The North East Microloan Fund

Peter GilsonFund Manager, Entrust

26th June 2012

Entrust: who we are…

• Small group of companies, not for profit, limited by guarantee:– Tyne & Wear Enterprise Trust Ltd t/a Entrust Ltd– Entrust Fund Management Ltd– North East Equity Matching Ltd– Street North East Ltd – Financial Inclusion Newcastle Ltd (FIN)– Service Network (North East) Ltd

• Customer Groups:– Pre-start– Start-ups– Existing businesses

• Work across the North East

• £19m under management – loans and equity

• We manage public funds

• We have our own loan fund (Street North East)

• Financial packaging – cocktails: business planning and sourcing public / private funding

• Business Angel Network: Investor Forum

Funds under management…

– Regional Enterprise Loan Fund

– CDFI Pilot

– Transitional Loan Fund

– Street North East Loan Fund

– North East Equity Matching Fund

– North East Microloan Fund

Funds under management…

Microloan Fund / “JEREMIE”

• Part of Finance for Business North East “superfund” - £125m

• Previously referred to as “JEREMIE”– Single Programme– ERDF– European Investment Bank (EIB) - £62.5m loan to be repaid on

commercial terms

• INVEST for returns; do not give grants

Microloan Fund - Objectives

• Increase the creation of new enterprises

• Improve the survival rates of new businesses

• Improve the growth rate and profitability of existing micro and small businesses

• Support businesses where mainstream lending is unavailable

• Create and safeguard jobs

Microloan Fund – Customer Groups

• “Disadvantaged” i.e. individuals starting businesses / small enterprises who unable to source mainstream finance

• Individuals starting business who face some form of disadvantage (e.g. Unemployment, disability, residence)

• Individuals starting business who are not disadvantaged but cannot raise mainstream finance

• Existing sole traders, partnerships, micro and small limited companies who cannot raise mainstream finance

• Social (Third Sector) Enterprises are eligible

Microloan Fund – Key Figures

• Loan capital £5m (£1.225m per year)

• Lending period To December 2014

• Number of Loans 500+

• Output targets– New businesses 300+– Existing businesses supported 200+– Jobs created and safeguarded 1,100+

Microloan Fund – Loan Criteria

• Amounts £1k - £25k

• Term Up to 3 years

• Interest Rate 6.5% above UK Reference Rate

• Security Unsecured but personal guarantees may be required from Limited Companies

• Purpose Normal business requirements

Microloan Fund - Eligibility

• Located in North East of England

• Viable but unable to raise funds elsewhere

• Must not operate in excluded sectors

• Must be an individual starting an enterprise or an established SME / Third Sector organisation

Microloan Fund – Progress

• Number of applications received: 545

• Number of applications approved: 223

• Value approved / drawn to date: £2.625m

• In Approval process: £162.7k

• Pipeline: > £500k

“Investment Readiness”

• “Loan repayment ready”

• Application Form– Business Plan / Overview of Business

– Balance Sheet

– 12 month cash flow forecast

– 12 month P&L forecast

– Personal budget

– Business Assets & Liabilities

• Business Support available

Third Sector

• £25k - working capital - music industry training and events  - cic 

• £20k – website development - support services to voluntary orgs  - clg 

• £25k - working capital for growth - training / personal dev progs  - cic     

• £25k - working capital - business support and training for music industry  - clg

• £5k - stock / equipment - gardening project for people with disabilities  - cic 

• £14k - equipment - recycling  - cic 

• £25k - equipment - training  - cic 

Assisted access

• Mindset that using debt is good rather than to be avoided;

• Be exposed to “the cost” of taking external expert advice and not only understand the value that the right external advice at the right time can bring, but also how to source and “buy” professional input independently in the future;

• Taking on debt can facilitate access to goods, products, services now that otherwise would have had to save for and hence can actually bring forward ability to deliver impacts – use the monies you would normally be saving for the asset purchase to repay the loan;

• Have systems in place which can alert to any operational difficulties which can then be addressed quickly thereby minimising any potential default and maximising the opportunity for learning for the future.

For more information:

www.entrust.co.uk

0191 244 4000