Its difficult to break out of the mindset of grants and revenue-funded advice, isn’t it? Here at Athey Consulting, we’ve been doing some thinking about how to stretch budgets further to increase the benefits to local communities. Here’s 5 ideas on how to make your LEP and partner budgets, and your local growth budget – go even further:
- If you are in a hot market for land and property: charge commercial loan rates for commercial projects. Developers are paying between 8-10% costs of borrowing per year. They might sometimes struggle to get all the funding they need to start breaking ground. If they come to you for gap funding – why not charge the full commercial rate? it avoids all those State Aid issues and creates a surplus you can invest into other projects, or use to cross-subsidise projects that are in more challenging market circumstances.
- User charging: charge businesses retrospectively for a business support service to cover administration costs – e.g. loan arrangement fees; advisory fees after they have successfully experienced an increase in revenues after assistance. Charges could be billed after a commercially successful application of assistance. Perhaps issue funding in the form of ‘forgiveable loans’ – where you won’t pursue your rights as a creditor if the company fails or genuinely can’t afford repayment; but you will pursue repayment if a company has obviously benefited. This has the added benefit of filtering out less serious users of business support services and adding the principle of community benefit – that a business beneficiary should support future support provision for other businesses. User charging could also be incorporated into loan funds and guarantees – i.e. a retrospective administrative charge to partially cover costs.
- Loan guarantees or interest repayment guarantees: this may be sufficient to lower the risk profile of an investment without requiring significant capital outlay. How many Enterprise Zones might benefit from mortgage guarantees for business premises?
- Grant funding that is drawn in advance from interest repayments on loans – for example there are Social Housing Bond models that take a £10m zero-interest bond; use it to make £8.5m in loans to housing associations (with 3.5% interest per annum, this repays the £10m bond after 5 years); and releases £1.4m in grant funding to be spent from year 1 of the scheme.
- Grant funding ‘swaps’ for services and other benefits. If your are bound by budget availability for prescribed uses (e.g. capital) then make a deal with the beneficiary that you will replace their planned capital expenditure in return for some services for the wider economy.
