Mary-Alice Stack, DirectorArtCo Projects, Arts Council England

Creative Industry Finance Seminar Series

Session 3: Tuesday 13 November 2012

Creative Industry Finance Seminar Series

Tuesday 16 October 2012Down to Business - when does a creative idea becomea business, and how?

Tuesday 30 October 2012An introduction to grant funding for creativebusinesses

Tuesday 13 November 2012The ins and outs of loan finance for creativebusinesses

Tuesday 27 November 2012A slice of the pie – equity investment for creativebusinesses

Why do we borrow money?

Business borrowing • Credit lines (with suppliers)• Overdraft facilities• Loans• Commercial mortgages

Personal borrowing • Credit/store cards• Student loans• Mortgages• Overdraft facilities

Terminology

• Loan (“debt finance”)• Lender • Principal• Interest• Risk• Secured/unsecured lending• Collateral• Capital • Credit history

Applying for a loan – key considerations

• What are you planning to use the money for?

• What impact will this investment have on the overall performance of your business?

• How confident are you about your ability to repay?

• What are the things that are most likely to go wrong, and what can you do to reduce this risk?

• Are the terms of the lending fair and reasonable? How do these terms compare with other finance options that may be available to you?

Pauline Barnett, Chief Executivewww.smallbusinesscentre.org.uk

Programme aims

The principal aims of the Creative Industry Finance programme are to:

• provide access to finance for small and medium enterprises (SMEs) operating within the cultural/creative industries, enabling business growth and supporting talent development

 • improve the business skills and commercial experience

of SMEs operating within the cultural/creative industries

Programme objectives

The primary objectives of the programme are to:

• improve the financial profile/lending history of creative industry SMEs with growth potential, enabling them to attract further investment from the private sector, thereby becoming more sustainable as independent enterprises

• provide an evidence base for the demand and effectiveness of loan finance as an alternative to grant funding for commercially viable cultural and creative industry enterprises  

Geographic focus

• The programme is being operated across to distinct and contrasting geographic areas:

• London• Yorkshire and Humber

• The London pilot launched on 29 May 2012, and is open to Creative Industry enterprises located across all 33 boroughs; delivered in partnership with East London Small Business Centre

• The Yorkshire and Humber pilot launched 5 September 2012 and is delivered in partnership with The Key Fund

Key features of the programme

The programme comprises two key components: • Training and support

Up to 12 hours one-to-one business development support with a specialist business adviser

• Access to finance

Opportunity to apply for a loan of £5,000 to £25,000 to help develop and grow a business

Who can apply?

Applicants must be able to demonstrate that their business meets the following key criteria:

• trading for a minimum of 6 months• business activity qualifies under one or more of the

following creative industry classifiers:

architecture; crafts; computer games; design; designer fashion; film and video; music; performing arts; publishing/literature; software; TV & radio; visual arts

• creative content is at the heart of their business• company is registered/located within the pilot

programme catchment areas (London or Yorkshire)

Who can apply?

• We will consider applications from sole traders (individual artists) as well as limited companies, partnerships and not-for-profit/social enterprises

• Organisations that receive regular funding from Arts Council England as part of the National Portfolio are not eligible to apply for support under this programme

• Companies in receipt of one-off/project based grant funding from Arts Council England, or other funders, are welcome to apply

Terms of lending

• Loans will be made available to businesses that have been unsuccessful in applying for finance from their own bank (“lender of last resort” principle) – but not a pre-requisite at application stage

• Loans will be available from a minimum of £5,000 up to a maximum of £25,000 repayable over a period of 1, 2 or 3 years

• Loans cannot be used to pay off existing debts

Interest rates

Loans issued under this programme will carry interest charges of 10% APR. The total amount of interest that the borrower will pay depends on the total amount borrowed and length of time over which it is repaid.

Example:

Amount Borrowed

Repayment term

APR Monthly Payment

Total Repayments

Total interest paid

£5,000.00 12 months 10% £439.58 £5,274.95 £274.95

£7,500.00 24 months 10% £346.09 £8,306.09 £806.09

£10,000.00 36 months 10% £322.67 £11,616.12 £1,616,12

How will applications be assessed?

An initial online application form will be assessed by Arts Council England using the following criteria:

• Relevance of creative content to the core business activity

• Quality of the creative content

• Potential of the business to benefit with regard to the aims of the programme

Investment Panel Decisions

• Proposals from businesses that have completed the Business Support Package will be considered by our delivery partners’ investment panels at regular intervals (normally every 6 – 8 weeks)

• The panels include representation from Arts Council England (ArtCo Trading Ltd)

• Lending decisions for the pilot programme will take into account both the strength of individual applications as well as the overall balance and range of applications from across the 12 creative industry segments

Target outputs 2012/13

• 250 businesses to receive 1 hour business consultation

• 150 companies to be offered the business support package (average10 hours per client)

• Up to 50 ‘investment ready’ referrals to loan fund panel

• 35-40 creative sector businesses supported with access to finance from Arts Council Fund (total £300,000)

www.artscouncil.org.uk

Any questions?

Mary-Alice StackDirector, ArtCo ProjectArts Council England14 Great Peter Street, London SW1P 3NQ

Email: mary-alice.stack@artscouncil.org.ukTel: 020 7973 6503