Part of a £1 million pot of development money intended to help victims of the credit crunch is lying unused – because hardly any takers have come forward in Birmingham.
Regional development body Advantage West Midlands put the money into local lending trusts to support small businesses who could not get funding from nervy banks.
But while trusts in other parts of the region saw the money fly out, the Birmingham group is seeing even fewer entrepreneurs come forward than in a normal year.
The Aston Reinvestment Trust (Art) is the largest of the five main trusts sharing the extra funding, and covers Birmingham and Solihull.
April, May and June are normally the busiest time of the year for businesses looking to start or expand, but it has lent less than half the money it was hoping to.
Art chief executive Steve Walker said: “With the advent of the credit crunch we really expected to be overrun with applications from both startups and existing businesses this year because we were aware that the banks were unlikely to lend to the higher risk part of the smaller business market.
“Art was lent more than £1 million last year, and this year AWM provided us with additional funding to provide for an increase.
“But in the first three months of the year we have actually been quieter than we were last year.”
Art is one of the five major members of the Fair Finance Consortium – a group of lending trusts in the West Midlands that give loans to help start-ups, entrepreneurs and other businesses that struggle to get funding from banks because they are seen as too high risk.
The four other trusts cover the Black Country; Coventry and Warwickshire; Staffordshire; and Herefordshire, Worcestershire and Shropshire.
All have seen increased business this year except for Art.
Art was given an extra £250,000 to cope with the expected demand from people frozen out by banks which are unwilling to take chances in the current economic climate.
But in the first three months of its financial year, it lent a total of less than £128,000, far below its normal levels.
Mr Walker said he was baffled why entrepreneurs were not coming to Art for funding.
“I’m as bewildered as anyone else as to why we are seeing this in Birmingham and Solihull,” he said. We still believe that there’s plenty out there that are searching around.”
He said one reason potential entrepreneurs might not be looking for funding was they wrongly believed there was simply no funding available because of the credit crunch.
Meanwhile, at the Black Country Reinvestment Society, the equivalent of Art, staff said they had been inundated with extra requests, and had already exhausted their £300,000 AWM funding top-up.
Business development manager Steve Grice said: “All the extra money we have had we have put out the door. We are actually going back to AWM to try to get more money.
“I think a lot of the difference between Birmingham and the Black Country seems to be that we have built better relationships with our bank managers. Our outreach activity has been really up this year.”
Art has launched a campaign to make people aware there are still sources of funding for sound business ideas out there despite the credit crunch.
Mr Walker said he still hoped to find businesses that would take the unused money, although he did not know what would happen if Art came in under budget, as it had never happened before.
“It’s never been an issue before,” he said. “The money is only there for this year. If we come under budget I suppose AWM could ask for their money back or it would possibly go to another area or be lost.”
He added the trust had seen an upturn in demand in July.
A spokesman for AWM said the money would not be lost, adding he was confident that ART would still be able to hit its targets for using the extra money.