How to lend money to a Welsh start-up

Kim Robinson of UKSE and Mark White with Richard Kelly (left) launching a Romany Wagon business

How to lend money to a Welsh start-up

Surge of new businesses as one lender gives £300,000 to 44 businesses in just five months

A wave of Welsh start-ups are on the lookout for funding to get off to a running start in an increasingly competitive market.

The latest figures from the Start Up Loans Company, part of a UK Government initiative to stimulate enterprise in Britain, shows that demand for funding has taken off dramatically in the first five months of the year - and the trend looks likely to continue

SULC has provided £230 million of funding to thousands of UK businesses. The scheme offers loans at 6%, and also free mentoring and advice for 12 months on how to create a business plan, cash flow and other issues faced by new businesses.

Robert Owen Community Banking based in Newtown is one of the administrators of the scheme in Wales, and has lent over £1 million to 140 businesses in Wales in just over four years.

In the first five months of 2017, ROCB has already lent over £300,000 to 44 businesses, exceeding expectations.

Senior Business Manager Mark White told BQ  it was more important than ever to do as much as possible to help the country’s new businesses.

“Looking ahead at where jobs will be created, it is hard to see that large employers can be relied upon in the future,  on the scale they have done in the past. Indeed, we have just seen 1,000 potential redundancies at Cardiff’s Tesco contact centre, as well as the announcement that the ambitious Circuit of Wales motorcycle racing project is not to be underwritten by the Welsh Government.

“At the smaller end of the scale, the picture is more rosy. Wales is generating more than its fair share of new start-ups in high tech, and low-tech ventures, and plenty in between. This is good news when one considers the background. The old heavy industries once dominated Wales; but in a short time in economic terms, the country has reinvented itself with light industry and small businesses. Much of this has come from start-up minnows which have grown into job and wealth creating companies.

“There is, though, much work ahead. The recent Labour Force Survey shows Wales ahead of the UK in unemployment  (4.8% compared with 4.6%) and economic inactivity higher (23.2% versus 21.5%). Other indicators of GDP and Household Income lag behind most other parts of Britain.”

White said one of the big benefits in Wales was the diverse range of  companies starting out there.

He said: “The dramatic rise in demand for Start Up Loans Company funding, which we have seen recently, covers a huge range of activities. Acting for SULC, ROCB has advanced loans to a company designing ships in Mid Wales, a builder of Romany Wagons, an exporter of Welsh craft beers to the Swedish market, a music studio, and a kaleidoscope of others nascent firms. It is probably the diversity of the applications - both in terms of work areas and ages of the applicants  - which is the dominant theme.

“But it is clear that a one-size-fits-all approach will not work in Wales. The cumbersome bureaucratic systems of the 80s for obtaining grants from Europe have now given way to a variety of flexible and accessible funding avenues, from several sources, including SULC.

“Too often, we come across entrepreneurs who have been put off by the bureaucracy involved in accessing business support services. Most of the businesses we encounter just want quick and uncomplicated solutions and advice to help them start their business. The finance is of course hugely important, but so is the timing of the mentoring and advice which is part of the package.

 “Funding models need to take account of the diversity of the country and the range and types of businesses being launched. Entrepreneurs in Wales often think out-of-the box and lenders need to embrace this approach with a broad-minded and open approach to applications.

“For example, businesses in rural Wales may have different needs and outlook to those in the industrial south and north, and lenders need to understand this.”

ROCB has forged a network of links, both in Wales and also with SULC delivery  partners in other parts of the UK and is also part of the UK’s Responsible Finance network which recently staged its annual conference in Cardiff.