Independent lending trusts are set to become the top source of funding for small businesses, the head of the Aston Regeneration Trust (ART) has said.
As the trust celebrates 10 years providing crucial funding for entrepreneurs in deprived areas, chief executive Steve Walker said its role was becoming more important than ever, as banks become ever more cautious lending money to young businesses in an unreliable market.
"We have seen an upsurge in interest and demand for our services in the last six to nine months, and I'm only expecting that to increase as the banks show they are going to take fewer and fewer risks, particularly in the early and start-up stage of business," he said.
And he pointed out that timidity from major banks unwilling to give reasonable rates to start-up businesses meant that groups like ART would be likely to be looking after them for longer.
He said: "Our point of view with regard to the banks is that we actually want to be offering higher interest rates on our loans than banks so we can encourage people to go to them later on in the life of the business.
"But when we are loaning at about 13.75 per cent, and the banks are offering about 16-19 per cent there's no way people will be going to the banks."
The expected rush of work for ART will be the latest stage in its history of regenerating the city through small business.
It was set up in 1997 following the result of a commission saying local people found it difficult to access finance for business ventures which could regenerate the area.
Originally it was funded almost entirely from individuals and company donations, but later attracted funding from the public sector, with Advantage West Midlands giving the trust its backing.
And it has even secured a significant amount of funding with a generous loan from the Birmingham-based Unity Trust Bank.
It has now helped more than 350 businesses in Birmingham on the road to success, giving loans to a huge variety of firms, from longestablished engineering companies to new media companies, from food manufacturers and restaurateurs to providers of sports and leisure facilities.
"There is more of an awareness of the funding gap that exists, but it doesn't make getting getting money any easier," said Mr Walker, who joined ART from Barclays at the very start of the trust.
"However, the public sector has now come on board. The big difference is that we have got them recognising the good work we do."
ART, based on offers loans from £10,000 to £50,000 to companies from Birmingham and North Solihull, with flexible repayment rates and often without security.
It aims to support enterprise in disadvantaged areas by enabling borrowers to create or protect local jobs and services, with customers include existing businesses and start ups engaged in a wide range of activities.
It is run like an old-fashioned building society and was the first trust of its kind when it was started in 1997.
Private individuals and corporate companies can invest between £250 and £20,000 in ART. As the trust is accredited by the Government, investments may qualify for Community Investment Tax Relief (CITR), which offers five per cent a year of the amount invested off personal or corporation tax liabilities for a maximum of five years.
