There has been a dramatic increase in both the number and scale of businesses that are need of loans says the 76 members throughout the UK of the Community Development Finance Association (CDFA).

Chief executive officer Bernie Morgan confirmed, “More and bigger businesses, with million-pound turnovers and employing more than 10, have been coming to us in the past ¬couple of weeks.”

In the 6 years that the CDFA network has been running their objective has been to create wealth through reliable lending in less privileged areas. For example, they have been helping ventures such as social enterprises to evolve and grow. Projects like these struggle to borrow from the normal sources like building societies and banks.

The CDFA network generates their finance through first-tier funding from major banks, regional development agencies and also local business owners. They have a loan book of 234 million pounds and 15,000 enterprises that they are supporting.

Paul Kalinauckas, head of the Black Country Reinvestment Society (BCRS) says, “We keep hearing the same thing from firms now coming to us — their credit stream has dried up because banks say they have reached the limit of their appetite.”

BCRS who are based in Wolverhampton, West Midlands will lend smaller sums up to 50,000 pounds, and they assess potential borrowers on “character-based, flexible, sustainable” ¬criteria.

Once upon a time their commercial loans were a little bit higher than the high street lenders but this is no longer the case.

“One of our aims was to be the gap provider for firms, then return or pass them on to the high street, but now our rates are just as — or more — competitive. The situation has changed so much. We don't just tick boxes, we go out and look at the business in action, assess its true viability, Kalinauckas explained

And he went on to say, “Most importantly, we look at the entrepreneur, to see if they have got what it takes to come through the tough times. These are good businesses that need working capital — the life¬blood of any business —but the banks aren't lending. This lack of access has caught customers by surprise.”

“One company we're helping had planned expansion into bigger premises. All the finance was in place except the last tranche to pay for the move itself, so they were not overstretched. The bank said no, thus threatening the project, including its growth and jobs.”

BCRS though is by no means a soft touch, Kalinauckas insists,

“We won't put up with firms that put their heads in the sand, but we're more understanding of those struggling, perhaps allowing an interest-free break or extending the loan ¬period from three to four years. Our focus is to keep firms going and preserve jobs, not pull the plug on them.”

Now BCRS is well established and sufficiently strong, Kalinauckas is very confident that they will be in a position to continue to give their support even if there is even more demand in the future, he says, “And we can carry on lending even if some of our sources are less forthcoming.”

However, the Government hand out to major banks of 37 billion pounds he says he would very much like to see being shared also with community lenders but, he says,

“The problem is the structure of the lending pipeline. We need to change that as soon as possible so that the banks can let the money flow.”