Cabinet Meeting 16 th September Councillor Mark Winnington, Cabinet Member for Economy, Environment and Transport said:

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1 Cabinet Meeting 16 th September 2015 Staffordshire and Stoke-on-Trent Business Loan Fund Councillor Mark Winnington, Cabinet Member for Economy, Environment and Transport said: We want to ensure that Staffordshire is a place where businesses of all sizes can thrive and play their part in our ongoing economic success story. In 2009 we set up the Staffordshire Business Loan Fund to help address the problem small companies were facing in accessing essential finance. Despite having good business cases, banks and other lenders have still been reticent to lend. Businesses tell us that this is still an issue and that is why we want to extend the fund for another three years. Since the launch of the Staffordshire and Stoke-on-Trent Business Loan Fund in 2013, it has been instrumental in the success of securing more than 70 loans to small businesses that would otherwise not have had the funding they needed to grow. The fund has been responsible for creating or safeguarding over 300 jobs. We look forward to it continuing over the next three years making a difference to people and business across Staffordshire. Report Summary: The Staffordshire and Stoke-on-Trent Business Loan Fund has made a significant contribution by supporting viable small businesses across Staffordshire and Stokeon-Trent with the provision of loans of 10,000 to 50,000. Since April 2013, this loan fund has enabled small businesses to access finance in order to help create jobs, develop and progress their growth and expansion plans. By June 2015, total loans of over 1.7m had safeguarded and created 318 jobs. Recommendations I recommend that: a. Cabinet invests 200,000 per annum for three years to extend the Staffordshire and Stoke-on-Trent Business Loan Fund, to provide well-run small and medium-sized businesses in Staffordshire who have been declined

2 a loan from their bank, with loans of up to 50,000 for diversification, growth and development. Due to the scale of demand and the progress made to date, the proposal is for the County Council to provide funding of 200,000 and Stoke-on-Trent City to provide 50,000 per annum, over a three year period commencing from December The Fund Management role will need to be procured and they will be expected to contribute 50% of private match funding per annum. The total lending amount will therefore be 500,000 per annum for three years, creating a pot of 1.5m. Staffordshire County Council will receive back 75% ( 450,000) of its total investment in stages and by no later than December The maximum exposure of the County Council is therefore limited to 25% of the total investment, that is 150,000 spend over the lifetime of the project. b. Cabinet delegates authority to the Director for Place (in consultation with the Director of Finance and the Cabinet Member for Economy, Environment and Transport) to finalise the terms of the contract with a procured fund manager to operate the proposed new loan fund. c. Cabinet recognises the success this initiative has achieved since its original launch as the Staffordshire Business Loan Fund nearly six years ago and appreciates that the loan fund has been instrumental to the diversification, development and growth of small businesses across Staffordshire, who continue to be refused finance from their bank.

3 Local Members Interest N/A Cabinet 16 th September 2015 Staffordshire and Stoke-on-Trent Business Loan Fund Recommendations of the Cabinet Member for Economy, Environment and Transport I recommend that: a. Cabinet invests 200,000 per annum for three years to extend the Staffordshire and Stoke-on-Trent Business Loan Fund, to provide well-run small and medium-sized businesses in Staffordshire who have been declined a loan from their bank, with loans of up to 50,000 for diversification, growth and development. Due to the scale of demand and the progress made to date, the proposal is for the County Council to provide funding of 200,000 and Stoke-on-Trent City to provide 50,000 per annum, over a three year period commencing from December The Fund Management role will need to be procured and they will be expected to contribute 50% of private match funding per annum. The total lending amount will therefore be 500,000 per annum for three years, creating a pot of 1.5m. Staffordshire County Council will receive back 75% ( 450,000) of its total investment in stages and by no later than December The maximum exposure of the County Council is therefore limited to 25% of the total investment, that is 150,000 spend over the lifetime of the project. b. Cabinet delegates authority to the Director for Place (in consultation with the Director of Finance and the Cabinet Member for Economy, Environment and Transport) to finalise the terms of the contract with a procured fund manager to operate the proposed new loan fund. c. Cabinet recognises the success this initiative has achieved since its original launch as the Staffordshire Business Loan Fund nearly six years ago and appreciates that the loan fund has been instrumental to the diversification, development and growth of small businesses across Staffordshire, who continue to be refused finance from their bank.

