Finding sustainability in an unfashionable corner of the finance market
Over the last six months the BOOST programme has supported over 30 organisations who are doing their level best to level-up: making opportunities more accessible and maximising their impact through partnerships with government, business and the wider civil society.
“Purple Shoots was the only one that offered to help and for that I’ll be forever grateful”, explains Nicky Stephenson, founder of Nuvo Designs. Nicky is in her early fifties with years of experience in sales, hospitality and training. When her mother died suddenly, she had to leave her job to take on a caring role for her father.
In need of a project, Nicky set about melting and remoulding her old bathroom candles. She shared photos of the upcycled candles on Facebook and, to her surprise, commissions started rolling in. Soon, she was able to open a small gift shop in Newbridge, Wales.
Shortly after opening, lockdown shut the doors. Savings that were propping up her business and home costs started to dwindle. High-street lenders would not provide finance because Nicky had been out of work for too long, had few savings remaining and the business had not been operating long enough.
Nicky was introduced to Welsh microfinance lender Purple Shoots by one of its borrowers, a dog groomer.
Purple Shoots is a microfinance model. It provides loans of up to £4000 to would-be-entrepreneurs – from hairdressers to bakers and decorators – with low credit scores, who otherwise struggle to get funding.
Purple Shoots founder, Karen Davies, saw what other lenders had not: a woman with a strong track record in business, a solid business plan and great customer recommendations. Karen ‘saying yes’ meant that Nicky could kit out the shop and develop a full gift range.
Karen says she has always had a heart for social justice. With a background in finance and economic development, she recognises both the fragility of SMEs’ cash flow and how hard it can be for those with the lowest credit scores to get finance to start a business. She firmly believes that these restrictions should not stop people reaching their goals.
As Karen explains, “Of course you can always find a reason not to provide the loan, like a credit check that throws up a County Court Judgement. Lending to this demographic is unpopular and seen as difficult, rather than as it should be seen: life-changing, inspiring and essential.”
Demand is high from borrowers, but the intensity of the Purple Shoots model means it has not expanded much beyond its home of Pontypridd in Wales. Valuing ‘people and place’ over algorithms, the team personally meet the applicants and review their business plans.
This approach brings its own challenges as it aspires to grow and help more people in more areas of the UK.
With growth in mind, Purple Shoots joined a six-month government-backed programme, BOOST 2021 to map its own growth opportunities. Run by The Young Foundation, BOOST has been helping Karen explore public and private sector partnerships and prepare for expansion.
Over the next six years, Purple Shoots plans to expand into at least six more areas and support 4,000 people, lending over £8m.
“We want to grow and help more people, not give in. It is all worth it for the borrowers that thrive,” Karen explains.
Purple Shoots needs to raise additional investment, which the BOOST programme has been helping it prepare for. Existing investors Tim Stumpff and Jeannie Latenser explain why Purple Shoots is a good investment for them, “Mainstream finance isn’t geared towards borrowers like Nicky, but Purple Shoots helps people to thrive. For us, there is a multiplier effect: the money we invest in Purple Shoots gets lent, repaid and lent again, over and over again. After five years, our investment will be repaid, and we know it’s helped many people like Nicky.”
Through BOOST, Karen has also been looking at digitisation strategies that allow Purple Shoots to retain a sense of community and place, alongside the individual care and dedication it is known for. Finally, Karen is also looking to find a sustainable underwriting solution, as this is currently managed though philanthropic donations.
Karen says, “The BOOST programme has been the catalyst to push me to streamline processes and give me the confidence to grow the organisation. It’s been inspiring working alongside other organisations facing similar challenges.”
Nicky is on track to draw her first salary from Nuvo Designs in time for Christmas 2021. Meanwhile, Karen is forming partnerships with likeminded organisations such as Income Max which she has met through BOOST. The Purple Shoots expansion plans should see new offerings opening in England next year, while it continues to fundraise for further growth.
BOOST 2021 has been part of the government-backed Inclusive Economy Partnership, which aimed to improve the lives of people across the UK, through partnerships. The Young Foundation continues to explore new forms of partnerships as part of legacy activities for BOOST in 2021, focussed on cross-organisational partnerships. Please email [email protected] for more information.
