Co-op finance bodies on the prospects for a post-Covid rebuild

Insight from BCRS Business Loans, Triodos Bank, Ecology Building Society and Co-op and Community Finance

On 15 June 2020, many shops and businesses re-opened after months in lockdown – but the ‘new normal’ of social distancing poses massive challenges for business, particularly for the co-operative sector.

BCRS Business Loans provides loans from £10,000 to £150,000 for businesses who find it hard to access finance from traditional sources. Last year was its most successful ever with £9.1m in lending. Then came lockdown.

CEO Stephen Deakin said: “We were accredited as a delivery partner for the Coronavirus Business Interruption Loan Scheme (CBILS), the government guarantee to support businesses where they do not have to pay interest for 12 months. We went live on 7 April and by the end 25 June had lent £5.3m, which we are incredibly proud of; we safeguarded hundreds of jobs.” 

Stephen Deakin

He added: “Co-ops and community businesses are a force for social good. They face similar challenges to the wider business community, in terms of dealing with reduced income/ turnover. Cash will be important in coming months as operations start to return to normal. And, if a cash flow issue is on the horizon, we recommend that, as long as the loan is affordable, it is a short-term solution for working capital requirements.

“We urge businesses to be brave and, where possible, try to retain staff so when furlough ends it will help keep the recession as short as possible.

“There is likely to be a change in thinking post Covid – hopefully we will move to a more inclusive, greener economy. As we all adapt to new ways of working, there may be long-term benefits, but business leaders need to work in a way staff want so there isn’t reduction in productivity.”

Bristol-based Triodos Bank has 721,000 customers worldwide; recent projects it has supported include vegetable box delivery company Riverford Organics and the Blue Bell Community Hub in West Sussex. 

Whitni Thomas, senior manager for investor relations & crowdfunding, said: “Community businesses are harder hit in many cases because they are smaller with fewer reserves to help cushion the impact of months of closure.

Whitni Thomas

“We’ve extended 12-month capital and interest payment holidays to our customers where require to help them through. We also support other lending institutions like BCRS. Where borrowing can help, we will work with community organisations but in many cases they also need grant support from government. We are vocal in the need for a green recovery and community organisations are part of the solution.

“We are in conversation with a number of organisations talking about options. There is a lot of willingness from individuals to support local businesses. The pandemic has also got people to think differently and I am hopeful more will think about using local community organisations in terms of resetting the economy.

“This really is a unique opportunity – for example re-designing cities with more room for pedestrians and bikes. The unprecedented actions that have been taken to address the crisis show that it is possible to move quickly and have wholesale behaviour change to address the climate crisis and create a more sustainable economy.”

Co-op and Community Finance (CCF) has around 80 co-ops on its books and over £3m out in loans. Business development manager Tim Coomer said: “Our initial reaction was to support borrowers with capital payment holidays for over 50% of our portfolio.

Tim Coomer

“We also provided updates on the schemes and opportunities that have come along. We looked at being a lender on CBILS but it would have taken time to get approved and we were concerned about the amount of ineligible enquiries we would have seen as a  specialist lender. 

“Bounce Back Loans were the game changer for many co-ops and SMEs in general, with good terms of up to £50,000, with six years to repay and no payments in the first 12 months. We were unable to take part because lenders were required to have £10m to on-lend, which excluded us and other smaller social and community lenders; but the Co-op Bank is an approved provider.”

Mr Coomer says the Resilience and Recovery Loan Fund helped some larger social enterprises but these are minimum £100,000 loans which does not meet what most CCF borrowers need.

“We are keen to know if co-ops have struggled to access finance they need from these schemes,” he said. “There have also been issues for some co-ops and community businesses who don’t have bank accounts with the mainstream banks in accessing loan support.”

Covid-19 has put particular pressure on the pub sector – including community pubs; these make up a third of CCF’s portfolio. “They are a partner in the More than a Pub programme,” said Mr Coomer. “We are supporting a number through their C-19 Emergency Trading Income Support Scheme to help pay ongoing costs, restock supplies, purchase PPE equipment, and cover layout changes and deep cleaning. 

“We will be there to support existing borrowers get back to business, lend more to help existing borrowers rebuild and we are also well placed to provide finance to new co-ops and community businesses that will emerge.”

Ecology Building Society has been another key source of support. Community and business manager Jon Lee said: “Throughout the current
situation we’ve been actively working with borrowers to understand the impact on their finances and provide support suited to their particular needs.  

Jon Lee

“We look at each situation on an individual basis and make arrangements that fit their circumstances. These include payment holidays and other alternatives depending on requirement. 

“We’ve also been working closely with groups whose projects have been delayed, putting in place flexible options to ensure construction can start or continue at the appropriate time.” 

New projects are coming to fruition despite the crisis, he says. These include Bunker Housing Co-operative in Brighton, Ecology’s first self-build housing co-op which offers affordable and secure homes to low-income families.

“Ecology is continuing to provide essential support for projects that respect the environment and enable sustainable communities to flourish,” added Mr Lee. “While we, and the sector, won’t be immune to challenging economic impacts, there are many reasons to be positive. 

“We’re seeing a big increase in collaborative action to support a socially just and sustainable green recovery. Co-ops and community housing are well placed to help deliver on this, tackling the chronic shortage of quality affordable housing and the devastating impacts of the climate crisis.”