Doing the Right Thing – Lending Amongst Uncertainty

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James Russell, former Head of Marketing and Impact at BCRS Business Loans discusses how business confidence is low, and how economic circumstances are becoming more difficult.

This article was written for the Birmingham Economic Review, published in September 2023. 

The review is produced by City-REDI / WMREDI, the University of Birmingham and the Greater Birmingham Chambers of Commerce. It is an in-depth exploration of the economy of England’s second city and a high-quality resource for informing research, policy and investment decisions.

BCRS occupies a unique position within the market. We are a not-for-profit Community Development Financial Institution (CDFI). All our customers are Small and Medium Enterprises (SMEs) unable to secure finance from traditional lenders. Because of this our business is often counter-cyclical, put simply when economic circumstances become more difficult, BCRS gets busier.


During Covid when many businesses were struggling, BCRS stepped up and we helped over 160 businesses. In April 2020 alone we wrote 43 loans, and in the year ended 31st March 2021, we had a 47% increase in our lending. 

There is no doubt that we are in a difficult economic period. Inflation remains stubbornly high and while it is trending downwards, interest rates may yet need to rise again. Growth is at best static (although perhaps that is better than expected) and household incomes have improved, although spending is still restrained. 

Business Confidence

Business confidence is low and figures from the Federation of  Small Business (FSB) suggest that 64% of businesses in the Midlands see economic conditions as the biggest barrier to growth. The desire to grow is still strong, however, and the same FSB survey suggested that 48% of small businesses were planning to grow either rapidly or moderately in the next 12 months. 

Finally, and crucially for many businesses, traditional lenders are tightening their lending criteria. Viable businesses are finding it more difficult to access the finance they need to survive and thrive. 

With all this in mind, you would think, therefore, that BCRS would be lending more than ever. It may surprise you, however, that our total lending is actually down in the last financial year. It may surprise you further to learn that as Chief Executive, I am not worried about this. 

As a not-for-profit CDFI and a proud member of Responsible Finance, we pride ourselves on lending for the right reasons. We lend to viable businesses that use that money to prosper, create jobs and strengthen the economies of the communities we operate.

In the financial year 2022/2023 we estimate that we helped safeguard 999 jobs and create 473 more. Behind each of these numbers is a person and often their family. An employee without the stress of looking for a new job during a difficult time. A young person getting their start in a career or an entrepreneur making their dreams come true. We are proud to have supported them all. 

However, we must also balance this against doing what is right for the customer. At a time of high interest rates, expensive borrowing, and tough economic conditions we must be sure that a loan is suitable for a customer before we write it. Many businesses took on debt during the Covid period to support themselves when they were unable to operate at full capacity (or at all). This makes affordability of additional debt a challenge and as a Responsible Finance provider, we will never provide a loan that we believe will result in a business being in financial difficulty. 

We are also not driven by the same incentives as others in the sector. As a not-for-profit, we do not need to maximise shareholder return and our business development team is not incentivised on the loans they write. This is especially important in difficult economic times as we need to take more time to get to know a business before lending; hearing their story and understanding what makes them unique. This often means we can turn a ‘no’ from other lenders into a ‘yes’ from BCRS. 

As economic conditions improve, BCRS will be at the forefront of helping businesses grow. As an organisation, BCRS lends to riskier propositions than many others in the sector. We can look at businesses that are otherwise viable, but don’t quite tick every box from other lenders, and support them with affordable lending but we never do this recklessly and never take risks lightly. We strive to make sure a loan is the right thing for the customer before writing it. This sometimes means turning down loans that we don’t think are right and that during difficult times, despite the number of loan enquiries received being high, we reduce the amount we lend. This belief, in doing the right thing for the customer, is at the core of what we do. 

This blog was written by James Russell, former Head of Marketing and Impact at BCRS Business Loans.

The views expressed in this analysis post are those of the author and not necessarily those of City-REDI / WMREDI or the University of Birmingham.

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