4 Report of the Director for Place Reasons for Recommendations: 1. Supporting the economy has been a priority for Staffordshire County Council over the last six years. By working with partners through the Stoke-on-Trent and Staffordshire Local Enterprise Partnership (LEP) we have helped the economy of Staffordshire grow after the 2008 recession and have helped to achieve a reduction in the number of people claiming Job Seekers Allowance (JSA). Currently just 0.9% of Staffordshire s working age population is claiming JSA which is the lowest figure since 1993 and is below the national and regional averages. 2. With 99.7% of businesses in Staffordshire being Small to Medium Sized Enterprises (SMEs) our support to them as the lifeblood of our local and national economy is essential. Programmes such as the business loan fund have been key to supporting the growth of small businesses. 3. Now the UK is moving out of recession, our priority is to grow the value of the economy. This will only happen if businesses in Staffordshire can grow and compete and this scheme is one way of helping to make that happen. 4. The Staffordshire and Stoke-on-Trent Business Loan Fund is currently a partnership between Staffordshire County Council, Stoke-on-Trent City Council and BCRS Business Loans (Black Country Reinvestment Society), which is a specialist not-for-profit, non-bank lender. They were appointed following open procurement as the best equipped organisation to deliver the 2m loan fund. 5. Following the formation of the Stoke-on-Trent & Staffordshire LEP the County Council invited Stoke-on-Trent City Council to take the opportunity to invest in a LEP-wide fund, whereby the agreed amount of funding from each authority was to be used to support businesses within its own administration area. The Staffordshire and Stoke-on-Trent Business Loan Fund was therefore formed in March 2013, which combines 700,000 investment from Staffordshire County Council and 300,000 from Stoke-on-Trent City Council. This was matched by 1m from the European Regional Development Fund to create a total fund of 2m. This funding was made available for lending to small businesses located within the Stoke-on-Trent and Staffordshire Local Enterprise Partnership area from 1 st April 2013 until 30 th June By 30 th June 2015, the current Staffordshire and Stoke-on-Trent Business Loan Fund had made 73 loans with a combined value of over 1.7m. The fund has enabled small businesses to create and safeguard over 300 jobs which would have otherwise been at risk. This means continued income to individuals and families, and a vital contribution towards the economic growth and prosperity of the county.

5 7. The fund has made a significant contribution to supporting viable small businesses across Staffordshire and Stoke-on-Trent by providing loans of 10,000 to 50,000 and the need for this financial support to small businesses remains. The full lending amount of 700k (matched by ERDF) contributed by SCC for lending in Staffordshire was achieved by the project completion date of 30 th June The remaining balance under the existing contract relates only to loans allocated for Stoke-on-Trent and exists due to a slower than anticipated take up of loans in this area and resource allocation. Both factors have since been addressed by the fund manager and sufficient traction and networks in the area have been well established and a substantial pipeline for lending in Stoke-on-Trent achieved. 8. Whilst proposing the rational for a further loan fund, it is worth considering the strengths identified as part of the mid-term review where a full SWOT analysis was undertaken in October 2014 of the current Staffordshire and Stoke-on- Trent Business Loan fund. This identified significant strengths and opportunities for investing in a future loan fund across the LEP area. 9. Due to the scale of demand and the progress made to date, the proposal is for the County Council to provide funding of 200,000 per annum and Stokeon-Trent City to provide 50,000 per annum for three years. This follows the trend of meeting the demand in Staffordshire and justifying the proportionally higher contribution of SCC. It is anticipated that SoTCC will add the remaining balance of the existing contract in addition to the future loan fund. 10. Following advice from the procurement team, on receipt of Cabinet approval the Fund Management role will be procured. They will be expected to contribute 50% of private match funding per annum from the anticipated project commencement date of 1 st December It is recommended that the proposed future loan fund is contracted on similar terms to prior contracts whereby the County Council will be the accountable body. Previous agreements ensured that 70% of this funding would be repayable to each Council with the other 30% used to cover bad debt. Given prior performance and levels of bad debt, it is proposed for the future loan fund to operate with a 25% bad debt provision, whereby 75% of funding would be repayable to each Council. To further protect the County Council s investment therefore, a future contract would include a reduced provision for bad debt capped at 25% with the Fund Manager, ensuring 450,000 is paid back to the County Council. 12. The County Council s refundable contribution of 450,000 would be repaid over a period of 4 years staring at the end of year two at December 2017, when loan repayments will start to be repaid by the fund manager to the County Council. 13. The principles of the existing eligibility criteria for the Staffordshire and Stokeon-Trent Business Loan Fund would be maintained and similar foundations for delivery would exist. Applicants must be existing businesses within the project area and have up to 50 employees. They must be viable at the time of

