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How living on JobSeeker's Allowance for a week might help kick-start the local economy!

By GrumblingNora  |  Posted: January 31, 2013

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We all know the banks aren't lending, even if they'd like to; and while some strong Gloucestershire businesses are battling through, all too many local residents are facing an uncertain year ahead.

One alternative lender in the county is able to work with those unable to get finance for a new or struggling business, with a package of small, affordable loans and professional mentoring to ensure the greatest chance of success.

And as the businesses take off, this breaks the cycle of benefit dependency and helps replenish the county's coffers through increased tax revenue.

Registered Charity Fredericks Gloucestershire has plenty of money to lend to those with a good business case and the determination to succeed. But in order to manage the lending, they need to raise enough to pay for one part-time client manager to work with the applicants and bring volunteers from local businesses together, to sit on decision-making loan panels and to help with mentoring and other business support for the clients.

This lending has been happening in the county for nearly a decade, and has started almost 150 new businesses and lent almost £1m.

In order to raise funds, and to bring attention to the situation faced by applicants who are trying to realise capital to start a business while living on JobSeeker's Allowance (81% of all applicants are in receipt of some kind of benefit), Fredericks Gloucestershire is launching the Trading Places Challenge 2013 to take place for the week of 1 March.

Participants pledge to spend no more than £71 in seven days on food, drink, treats, entertainment and other discretionary items, while raising at least that same amount for Fredericks through Just Giving. They're invited to include in their spend other amounts connected with daily life that would be faced by the unemployed, such as utility bills and TV licence, but travel or other expenses connected to their work are exempt.

One local participant has set up her JustGiving.com page, Becky-H, in the hope she can raise her sponsorship quickly enough to encourage others to take part.

"I like to think I don't over-spend, but this £71 has to cover everything from a glass of wine to dog biscuits. I think I know which of us might be going without!" she says. "But obviously it's not about just existing on benefits, especially in the long-term – it's about people trying to save enough to try their business idea, and give themselves, their families and their local economy a new start. Not so easy to imagine.

"I've had a long involvement with Fredericks as a volunteer from the local business community, and the work they do has to continue if we're to see a strong economy in the county."

Those taking part are invited to blog, tweet or otherwise describe what they're thinking as they wave goodbye to things they might normally not think twice about, such as expensive takeaway coffees or meals out. And in previous years, when larger workplaces have joined up as a group, participants have enjoyed competitions to produce the most interesting inexpensive packed lunches, best cheap nights out and cunning money-saving ideas, some even using it as a kick-start to weight loss or stopping smoking. And Fredericks will give prizes for those raising the highest sponsorship locally.

Although hopefully offering a fun element, Trading Places is not intended to make light of the real dilemma faced by the unemployed in feeding their families on limited income or expenses incurred seeking work, but rather to draw attention to the plight of those who may have the determination, skills and idea to start a business but can't access the finance to give it a kick-start.

How will this help the economy out of recession? There's no proof that it will – but without a healthy small business sector the local economy has less chance of recovery. Without small businesses manufacturing, transporting, fixing, painting, growing or selling things, larger, established businesses have fewer suppliers, or infrastructure, or even customers.

The model itself is proven to work. Gloucestershire was the first Fredericks local hub, keeping all funds raised - and only lending to people from - within the county; and this has been replicated in fifteen counties across the country. The success rate for businesses still operating after three years currently outstrips those started by the banks. While a less than perfect credit rating might stop a bank lending, Fredericks sees beyond this – it's more about a client's fitness to run a business, ideas and determination than assets and bank accounts. Some of the most successful clients have been ex-offenders, single parents who have never run a bank account, and those previously considered unfit to work through ill-health, who have found a way to run amazing businesses despite their disadvantages.

If you can support the Trading Places Challenge, either by taking part or looking for a participant to sponsor, you can find out more by calling Mike Lewis on 01242 242555, or on the Fredericks website, fredericksfoundation.org. There are lots of key businesses in the county already supporting Fredericks, including solicitors, accountants, business support agencies, local councils – and even the banks themselves!

Please join them by showing your support, spreading the word, and backing this initiative to get business working in Gloucestershire. 

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  • raidermanuk  |  February 01 2013, 12:08AM

    What a fantastic opportunity for those that are lucky enough to have a loan approved. Very few would qualify for a loan based on normal commercial underwriting regardless of the economic climate and the additional support they receive could never be available outside of a charity or subsidy. Their latest annual report makes interesting reading. The charity operates a very small loan book yet their basic operating costs for the last year were over £700,000. That was to administrate net assets of only £1.3 million so bearing in mind most of the operating costs recur every year you can see they are under pressure. That pressure comes in two forms. They need charitable donations to maintain their day to day operating (more than they need it to lend to clients based on the past years figures) and secondly, they are under pressure to lend. They made just 60 loans last year which probably reflects how difficult it is for them to sift the wheat from the chaff and then put their personalised systems in place. Indeed they were left with £900,000 still in the bank. It also highlights how difficult it will be to scale up the operation in order to further defray their operating costs. Whilst they are overtly looking for expansion my concern would be how they avoid growing into a large, expensive to run operation that is only able to provide for a relatively small number of clients where the majority of peoples donations fund the organisation rather than the intended beneficiaries. Their business model and projections would make interesting reading. I wish them well and hope their clients appreciate how lucky they are.

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