Is fair finance available to the businesses loved by their communities?
For the last two Mondays, BD Giving sat down with residents to ask: “how do local businesses make a difference to your life?”. The free-flowing conversation will not surprise readers who live in an urban area. We heard stories about the hairdresser who reserves one day a week for autistic people, or the florist who provides flowers free for local funerals. But the stories were not limited to those that go ‘above and beyond’ – residents were keen to point out the cafes, grocers, clothes shops and even accountants who make a difference just by being there when needed. Open, local, and familiar.
The importance of local businesses in creating and supporting communities is not a contentious issue. As The Federation of Small Business declared in their 2023 report, Small Business, Big Heart:
“small firms create strong civic engagement networks, fostering greater trust within communities and, as a result, encourage more people to work together to help the community as a whole”.
Unfortunately, running a local business is increasingly challenging with many disappearing from our neighbourhoods. No single factor drives their disappearance, and companies always have a responsibility in ensuring their products and customer service are top-notch and meeting a need. On the other side, we must also take responsibility for our local areas and recognise what the convenience of ‘delivery’ over the 5-minute walk to the shop may cost us in the long run.
In talking to businesses, it is clear there are systemic factors that can and should be fixed like access to fair finance. All businesses need access to finance to see them through a tricky period, adapt, and grow. This includes small companies, with 59% of all small businesses applying for external finance over the last five years. Is fair finance available to the businesses loved by their communities? By fair finance, we mean lending options that allow a business to thrive and continue supporting their local community without compromising their ability to be profitable and sustainable. Businesses I have spoken to cite significant barriers to accessing finance, including application processes, cost, conditions, guarantees (often personal), and inflexibility.
If the product isn't useful, you need a different product
The market is failing our communities because it is not providing the right products. My collaboration with Barking and Dagenham Giving aims to develop a product that addresses this market failure in two ways;
- Recognise businesses for their impact by asking the community to nominate and endorse businesses that make a difference to them.
- Work in partnership with these businesses to create fair finance products. We are looking at the things businesses tell us are a problem. For example, can we address the flexibility issue by offering a revenue-backed loan without increasing the rates? Do we really need personal guarantees?
Like all innovations, the journey from idea to product is arduous. We need lots of help from experts, investors and, most importantly, from the residents and the businesses that make up the Barking and Dagenham community. Thankfully, we feel supported; Fair Finance is a growing movement.
In a future Note, we will share what we are learning from other projects nationwide. While you wait, I encourage you to check out: Emma Shaw’s ideas around Fair X, which asks investors to consider returns; the CDFI network of lenders’ money along these ideas; and Kindred, who are cultivating similar ideas in Liverpool.
