The Regional Director of the Arts Council writes about their new micro-loan scheme for creative businesses and why it is 20 years too late.
I’d like to tell you about a new scheme in Yorkshire called Creative Industry Finance (or CIF) and why I think it might be a good thing.
At the moment the Arts Council is restructuring itself because of government cuts. We will be significantly smaller and it’s a period of uncertainty for everyone. I’m hedging my bets so have dusted off my CV. I can’t decide if this statement in it is true, or not:
From 1989 to 1998 I was the Chief Executive of a creative SME in Yorkshire working mainly in the UK and Europe but with growing worldwide sales. We had seven part-time employees and an annual turnover of around £100k.
Technically the statement is true – but when at the time I didn’t think like that. I thought I was just in a band. I had no idea I was running a business. Our business plan, if we had one, stretched to four words: … Must Get More Gigs.
We did make some business decisions I suppose. We paid ourselves less so we could save up for our own PA system, knowing that the cost of PA hire was often a prohibitive factor in medium size venues booking us. We also saved for our own minibus to save on travel costs, and didn’t distribute the profits of our CD sales to ourselves until we had recouped enough to pay for the next recording. This all took time and we went months on meagre rations before we saw started to get some benefit from our savings.
People moved on and the band ran its course, but on reflection I wonder if I we had treated it more like a business we would have developed more quickly, got more and better work, sold more CDs and become famous sustainable. Could we have financed our capital costs (minibus, PA, CDs) up front and started to recoup straight away? It wasn’t an option at the time – we didn’t have access to the cash.
With the CIF pilot scheme we are starting in Yorkshire this Autumn that might not be the case for people in a similar position now.
With the financial forecast still grim, there’s an almost universal sense in small business circles that traditional lending is simply not on the cards. Additionally, as creative businesses are assumed to be riskier with unconventional trading models, getting access to finance seems all the more insurmountable. We know many artists attempting to make a living from their work are discouraged by business-speak, meanwhile, potential investors and financiers can be turned off by the unfamiliar and the risky. Stereotypes abound in both directions, creating a barrier to possibilities for investment.
Creative Industry Finance has been set up to see if we can’t just start to change that. The programme is primarily focussed on free business support for creative businesses. This isn’t unique on itself of course, but crucially this programme also includes a loan fund, giving those who’ve already made a start an extra leg up to the next stage (you could call it ‘sustainable growth’ or ‘getting more gigs’, please yourself!). It is certainly a new area for the Arts Council and represents a potentially exciting development from our usual model of simply distributing grants.
CIF has already started in London. We wanted to test the scheme initially somewhere there is a really high concentration of creative businesses. Some of the artists who have benefitted from the programme in London so far include metalwork and jewellery designer Niza Huang, weaver and woven textile designer Margo Selby and John Sivak who runs an independent publishing house. If you want you can read more about these business-owners and their stories here.
We researched the sector outside London and the evidence showed Yorkshire and Humber should be the second pilot because of its burgeoning creative sector albeit one with a different set of strengths and weaknesses. Affordable space may be at less of a premium than in London, but there are still the challenges of tapping into support and commercial networks, to name a couple.
We are using taxpayers’ money for the scheme so we have to have some checks and balances in place and it won’t be for everyone. For example, the programme isn’t geared towards start-ups at this stage, and asks for six months of trading history.
In practical terms there could be the opportunity to present to a loan panel and borrow between £5000 and £25000, repayable over one, two or three years at an APR of 10 per cent. It’s a loan so we want it back so it can be used again to support another business. We are not (yet) at the Dragon’s Den stage of asking for any equity in return – although I bet the Scottish Arts Council wish they had done that many years ago when they gave J K Rowling a small bursary to let her work on Harry Potter…
Our colleagues in The Key Fund will deliver the programme in Yorkshire. They have been involved in social enterprise and the creative industries across Yorkshire for thirty years, and are well placed to offer these specialist business support and lending services. You can find out how to apply at www.creativeindustryfinance.org.uk
I am going to have a 50th birthday party later this month with my ex-band gigging for the first time in 15 years. You never know, if the old magic is still there I might think about applying myself (it is never too late to get a proper job).
I ran a creative small business (non-profit) in Yorkshire a few years ago. We received Keyfund funding which was a mixture of grant/loan.
I see keyfund are a funder in this scheme too. I am just wondering if this is not such a big departure and is actually more of the same kind of ‘model’ that has been going in this sector for quite a long time.