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ART Business Loans

Financial performance

ART has a strong Balance Sheet and track record, including repayment of all loans made banks and others over 20 years in line with terms and conditions.

Track Record

At start up in 1997, ART raised grant funds from several sources to cover revenue costs – staff, marketing and rent etc. The major providers were Barclays, NatWest, Investors in Society and Birmingham City Council.  As scale increased, income generation from interest and fees was able to cover all the overheads of the business, excluding bad debts.

Initially, capital for lending was obtained from a share issue to investors who invested for purely social purposes, raising about £360,000. Investors included large private sector companies, major banks, housing associations, local and national government, trust funds, high net worth individuals and other individuals wanting to put their money to work for a social purpose and support the economy in the area that ART served. They received no financial return.

Since launch, ART has been supported by local, national and European public sector funding, including the Phoenix Fund, the Regional Growth Fund and the European Regional Development Fund. The major loan provider to ART has been, and continues to be, Unity Trust Bank.

Following the closure of the Regional Growth Fund in 2015, ART and other CDFIs were encouraged to seek funding for their activities from local public sector sources. ART has established, with support from Birmingham City Council, Unity Trust Bank,ThinCats peer lending platform and loan investors using that platform, a targeted Birmingham Small Business Loan Fund to provide loans totalling £1 million a year for three years to March 2020.

All loans made to ART (to date in excess of £10m) have been for capital to lend to businesses and social enterprises and have either been fully repaid or are still being serviced in line with terms and conditions.


Performance History

ART’s performance for the three financial years ended 31st March 2018 is summarised below:

 

Lending reduced in 2017 due to delays in agreement as to the recycling of loan receipts for the CDFI sector from the Regional Growth Fund (RGF) and, in ART’s case, there were no other available funds for lending at that time. Since then, RGF recycling has been agreed and is planned to continue until all RGF grant funds have been exhausted. The Birmingham Small Business Loan Fund was established from the financial year ending 2018 and will run until the financial year 2020. This increased our lending for the financial year ending 31st March 2018 back up to £2.5m.


Forecasts

The forecasts below cover the six financial years from 1st April 2019 to 31st March 2024, which include the first five year investment period for this share offer.

 

Investment Illustration

The forecast of how a capital investment of £500,000 in ART will be available for repayment to investors should they choose to withdraw their investment at the end of the five-year investment period is as follows:

 

The principal assumptions underlying this illustration are as follows:

  • For the purpose of this illustration the investments through this offer are treated as being received on 1st April 2020.
  • All the capital will be lent to small businesses and social enterprises in the first year. We anticipate that the portfolio will be approximately 15 term loans, with an average value of approximately £34,000.
  • The loan terms will be on average around 54 months, thereby ensuring that there will be sufficient capital realised at the end of five years to repay those investors who choose to withdraw their investment at this point.
  • Capital receipts from the loans made will be ringfenced to be available to redeem the shares after the 5 year investment period.
  • Bad debts of 16% are assumed for the portfolio. The loans will either be secured through tangible security in the form of a legal charge over property or where this cannot be provided by the borrower, the Enterprise Finance Guarantee scheme will be used.
  • The income ART earns from the loans is in the form of arrangement fees and interest. This income is used to pay running costs and to make up any shortfall in the capital due to investors. In the above illustration a shortfall of £30,000 is anticipated and £6,000 per year is transferred to the capital fund from income earned on the loans.

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