Community Development Finance Institutions (CDFIs)
CDFIs are independent organisations which provide finance and related support to businesses in disadvantaged areas, financially excluded individuals and social enterprises/third sector organisations unable to access mainstream finance.
Community Investment Tax Relief (CITR)
The CITR scheme encourages investment in disadvantaged communities by giving tax relief to investors who back businesses and other enterprises in less advantaged areas by investing in accredited community development finance institutions (CDFIs). The tax relief is available to individuals and companies, and is worth up to 25% of the value of the investment in the CDFI. The relief is spread over five years, starting with the year in which the investment is made.
The deployment ratio measures the percentage of total funds that are being deployed by the CDFI in lending and investments, or commitments to lend or invest. This ratio can vary and is enormously affected by large repayment, recent injections of capital and the age of the CDFI.
Enterprise Finance Guarantee scheme (EFG)
An interim government-guaranteed lending scheme, replacing the Small Firms Loan Guarantee. It is intended to help smaller businesses who may be struggling to secure finance by facilitating bank loans of between £1,000 and £1 million. The scheme aims to help credit-worthy companies which might otherwise not be able to access the finance they need for working capital or investment finance due to the current tight lending conditions.
Equity investment is medium to long-term finance provided by an investor in return for taking shares in a company. When made by an investment fund, this type of investment is also called venture capital. Financial returns are made by selling the shares for a greater value after some years of investment. One CDFI currently provides this type of finance with a community development focus by focusing on deprived areas or communities.
This includes temporary borrowing to provide needed funds between the termination of one loan and the beginning of permanent financing. Gap financing also includes stop gap funding to cover cash flow problems and seasonal fluctuations in income.
Home improvement loans
A consumer loan taken out to finance alterations, remodelling, or structural renovations to an existing dwelling. These loans are generally short-term, but may be for longer periods.
The Phoenix Fund
Officially launched by the then Department of Trade and Industry in 2000, the Phoenix fund was designed to stimulate enterprise in the UKs most disadvantaged regions. Between 2000 and 2006 the fund invested over £42 million into the CDFI sector. A further £11 million has been invested in CDFIs to varying degrees by the nine regional development agencies. The Phoenix Fund was formally terminated in 2008.
Portfolio at Risk (PAR)
The principal balance of loans outstanding that have one or more instalments of principal past due by one or more days as indication for quality of the portfolio. The PAR can also be determined for loans over 30 days overdue. The portfolio at risk ratio reflects the true risk of a delinquency problem because it considers the full amount of the loans at risk.
Investment in an organisation that is focused on a social return, rather than a financial return.
The creditor has a claim on some particular part of the debtor’s assets in the event of default. This is contrasted with an unsecured loan, where the lender has no right to take over any particular asset if payments are not made when due.
Small Firms Loan Guarantee (SFLG) scheme
Now no longer in operation and replaced by the Enterprise Finance Guarantee scheme in January 2009. The SFLG scheme was a government guaranteed lending scheme intended to help smaller businesses who may be struggling to secure finance by facilitating bank loans of between £5,000 and £250,000.
Working capital includes the accessible resources needed to support the day-to-day operations of an organisation. Working capital is commonly in the form of cash and short-term assets.
Unpaid payments of principal which have been written off as bad debts by a lender. This figure is generally reported at the end of year net of any recoveries from bad debts in the previous year.