IT SEEMS to have proved popular in Burnley, Lancashire. Now an Edinburgh-based entrepreneur wants to emulate the “Bank of Dave” by setting up a similar lender to help small firms raise money.
Property tycoon Peter Grant is setting up Social Baank with the backing of wealthy individuals who will donate funds to start-ups and others who are struggling to get finance from the big banks.
“There is still a lot of frustration about banks not lending, so I decided to stop moaning and do something about it,” said Grant.
He was inspired by India’s microfinance sector and by the Bank of Dave, created by businessman Dave Fishwick, whose Burnley Savings and Loans initiative has been featured on Channel 4. It offers personal and business loans and aims to pay a competitive interest rate to savers.
Unlike Fishwick’s so-called Bank of Dave, Social Baank – the second “a” is to indicate that it is not really a bank – will be registered as a charity and the funds provided will not be returned to donors, nor will they earn a return on the capital. Instead, all the money lent will be repaid and recycled to other recipients.
By making the Social Baank a charity, it can increase the money raised by 20 per cent through gift aid.
“The Social Baank is about the customer – helping people get into business,” said Grant. “It’s about job creation and inspiring entrepreneurship.
“Start-ups and SMEs are vital to jobs and the economy. How can SMEs and start-ups get going and expand without bank lending?
“There was a time when this was me, having to go cap in hand to a bank, which is why I feel so strongly about it. So having complained about a lack of bank funding for some four or five years, I decided at Christmas to stop complaining and do something about it.”
Initially, loans will be limited to £1,000, but Grant said setting funding at that level would not hold back the growth of good businesses.
“That’s not much, but many good ideas don’t require a lot of money to get going. Some of the biggest entrepreneurs today started with just a great idea and a lot of determination.
“As Social Baank grows, we will increase the amount we lend. Perhaps the UK government can help by donating some of the money it’s collected from mis-selling and rate-rigging by mainstream banks.”
He said he has already lent to his first customer and now has three: a social enterprise, an import and export business and a microbrewery. He is also talking to a cleaner wanting to set up an eco-laundry.
It is run as a not-for-profit organisation by entrepreneurs and a support team.
He said the customer will be “empowered” by having the ability to negotiate their own repayment terms. They will also be offered a mentor: an entrepreneur who can share their knowledge and experience.
Borrowers will be assessed on the quality of their idea, their determination to succeed and what their business can do to generate jobs or “put back” in another way.
“They have half an hour to present their case. They then either get a cheque or get asked to improve their idea,” said Grant.
“People can help by giving their time and money. Almost everyone I’ve spoken to loves the idea. Entrepreneurs, ordinary individuals and companies from all over the UK and abroad have pledged support, made donations and offered their time, allowing us to lend to some great budding entrepreneurs already.”
Grant has been asked to speak about the concept to business leaders in Hong Kong, where there is a sizeable community of wealthy ex-pat Scots interested in the idea.