Case study

Let’s Do Business: enhancing support to help small firms survive, grow and thrive

University of Derby expertise has helped justify the relevance and impact of financial support for hundreds of start-up and small businesses and identified further areas for enhancing the support offer by combining finance and managerial training as an integrated package.

Research from the University of Derby has enabled the Let’s Do Business Group (LDBG) to strengthen and potentially broaden its work to create jobs and bolster the local economy in the South East and East of England.

Located in a deprived area of Sussex and backed by the European Regional Development Fund, the LDBG provides £1.5m of loans and grants, advice and training support to 465 small and young local businesses each year.

It commissioned the research, led by Professor of Business Economics Marc Cowling, to assess the relevance and usefulness of its current offer so that it could strengthen its business model and reach even more start-up firms and SMEs that are keen to invest in scale-up opportunities. The research for the LDBG drew upon – and added to – the University of Derby’s wide-ranging expertise in SME and regional finance.

As well as conducting an in-depth evaluation of the Group’s services during 2019-20, the research team established the potential for the design a new local funding escalator which addresses the significant barriers faced by small businesses in raising external capital – such as their lack of a track record, limited marketing support, irregular cash flows and managerial inexperience.

As a result, the LDBG has the potential to differentiate its suite of financial products to create even more highly targeted support, matching the funding offer to assist businesses at the different growth stages in their evolution and lowering the average interest rate on total borrowing. This is especially useful for the many young and micro businesses that do not have the assets against which to securitise their lending, increasing their ability to finance new projects with positive returns.

The research has also helped the Group to identify the potential to create a more integrated portfolio of services, combining funding support with skills building to help SMEs improve both their financial and managerial capabilities at the same time. While publicly funded business support typically involves separate finance and training programmes, the research recommended bringing them together because a firm’s managerial weaknesses can affect its ability to make best use of financial investment.

In addition, the LDBG benefited from in-depth insights into the full economic impact of its activities. The researchers estimated that this amounts to around £16m in additional consumer spending from the extra 1,003 jobs created for local workers. Thorough economic evaluations of the kind undertaken by the University are rare for publicly supported interventions, particularly at local levels, making it hard to gauge what works. This evidence will strengthen the ability of LDBG to attract further funding for business support at a time when demand for support services has doubled.

On a broader level, the project has generated greater appreciation of how public policy and intermediary organisations can enhance the survival and growth prospects of smaller businesses which are often capital-constrained. It has also reinforced the importance of place-specific interventions that offer greater proximity and trust between borrowers and lenders than the services provided by mainstream banks.

Researchers

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