UNITED KINGDOM: EAST LONDON SMALL BUSINESS CENTRE
The East London Small Business Centre (ELSBC) was set up in 1978 in response to the emergence of community tensions and the rise of radical political forces in the East End of London. ELSBC runs several activities of which the Incubator Support Programme will receive particular focus below. The Incubator Support Programme targets minority start-ups in the fashion and arts sectors.
ELSBC was originally set up as a public-private partnership. Currently, the organisation can be characterised as a not-for-profit private organisation. ELSBC's mission is to strive to be the best in the provision of help to all entrepreneurs in the East London region for the starting up and development of successful businesses.
Funders and funding
ELSBC was established in 1978. Funding for ELSBC over that time has come from a myriad of sources including supranational, national, regional, local and private funds. Supranational funds have come from the European Regional Development Fund (ERDF). Sources of national funds include the Phoenix Development Fund, the Local Enterprise Growth Initiative, and the Single Regeneration Budget. On the regional level, funds have been secured from the London Development agency since 1999. Local authorities have financed ELSBC on a smaller scale. Private institutions donating money to ELSBC include both businesses and charitable organisations. One example is the regular donation made by the Morgan Greenville bank to establish and support ELSBC's loan fund.
Table 1, which is taken from the 2006 ELSBC Annual Report, shows how ELSBC's income is generated. The table specifies project income and grants (including subsidies), loan fund administration fees and income from private donations.
Project Income & Grants Loan Fund Administration Fees Private Donations Totals 981,078 189,692 33,750 € 1,204,520 1,329,765 179,538
81,248 € 1,590,551 1,560,489 183,914
34,725 € 1,779,128
The figures in Table 1 include the subsidies for the Incubator Support programme, which was established in 2001. From 2001 until 2003 the Incubator Support programme was financed through the Phoenix Development Fund with an amount of € 450,000. The Incubator programme is currently supported through other sources.
ELSBC operates in areas of East London where social and economic deprivation are most pronounced. It is in these disadvantaged areas that most can be gained from an initiative supporting small businesses; and, in many cases, these small businesses are run by ethnic minorities.
ELSBC is affected by policy at various levels in its operations. European, national, regional and local policies all have an impact on the organization through financial support. For instance, the central government recently changed the institutional structure within which ELSBC operates, with the creation of Regional Development Agencies (RDAs) in 1999. Since then, each RDA has been responsible for the economic development of its region and coordinates the allocation of government subsidies. Funds for business support schemes in London are now heavily influenced by the local RDA. For ELSBC, this means that even though in the past it was able to rely on a variety of organisations, it has become more dependent on one organization, the London Development Agency (LDA).
The objective of ELSBC is to increase the social wealth and mobility in the East End of London through the stimulation and support of micro-enterprises and small businesses. The specific objective of the Phoenix Development-funded Incubator Support measure is to help ethnic minorities and people in setting up businesses in creative, mainly fashion-related industries.
ELSBC targets potential and existing business owners in the East London boroughs of Tower Hamlets, Newham, Redbridge, Barking & Dagenham and Havering. As a rule, there are no special measures aimed at ethnic minority groups or women; all measures are available to anyone from any community as long as they fall within the geographical reach of ELSBC. The Incubator Support programme, however, specifically targets ethnic minority start-ups operating in the fashion and arts sectors of the local economy.
How ELSBC works
ELSBC has a wide range of services on offer. These include both financial and non-financial services and present a comprehensive package of support to clients. Thanks to the addition of the Incubator Support Programme, ELSBC currently offers the complete spectrum of services: access to finance, training and counselling, and a business incubator. These services are described in more detail below.
- Access to finance
ELSBC runs several loan funds, which either target enterprises operating in specific geographical areas or, in one case, entrepreneurs with a specific religious background. ELSBC has the following funds available:
1. Loans for start-ups and existing businesses For entrepreneurs operating in Tower Hamlets, Newham, Havering & Greenwich and Barking & Dagenham. The fund makes five-year loans of up to €30,000 for start-ups and up to €75,000 for existing businesses.