6 application and must have been refused financial support from their bank. Loans will be made to businesses proposing activities that will assist economic development, such as business expansion and job creation. Any activity that has the effect of displacing similar business would be deemed ineligible. 14. Accessing finance continues to be a challenge for small businesses and demand for the Staffordshire and Stoke-on-Trent Business Loan Fund remains strong. Banks understandably responded to the wider economic downturn, but with the effect that small businesses, particularly those without significant assets, have often been unable to invest to expand or develop. The Staffordshire and Stoke-on-Trent Business Loan Fund successfully addresses this issue. 15. Established initially as a response to the recession, the loan fund now focuses more heavily on enabling the diversification, growth and development of our small business community. By supporting businesses in this way, it has and will continue to make a significant contribution towards the economic growth and prosperity of the County. 16. Since the formation of the partnership in November 2009 with BCRS, the County Council and latterly the Stoke-on-Trent City Council, have invested a total of 2m in a 4m loan fund. We have invested funds with BCRS through four separate contracts, which have been matched by funding from the Fund Manager and the European Regional Development Fund. These funds will be available for reinvestment by BCRS in Staffordshire businesses, once each of the loan funds are repaid. At April 2015 the County Council had received back a cumulative sum of 815,349 which will increase to 887,600 in April 2017, once contract 3 is finalised. A further 490k will be returned to the County Council when the current contract expires in June Figure 1 below provides repayments received so far from existing contracts and contracted amounts to be paid back to Staffordshire County Council. Figure 1 Repayments from existing contracts Contract Apr-12 Apr-13 Apr-14 Apr-15 Apr- 16 Apr- 17 Apr- 18 Apr- 19 Apr-20 1 (Nov 09- Apr14) 197, ,077 50,679 2 (Jan 11-Apr 15) 218,033 61,967 3 (Jun 12-Apr 17) 185,349 72,251 4 (Jun 13-Jun 20) 490,000

7 List of Background Documents: Staffordshire Business Loan Fund Update Cabinet Report 16 th July 2014 Staffordshire and Stoke-on-Trent Business Loan Fund SWOT Analysis October 2014 Community Impact Assessment Report Commissioner: Steve Burrows Job Title: Commissioner for Business and the Enterprise County Telephone No:

8 CIA Précis for Cabinet Reports and Cabinet Member Delegated Decisions Name of Policy/Project/Proposal: The Staffordshire and Stoke-on-Trent Business Loan Fund Responsible officer: Steve Burrows Commencement date & expected duration: 1 st December 2015 for 3 years Impact Assessment +ve/neutral/ -ve Further information degree of impact and Impact on access to more good jobs and increased economic growth Supporting healthier living and independence Impact on feeling safer, happier and more supported in and by the community Maximising the opportunities for a good quality physical environment Maximising the use of community property portfolio Addressing issues affecting rural areas? +ve +ve Neutral Neutral Neutral Neutral signpost to where implications reflected within the report/ main Assessment A target job creation / job safeguarding output of 200 is to be achieved. More jobs and access to them through workforce safeguarding, will likely have a positive impact on the mental health and wellbeing of residents.

9 Equalities impact Age Disability Neutral (+/-) Neutral (+/-) It is assessed that there are no equalities implications to the proposal and that there will be Ethnicity Neutral (+/-) neutral impacts on protected groups, since there are potential benefits to Gender Neutral (+/-) all sectors of the community. Religion/Belief Neutral (+/-) Sexuality Neutral (+/-) Gender-reassignment Neutral (+/-) Pregnancy/maternity Neutral (+/-) Resource and Value for money Risks identified and mitigation offered Providing a bad debt provision of 25% (previously 30%) SCC will receive back 75% of its investment. A project risk log will be maintained throughout the course of the programme, to ensure any risks identified are monitored and mitigated against. Legal imperative to change/implications (including the Social Value Act 2012) Author: Nicola Kent / Rebecca Wilson Business Support Team