawn with 90 days’ notice. It was an ‘investment’ in shares in a mutual society rather than a ‘donation’.
In fact, very few have ever withdrawn their money and all their original investments remain intact. There have been some who have sadly passed away, but donated their investment to ART to carry on its good work. So these early investors, who were prepared to back a risky start-up venture, were at the cross over point between philanthropy and social investment.
Since then much has changed. Firstly, ART was able to use the initial social investment as leverage to raise substantial additional funds, leading the way for the public sector to become engaged and take over from a charity to provide the guarantee funds that would in turn enable ART to raise even more. In an interesting twist, ART is now able to raise funds from a Bank on commercial terms to lend to small businesses unable to access their full needs from the banks. Sadly not all banks take the same approach.
Secondly, many larger companies now have their own trust funds, allocated from profits, which they use for particular purposes, often voted on by employees. Those exercising Corporate Social Responsibility are looking for a much clearer link to their own chosen aims than in the past. Many find it easier to donate than to invest, because they have no internal mechanism for tracking an investment. But there is a new generation of entrepreneurs and individuals who are more aware of social enterprise, social investment, ethical supply chains and the need to protect the environment than their predecessors. They now have a range of options and platforms through which to make social and ethical investments. And, of course, there is still the option to be totally philanthropic and donate to a favoured charity or good cause.
Return in the Form of Tax Relief
In 2002 a specific national tax relief called Community Investment Tax Relief (CITR) was introduced to support CDFIs like ART. We were accredited to use the relief to raise funds and target lending to underserved areas and communities. This tax relief provides 5% of the amount invested off an individual’s income tax bill or a company’s corporation tax bill every year for five years.
Individuals and companies have invested over £700,000 in ART shares using CITR to date. Interestingly these investments have not just been from people and organisations based locally, but from across the UK.
The financial return from CITR has become more attractive in recent years as interest rates on savings accounts have dropped substantially. As a tax relief it offers the highest gross return to individuals with the highest income tax bills.
The Greatest Impact
CDFIs such as ART have a greater impact when difficult times emerge – for example recession, the banking crisis and now COVID-19. This is when viable small to medium sized businesses looking for cashflow support, capital to invest in better equipment or more suitable premises, or even diversify completely if their market has collapsed, become too ‘risky’ or perhaps need loans that are too small to be profitable for the banks.
We have lent to a wide variety of businesses over the years as they have faced different challenges. You can read some of their stories on our website: www.artbusinessloans/casestudies.
In total ART has lent over £30million in loans of between £10,000 and £150,000 to businesses in Birmingham and across the wider West Midlands, supporting over 1,500 businesses and helping them to create or preserve over 8,000 jobs.
Money for Good
Traditionally, the causes that attract most support are related to children, animals or health issues that have affected someone close to the donor. Fewer people think of investing to support their local economy, but that makes a huge impact on the lives of all those who can therefore keep their jobs or apply for new jobs that are created. And that in turn impacts on the public sector, including the health service. Maybe this pandemic will see a future change in the way individuals and companies seek to help others.
If you are interested in seeking more information about ART’s CITR-supported social investment opportunity visit ART’s website www.artbusinessloans/invest-in-art. If you invest before the end of the financial year, the tax relief will apply to this year.