Michelin, the tyre manufacturer, has emerged as a white knight to small businesses seeking bank finance as the government continues to struggle to kickstart lending on the high street.
The financial crisis has thrown many small businesses into turmoil as their banks have withdrawn overdraft facilities and tightened terms on loans.
Rekindling the market for small business lending was one of the key goals of measures unveiled in this week’s pre-Budget report.
But the Michelin Development loans fund has already managed to provide almost £3m of unsecured business loans at Bank of England base rates during the last five years as part of its corporate social responsibility drive.
The finance is provided by RBS and backed by the tyremaker. Michelin Development also offers free advice to the companies it is supporting and claims that its efforts have so far created hundreds of jobs.
Mike Cole, director of Michelin Development, said: “It’s a credit crunch-defying package.”
Michelin’s scheme is run at a loss as it subsidises the loans to keep interest rates low and shoulders the costs of defaults on payments.
It is also limited to companies operating in North Staffordshire, East Lancashire, Dundee and Ballymena, where Michelin currently manufactures or has had operations.
“It is our way of putting something back and helping communities that have helped us become what we are,” Cole said.
Among those that have benefited from Michelin’s scheme are Damion Nickerson and Nick Hargreaves, who launched Buildfix, a building products business based near Blackburn, 18 months ago.
The collapse of the property market and large-scale redundancies at house- builders has forced thousands of plumbers, roofers and other skilled labour to go it alone as tradespeople, creating a large customer base for Buildfix.
The business, which was started using a £10,000 overdraft, moved into profit after a year of trading on an annual turnover of £1.8m. However, it has struggled to get additional bank finance.
“Nobody wanted to touch us,” Nickerson said.
Michelin Development provided a £20,000 loan, enabling Buildfix to put its telesales team on the road to reach new customers. “If it wasn’t for Michelin Development’s loan, we wouldn’t be at the stage we are now at,” Nickerson claimed.