2. ELSBC Business Loan Funds For businesses in the Tower Hamlets and Newham boroughs. Five-year loans of up to €15,000 are available for new businesses and up to €22,500 for existing businesses. Only entrepreneurs that do not have access to other sources can apply for this fund.
3. West of Borough Loan Fund This is available for businesses of the west side of the borough of Tower Hamlets. It funds seven-year loans of up to €37,500 for both new and existing businesses and these are repayable over a period of up to 7 years. The fund is open for starting entrepreneurs with no other sources of finance only.
4. Muslim Loan Fund This is available in the boroughs of Tower Hamlets, Newham, Redbridge, Barking & Dagenham and Havering. It can make loans of up to €30,000 for both new and existing businesses and is repayable over a period of up to 5 years. There is no interest payable because of the religious prohibition around usury. The borrower therefore makes a donation to the fund instead.
- Training and counselling
ELSBC runs several programmes including training courses and one-to-one counselling sessions for start-ups, new businesses, micro businesses and entrepreneurs operating in specific sectors. These programmes, some of which also include access to finance, are described below:
1. Training course for start-ups In Tower Hamlets and Barking & Dagenham, ELSBC offers a four-day training course covering all the issues associated with starting up a business. The training covers the creation of a business plan, market research, marketing skills, finance and cash-flow forecasts, bookkeeping, legal obligations, and human resource management. The four-day course is run every week with about 20 participants.
2. New businesses: "Up and Running" The programme Up and Running provides recently established enterprises 18 months of mentoring. The programme also involves the provision of information, access to finance, and access to (on-line) business-to-business networks. Furthermore ELSBC runs a number of seminars on a range of subjects. These include developing a business plan, selling, marketing, advertising, financial management, bookkeeping and taxation.
3. Micro businesses To micro-businesses ELSBC offers strategic business reviews, access to finance, personal coaching, and support with formulating business plans. Micro-business owners may also attend the aforementioned seminars for new businesses.
4. Support for the arts and design industry ELSBC helps entrepreneurs operating in the arts, fashion and design sectors. Entrepreneurs operating in these sectors may turn to ELSBC for start-up assistance, business plan formulation, counselling and access to finance. There is also some specialist sector help for music and media entrepreneurs.
- Incubator Support Programme
At two locations ELSBC has a number of workspaces available for start-up companies. These spaces are offered at a low (subsidised) rent and come along with free internet access. The workspaces range from 90 square feet to 480 square feet. Entrepreneurs in the incubator also have free access to ELSBC's other support services such as counselling and training. In 2002, ELSBC started with 13 work spaces. This capacity has now been increased to 80.
Tables 1 to 6 below illustrate the output of the work of ELSBC. Over the 2003-2006 period ELSBC carried out 14,752 one-to-one sessions, 2,174 people took part in its training courses and its loan funds awarded a total of €5.4 million. Over a three-year period ELSBC's activities generated 1,048 start-ups and 2,576 new jobs. A large share of these start-ups concern businesses started by ethnic minority entrepreneurs. The estimated three-year survival rate for newly established enterprises is over 80 %. Table 6 gives an overview of the capacity and occupancy rate of the incubator support programme. Over the years capacity increased from 13 to 80 workspaces. The current occupancy rate is estimated at 80 %. Most of the entrepreneurs in the incubator (about 75 %) have an ethnic minority background.
Table 1: Start-ups Start-Ups 2003/04 2004/05 2005/06 Totals Women 127 128 144 524 Ethnic Minority 182 167 239 775 Unemployed 132 106 164 591 Total 334 308 406 1048
Table 3: Counselling
407 546 346 717 563 567 315 730 321 529 416 727 1291 1642 1077 2174
Total value of Loans € 810,000 € 1,710,000 €2,850,000 I € 5,370,000 Total Number of Loans 49 79 118 246 % of loans to ethnic minority 56% 64% 59% businesses 59% % of loans to start-ups 70% 53% 46% 52% Muslim Clients € 300,000 € 585,000 € 480,000 € 1,365,000 Table 6: Incubator services
Evaluations Each year ELSBC publishes an annual review in which it gives a summary of the activities undertaken over the previous year. ELSBC uses these annual reviews and other support documents to account for the funds it received from its donors. The Phoenix Development Fund, which supported the incubator programme, was subject to an external evaluation itself. The final report on the Phoenix Development Fund and the 96 projects that it funded was published in 2005.
