Community Business Loan Guarantee Scheme

It’s good for local business to belong

Based in Southampton, Solent Credit Union (SCU) is a Member-controlled Savings and Loans Co-operative rather than a high-street bank.

We are now open to applications for Corporate Membership by local small businesses. SCU particularly welcome applications from Community Businesses, Co-operatives, and Social Enterprises as part of our Community Economic Development strategy.

As a community-based enterprise with a co-operative governance structure and a strong social mission, SCU is well placed to provide an empathetic and appropriate service to Members of this kind! SCU also accepts individuals who are sole traders or social entrepreneurs.

For individuals and business interested in your own financial well-being and the local economy, it is good to save with SCU because it provides a simple way for enterprises to steadily build reserves, resilience and evidence of ability to budget sustainably and to repay borrowing. SCU provides stewardship for those funds and uses them responsibly to provide affordable loans to people and small businesses in the local community. It keeps local money circulating locally and away from loan sharks, hedge funds and exploitative investors.

It’s also good to borrow with SCU because it’s simple and affordable. Lending is designed to fill the well-known gap in provision for the small businesses – typically for £10,000 or less with repayment over 5 years or less. The maximum rate that SCU will charge for business loans made under the Community Business Loan Guarrantee Scheme is 10% APR and there are none of those expensive set up or administration fees that other lenders charge for the foreseeable future.

Apply on-line at www.solentcreditunion.co.uk or contact us on 023 8000 2018 about membership and potential community business accounts and services.

Click here to download corporate membership application form

Community Business Loans Guarantee Scheme

As part of the above scheme, directors or principals of borrowing organisations are never asked to sign the sort of personal joint and several guarantees or give charges over their homes that other lenders often insist on, because that can create a burden of personal risk that should never be carried by people running a small business, particularly an enterprise for social purpose. It would also create tensions within the democratic cultures in borrowing organisations if some of their members were exposed to such personal risks. These are some of the important concerns other lenders simply do not understand.

Instead, when a business wants to borrow money to expand its services, re-equip or cash-flow a project, SCU takes guarantees from Members who want to back it. Those guarantees are limited to amounts that the guarantors specify and have available in their own savings with the Credit Union.

The “exposure” of the guarantors reduces as the business makes repayments, making the money available again for their own use or to guarantee loans to other businesses or friends and family members.  This system limits the risk of the Credit Union and explains why such an economic and helpful lending service can be made available. Businesses that have taken up Membership of SCU can introduce their own supporters to membership as well. They too can use their account to build up savings, part of which could be used to guarantee lending. Other guarantors can be found through co-operative and social enterprise networks. 

The system is akin to crowd funding but the funders do not actually invest their money in a business, rather, they keep it in an account in their own name in their own Credit Union unless and until the business fails to keep up the repayments. When a business has built up a working relationship with the credit union, a track record of loan repayments and some reserves then the need for guarantee backing reduces. Businesses can enter into alliances

SCU provides support over and above the cash – and it’s all part of the service. SCU undertakes an assessment of each loan applied for – even if there are people willing to guarantee every penny of the loan – and provides feedback which can help to improve the business planning. The feedback might even be that the proposed borrowing might prove to be a bad idea for everyone involved. SCU can facilitate a meeting to ensure that borrower and guarantors have a full understanding of the plan and the role and responsibilities of all concerned. When a loan is agreed the Credit Union provides quarterly monitoring of outcomes against plan, plus six monthly progress reviews with the borrower and twelve monthly review of the guarantees – allowing these to be reduced if all is proceeding to plan.

It’s good to be an active Member of SCU because it is an important community-owned resource.  The professional staff are supported by Members who provide Governance through an elected Board. There are opportunities to contribute time and expertise in areas such as Marketing, HR, Business administration and all the other areas that contribute to a healthy and developing organisation.

In fact, it’s just good to belong.