Case Study

How DSL are shrinking the SME funding gap

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An image of a plant growing in the sunshine

The Challenge

For those in Scotland that run micro enterprises, there has long been a need for funding to help them start or grow their business. However, in research undertaken in 2021 by the UK government, it was estimated that in Scotland between 11,000 and 14,000 small and medium enterprises have unmet bank loan needs each year.

DSL has a long-established track record of supporting small businesses and entrepreneurs other financial institutions find difficult to work with. As a not-for-profit lender and the only CDFI  (Community Development Financial Institution) in Scotland with a focus on SME lending , who by their very nature provide credit and financial services to underserved markets and populations, DSL  provides funding to ambitious micro, small and medium sized businesses, that have been unable to access funding through traditional financial institutions.

Many people that wish to start or grow a business  often find that they lack access to adequate finance to realise these ambitions. If an individual has been unemployed for any length of time, any savings they have will most likely be used, which makes them less attractive to mainstream lenders because they have  little or no capital to invest in their business.

Similarly, if an individual has a poor credit score or credit rating, mainstream lenders’ criteria will designate them as ineligible for a loan, making it incredibly difficult to raise funds.

The Solution

The solution to this is microfinance. Typically, this takes the form of small loans, often sub £25,000 for those that have little or no collateral to put against finance as security, are lacking capital to invest or have a personal or business credit record that is less than excellent. It is this kind of funding that can help people start, and grow, micro enterprises.

Micro enterprises make up a significant part of the Scottish economy. In 2021, it was reported that there were 344,500 private sector enterprises in Scotland. 321,615 of these businesses employed less than 9 people, meaning that micro enterprise accounts for 93.36% of all private sector businesses. This represents 592,600 jobs, indicating that 28% of Scotland’s 2.1m people in employment work for micro enterprises.

Funding and investment in these businesses is crucial not only to Scotland’s economy, but it is also important to local communities. Many of these enterprises employ people locally and spend their money within the community.

It is therefore important that organisations like DSL exist to provide support to this market. More broadly, it also furthers the goal of creating a more inclusive economy in Scotland.

The Result

As a CDFI, DSL is committed to investing in micro, small and medium enterprises. As a not-for-profit organisation, any surplus generated is used to provide further lending support to communities throughout Scotland.

Since 2000, DSL has provided more than £33 million of loan funding to create and maintain 7,462 jobs in 1,745 SMEs in Scotland. On average every £4,482 invested has created or maintained one job. Conversely, the UK government spent around £6,000 to save a job with their Coronavirus Job Retention Scheme that took place at the height of the COVID-19 pandemic in 2020/2021.

Through its network of loan officers across Scotland, DSL continues to provide loan funding and its success demonstrates the real need for micro, small and medium enterprise funding across the country to individuals and businesses that mainstream lenders don’t reach.

Mateusz Noniewicz, Planet Kuku commented “We applied for the loan after we learned that we had outgrown our shared kitchen and would no longer have access to it in 2020. The funding from DSL couldn’t have come at a better time, it created an incredible opportunity for us.

Our new premises has capacity for us to increase production from 40 Kukus per day to 160 and is also providing us with the opportunity to work towards achieving a SALSA (Safe and Local Supplier Approval) accreditation. Not only will this funding allow us to move into our very own rented space, but we will finally be able to meet demand for our product and accommodate for customers seeking much larger orders.”

For further information on DSL, visit www.dsl-businessfinance.co.uk



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