Assessment of ELSBC
ELSBC successfully manages to reach out to a large and growing group of ethnic minority entrepreneurs. Thanks to its long existence ELSBC has established an immigrant community outreach that mainstream organisations normally do not achieve. The Incubator Support Programme also proved its relevance for immigrants. This is evident from the high proportion of ethnic minority clients (75 %) in the incubator and the high occupancy rate. The average length of stay within the incubator is around one year, adding a further illustration of the usefulness of the incubator units.
- Effectiveness and efficiency
The effectiveness of ELSBC in targeting ethnic minority groups is evident from the figures. This effectiveness has a positive, reinforcing effect that brings in more people willing to be advised and supported. The programme's long-term effectiveness is illustrated by the three-year survival rate of over 80 % for ELSBC's start-ups as against a national survival rate of 62.5 %. The Incubator Support Programme also shows positive results, particularly in terms of attracting ethnic minority entrepreneurs. In terms of efficiency the following numbers are illustrative. From the 2006 annual budget of €1.78 million, ELSBC generated 406 start-ups, 675 jobs, 4665 counselling sessions, and 727 trainees, and it awarded €2.85 million in business loans.
ELSBC has been innovative in two major ways. The first is its establishment of a Muslim Loan Fund. On this fund no interest is payable because of the religious prohibition of usury: instead, the borrowers make donations to the fund. The second major innovative development is the location of the business incubator outside of the regular business parks. This offside location made the rent more affordable for starting entrepreneurs.
Many factors are involved in replicating the success of an organisation like ELSBC. One of the reasons for ELSBC's success is the fact that it has built up a strong reputation. This has been developed through the delivery of a high-quality service and the outreach work that its counsellors undertook by attending local events and fairs. Replication of ELSCB's services would require a team of staff members willing to invest time in building similar networks. Finally, it would also require a team dedicated to obtaining funding from many sources. The project is not replicable without external funding.
ELSBC has been in operation since 1978 and is set on a continued path of steady growth over the next few years. The growth of its activities is perhaps most visible in the Incubator Support Programme. Here the capacity was raised from 13 to 80 work spaces within just a few years. ELSBC managed to finance this increase of work spaces from internal sources, and not through an external subsidy. This suggests that its services are becoming more self-sustainable.
Key Learning points
1. Offering the full range of business support services integrating training, counselling, access to finance and incubator services can improve results in terms of an increased number of start-ups and a higher business survival-rate. 2. In specific cases policy measures should be developed in such a way that they overcome cultural barriers. A loan fund targeting Muslims for instance, should ask for donations rather than charging interest. 3. Although a community outreach programme is essential to raise awareness its implementation can be a time consuming process.
East London Small Business Centre Universal House 88-94 Wentworth Street London E17SA E: email@example.com T: +44 20 7377 8821 F: +442073751415 W: http://www.goeast.org Contact: Tim Heath, Chief Executive
Sources Interview with: • Mr. Tim Heath, Chief Executive East London Small Business Centre. Websites: • ELSBC: http://www.goeast.org/ Documents ELSBC (2005). Annual Review 2005. [Electronic Version]. London: ELSBC. ELSBC (2006). Annual Review 2006. London: ELSBC. Maurey, K. (2006). Investing in Success: Capturing the Lessons from the Phoenix Development Fund. London: SBS. Ramsden, P. (2005). Evaluation: The Phoenix Development Fund. London: SBS. SBS. (2004). Leading Lights: Experiences from the Phoenix Development Fund. London. SBS. Good Practices in the Promotion of Ethnic Minority Entrepreneurs 6