A statement from our CEO - Regarding the extension of the Recovery Loan Scheme

"There has been delight expressed by many in the Financial Services Industry this week around the Government’s decision to extend the Recovery Loan Scheme for a further two years. It has been welcomed as a much needed boost to small business. But…?

How many people actually know what it is and how it works? It is funding from the Government to underpin lending by lenders accredited to the scheme so that if one of the loans they make goes bad, 70% of it will be reimbursed by the Government.??

The idea is that it encourages lenders to lend where perhaps they might not otherwise be prepared to – for example, if there is insufficient security behind the loan. So far so good – the money only indirectly benefits small business, but there is no doubt that many have benefitted but what rankles with me is the businesses that are excluded from this for no good reason that anyone has been able to give me.?

RLS is NOT available to anyone making a loan of less than ￡25,000 – this effectively means that all the sole traders and small businesses who only need relatively small amounts of money to succeed are excluded. There are more than 5 million micro-businesses and sole traders. British Business Bank will argue that their start-up loan scheme covers this – but this scheme will not support those with weak or poor credit scores, no money to put in etc.?

So big numbers of people on the margins of the economy remain excluded from any form of finance to start or run a business.?

Purple Shoots does make loans to this end of the market and we have nothing like enough capital to meet the demand that is out there, mainly because we can’t benefit from RLS so we struggle to raise investment.?

It seems to me completely the wrong way round that taxpayers’ money is used to support the profits of the big banks and other larger lenders, to enable them to lend safely to established businesses, and is not used where it could make a real difference on the margins of the economy, enabling people who are struggling financially to build an independent income for themselves.?

To cover all of Purple Shoots’ losses for a whole year is less than one bank loan going bad – and yet the Government is prepared to underpin many more than one of those, whilst failing to support our lending.?

In almost every other country in the world, the type of microfinance which Purple Shoots does, for people on the margins of the economy, is supported by Government – the UK is unique in offering absolutely nothing in this space."

Karen Davies - CEO of Purple Shoots