We must expand the provision of affordable finance to help power young entrepreneurs' ambitions

Posted On: 
6th March 2019

Demand for business lending far outstrips supply. Which often means the most disadvantaged have to choose between poor options. Let’s not condemn our ambitious young entrepreneurs of the future - or force them into a position where their only choices are poor, says Responsible Finance. 

Responsible finance providers have helped make young peoples' entrepreneurial dreams come true when the banks could not help. Fabio's Gelato in Hitchin has already created five full-time and twelve part-time jobs. Their success contributes to cities’ local economies, talent pools, and to poverty reduction, says Responsible Finance.
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More young people than the population of Leeds are unemployed and out of education. 788,000 are neither in education, employment or training, an increase of 31,000 according to the latest ONS data. That’s 11% of all young people in the UK. It’s a crisis today and a future disaster for these individuals and our economy.

Many will be seeking meaningful careers and others – 54% of all young people, according to some research – dream of running their own businesses.

What’s stopping them? Confidence, access to finance, and access to appropriate knowledge and resources are the three most common barriers preventing would-be entrepreneurs from launching a business, according to a Start Up Loans survey of 2,000 people.

The irony here is that if young people get insecure, poorly-paid gig economy work with little guarantee of income they can find exploitative high-interest lenders happy to extend unaffordable personal credit to them. But young would-be entrepreneurs can get short shrift when it comes to accessing affordable business finance to help them achieve their business dreams.

This may be down to a lack of assets to secure loans against, or a limited track record in business, or an undeliberate and unconscious bias causing money to flow to entrepreneurs in the image of mainstream lenders. Many young (and female and BME entrepreneurs) have reported difficulties in securing seed funding or working capital for their business ideas, even if they are investing in them themselves.

Responsible finance providers can help, though. They collectively lent £85 million to 5,310 businesses in 2018. Many are led by young people; many come from disadvantaged communities; responsible finance providers help them create sustainable businesses and good jobs. Often they contribute to the UN’s Sustainable Development Goals through their impact too.

Kieran Aitken is one example. The now 22-year old runs Orbit, a social enterprise he founded aged 18 which has supported over 270 young people inspiring them to start their own business or secure a job in an industry of the future. A third of the people Orbit has supported are either in or at risk of poverty. These “Orbiteers" have launched over 170 new businesses and come from 10 of the UK’s major cities. Their success contributes to cities’ local economies, talent pools, and to poverty reduction.

Or meet Hannah and Fabio Vincenti, who founded a hand-made Italian-style ice cream parlour in Hitchin in 2015. Fabio's Gelato has already created five full-time and twelve part-time jobs; their “rolling stock” of 24 flavours of ice-cream and sorbet (which have included Pigs in Blankets, Chocolate and Marmite and Pear and Blue cheese) have helped Fabio’s to become a celebrated local brand, with their creations often going viral across social media. And they’re about to open a second store.

Now say hello to Tom McKenzie (25) and Sam Leach (25), who had a vision to establish affordable retail space in York, add value to the city and create social change. Tom and Sam launched Spark:York in May 2018, turning a derelict city-centre site into a thriving village of independent enterprises. It’s built from 23 upcycled shipping containers offering affordable and much needed space to York's independent food, drink, retail businesses – and are used as art and music studios, galleries and workspaces.

What do those five young people running three very different businesses have in common? All turned to “responsible finance” providers to help make their entrepreneurial dreams come true when the banks could not help. And the five have been named the UK's foremost “young entrepreneurs of the year” by an international foundation.

Tom, Sam, Hannah, Fabio and Kieran are the finalists for the “Young Entrepreneur” award in the Citi Microentrepreneurship Awards, funded by the Citi Foundation, a global financial inclusion initiative which recognises the contributions of microentrepreneurs to their local economies.

A celebration of the enterprises and local businesses that are the backbone of our communities, this year's Citi Microentrepreneurship Awards also align with the UN Sustainable Development Goals agenda, and sit alongside Citi’s Pathways to Progress project, a response to persistent youth unemployment which invests in initiatives to help young people pursue their career and economic ambitions.

The Award winners will be announced on 13th March; all the finalists are exceptional and contribute to the economic, social and environmental vibrancy of their communities. None would exist without responsible finance.

Microenterprises make a vital contribution to the UK. A third of microenterprises access external sources of finance. While responsible finance providers can help them – and offer crucial advice, mentoring, business support and skills development, just as important as the finance they provide, they could do more if they had access to more capital to lend-on.

Demand for business lending far outstrips supply. Which often means the most disadvantaged have to choose between poor options. Let’s not condemn our ambitious young entrepreneurs of the future - or force them into a position where their only choices are poor. Let’s not “damn them if they do, and if they don’t.” Let’s celebrate and support them - and expand the provision of affordable finance to help power their ambitions.