Extended scheme gives CDFIs chance to make more loans

Community development finance institutions will be able to make more loans in poorer areas thanks to an extension of the Government's Small Firms Loan Guarantee scheme.

Three CDFIs – the South West Investment Group, Foundation East and the Bradford Enterprise Agency – have become approved lenders for the scheme, which provides a 75 per cent government guarantee where the borrower is unable to give security.

“The Small Firms Loan Guarantee is important because it’s a new way for CDFIs to minimise risk,” said Sarah McGeehan, deputy chief executive of the Community Development Finance Association. “It enables any lender to say ‘yes’ where otherwise they might say ‘no’ because of the level of risk they perceive.”

She added that the scheme could be extended in the future, providing the opportunity for more CDFIs to become approved lenders.

The Department for Business, Enterprise and Regulatory Reform also announced changes to community investment tax relief, which provides incentives for individuals and businesses to invest in CDFIs.

“The changes ensure that no investors are excluded and gives them a more attractive risk-return profile, which will unlock greater capital flows in the UK’s most under-invested communities,” said McGeehan.

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