Reaching out to lend a hand up

Reaching out to lend a hand up

BQ Yorkshire editor Mike Hughes meets the loan arranger, Sam Tarff, who holds the key to a strong future for social enterprises in Yorkshire.

Across communities in Yorkshire, there is a cost attached to doing nothing. If banks turn down an idea that could offer employment to local families and help them earn their way out of a dead-end, and that could give hope to an area that presumed it would always be ignored, then there is a price to be paid.

If no one does anything to help these projects, the families lose aspiration, the local economy loses money coming into its shops, taxes fall and the region loses any chance of communities supporting plans for its future, because they feel they are being clearly told they are not part of it.

Whole tracts of potential are ignored and we may never know what could have been achieved. But at least they can turn to Sam Tarff.

Now in his second year as CEO of Key Fund, Sam approves lending others wouldn’t. And as a social enterprise itself, its money goes back into the next project. “When South Yorkshire was given Objective One status because of the coalfields legacy pushing its GDP below the average, the region got about £750m of European money,” Sam told me at Key Fund’s offices in Leeds Road in Sheffield.

“Key Fund started back in 2000 as a group of concerned individuals who identified this economic opportunity, but recognised there was a problem in our communities. We needed to make sure the not-for-profit was able to take advantage as well.”

The beaureaucracy and administration around such an enormous slice of funding was an obstacle – and a fear – for the smaller enterprises, and an intermediary was needed to bring David and Goliath together.

“We got money to distribute as grants to small groups and organisations, but also for capacity-building and job creation. We worked with the partnerships that were actually on the ground, through delegated panels and funds and gained a good reputation as a distributor of funds.

“In 2002, the idea developed from CLG - Communities and Local Government - of a blended product, basically loans alongside grants. They said this would help with the economic impact of what we were doing.

“The groups we were giving money to would be able to become more entrepreneurial and develop their trading abilities. The region was rich with those sorts of organisations that formed out of area-based regeneration.”

This determination by disenfranchised communities to climb clear of the coal legacy and make something of themselves was a key element. People were knocking on the door of Key Fund with supportable ideas for their immediate areas. Sometimes they had nothing more than an in idea, so sometimes there was a plan to be supported and sometimes there was a plan to be created from scratch. But at least they now had a door to knock on.

Sam Tarff 02Sam was brought up in Barnsley, and had early experience of hardship and the ways to deal with it. “I came from a pit village next to Grimethorpe, the youngest of nine children. My dad died when I was six, so mum was a single parent, working as a primary school teacher.

“So I saw a lot of deprivation and the way I was brought up was about tackling problems and helping people. Mum was pretty much a social worker at her school, so when I had hand-me-downs from my brothers and had finished with them they went to kids at the school.”

It is crystal-clear that those memories still play a huge part in what he does and what his aims are for his own community to help it grow and live up to its potential. “The combination of loan and grant we now offer imposes a different set of disciplines and behaviour and people become more focused on the bottom line, while still delivering massive social impact,” he says.

“We see it as doing work that no one else wants to do, because of the risk of unsecured lending at an early stage to groups that just don’t have a massive balance sheet. They are not cash-rich, but they are doing really good things with people that others can’t reach.”
The model was just too good to sit in one place, so it was rolled out across Yorkshire and the Humber, with grants and loans of up to £150,000 - unsecured and only to organisations that couldn’t get money anywhere else.

“We are not here to distort or compete with the mainstream market, but we will work with them if they want to do part of a package, perhaps for a mortgage. We are able to take the extra risk, and have a different description of what a viable business is, because we have a greater margin to be able to lose.

“If we get money back, we are able to keep it as long as we reinvest it and then can lend it out again, which enables us to lever in more money. We don’t want to lose any money, but it is high risk because of the nature of the people we are lending to and where they are at.

“One reason our loss rate is still low is that we help people become investment ready, with the ultimate aim that they can be in a position to go to the banks and be investable.”

That pleases the banks, because they get new customers from an area that they had been avoiding – high risk micro-businesses. But Key Fund’s retrieving of lost causes also appeals to the various funding streams they have access to because it addresses social blight. There will be less disorder, fewer benefits paid and more taxes paid and the return of aspiration, which all makes communities more approachable and more likely to be seen as worthy of investment and means they won’t need as much money spent tackling their former issues.

Sam has been involved with Key Fund for more than 15 years, starting as a volunteer member of one of its grant panels when he was working for a development trust in Barnsley. Then he moved to an investment panel and then as a non-exec on the board before applying for the top job.

With a staff of 26 including seven “rehabilitated bankers” and a head of investment with 30 years’ top-flight experience, Key Fund understands the banking system – where it works and where it doesn’t – and understands social and financial investment. But the broad spread of skills also means that when they get out and meet every business, they can look them in the eyes and see the character and determination that will make the best use of Key Fund’s money and make a difference in their own square mile, not just their own household.

Its Yorkshire and the Humber Patch is maturing as businesses succeed, develop and move to mainstream financing, but Key Fund operations in the North West, North East, East Midlands and West Midlands, basically everywhere from Watford Gap up to the borders, are its biggest areas of growth. More people need help, financing is as multi-stranded and complex as ever and changes to the achievable levels of public service provisions are opening up more opportunities for others to step in.

Sam has built an organisation that has gained respect from all sides. From the people it gives the money to, because it trusted them; from the banks because it did a job they didn’t want to do and provided an eventual revenue stream and from the people who give Sam his money in the first place, because Key Fund gets results and has made a difference.

That respect now means that bigger businesses, institutions and local authorities want to work with Sam and learn from him. He’s a happy and fulfilled CEO because he is now helping the old school learn and develop as much as the new intake.