A low credit score should not stop someone from getting a loan to start a business, a community lending charity founder has said. Karen Davies, who founded Purple Shoots to provide credit for people turned away by mainstream lenders, said banks were "missing out a big talent pool". Tiffany Bramley, whose bank rejected her request for a loan to re-start her business after her daughter died, said banks "tend to just label people and that needs to change". UK Finance, which represents the financial services sector, said the banking and finance industry was "on course to provide over £60bn" in finance for small businesses in the UK this year. Ms Bramley was running her business in the south of England in 2014 when tragedy struck. Complications with her pregnancy meant she had to have an emergency Caesarean at 32 weeks and her baby, Tianie, died. "It was like walking through hell," said Ms Bramley, who then moved to Cardiff to be nearer to friends and family. Dealing with the grief of losing Tianie, and organising the funeral, meant that Ms Bramley missed a few payments on her financial commitments which affected her credit rating. But Ms Bramley was determined to re-start her business. "It's like a firework that goes up and just scatters - that's how my life had just exploded," she said. "I needed to restart the business to feel like I had some control over my life again." Ms Bramley was rejected by her bank when she applied for a small loan, even though they were "sympathetic". "They tend to just label people and that needs to change," she said. The bank instead suggested she contact Purple Shoots. "That's when I met Karen," she said. "She was the one who gave me that hope and believed in me." Ms Bramley borrowed £3,000 to re-start Tiff's Cleaning Angels in Cardiff and has successfully paid off the loan. Since it began 12 years ago, Purple Shoots has supported nearly 1,000 new businesses with loans of up to £5,000. In the year 2023-24 the charity gave 69 loans creating 104 new jobs, often in deprived communities. "We're looking at the person and what they're like," said Mrs Davies. "And we're looking at the business plan and whether it's going to be viable." She accepts the approach is high risk because her clients are "starting with absolutely nothing but our loan". "So if something goes wrong it will impact their ability to repay," she added. More than half of Purple Shoots' borrowers will be behind on their loan payments at some point, said Mrs Davies, "and we always accommodate that because we want them to succeed". "But the actual failures are much lower" at around 20%, she added. Mrs Davies said the effects could be "transformative". "People who've been struggling on benefits can create an income", start paying tax and benefiting the economy, she added. Sam Rex-Edwards, from Finance Innovation Lab, a charity which campaigns for reform of the financial system, said she wanted to see mainstream lenders make affordable lending more accessible to those with low credit scores. She was calling for a "fair banking" law that would place obligations on banks and other lenders to offer more support to those who struggle to get credit at the moment. "Too many people are having to pay a poverty premium through using high-cost credit like payday loans," she said. "And too many small and medium-sized businesses can't flourish because they're also refused credit from High Street banks." There was some government backed support for small businesses from the British Business Bank and the Welsh Development Bank which both offer micro-loans for business start-ups. The British Business Bank said it had provided "5,165 loans worth over £53m to start ups in Wales since 2012". A UK Finance spokesperson said: "Last year we saw an increase in the amount of lending to small and medium enterprises in Wales, as well as more loan applications being approved. "Banks also support other organisations, like non-bank lenders and charities, which help businesses that find it challenging to access mainstream finance. "We are also working with government, regulators and business groups to help even more businesses access the finance they need to grow."
Banks urged not to 'label' people with low credit scores
TruthLens AI Suggested Headline:
"Community Leaders Call for Change in Lending Practices for Low Credit Score Borrowers"
Bbc News
7.2
TruthLens AI Summary
Karen Davies, the founder of Purple Shoots, a community lending charity, advocates for a change in the banking industry's approach towards individuals with low credit scores. She argues that these individuals should not be automatically denied loans for starting a business, as this practice excludes a significant pool of potential talent. One poignant example comes from Tiffany Bramley, who faced rejection from her bank when she sought a loan to restart her business following the tragic loss of her daughter. Despite the bank's sympathy, Bramley felt that their tendency to label applicants based on credit scores hindered her chances of receiving the support she needed. After being directed to Purple Shoots, she received a £3,000 loan, which allowed her to successfully relaunch her cleaning business, highlighting the transformative impact that tailored financial support can have on individuals in similar situations.
Purple Shoots has made a notable impact since its inception 12 years ago, providing nearly 1,000 loans of up to £5,000 to aspiring entrepreneurs, particularly in underprivileged communities. In the current financial year, the charity has facilitated 69 loans, creating over 100 new jobs. Davies emphasizes the importance of evaluating applicants not solely on credit scores but on their character and business viability, accepting the inherent risks involved in lending to those starting from scratch. The charity accommodates borrowers who may fall behind on repayments, with a failure rate of around 20%, which Davies considers manageable given the broader context of their mission. Advocates like Sam Rex-Edwards from Finance Innovation Lab call for reforms in the financial system to ensure mainstream lenders provide accessible, affordable credit options to those with low credit scores. She highlights the detrimental effects of high-cost loans on individuals and businesses, advocating for a fair banking law that would ensure better support for those struggling to secure financing.
TruthLens AI Analysis
The article highlights the challenges faced by individuals with low credit scores in accessing loans, particularly for business ventures. It brings to light personal stories that illustrate systemic issues within traditional banking practices, emphasizing the need for a more inclusive approach to lending. The narrative serves to advocate for change in how banks evaluate potential borrowers, especially those who have experienced significant life challenges.
Raising Awareness of Financial Inequality
The main intention behind this report appears to be raising awareness about the difficulties faced by individuals with low credit scores, particularly in the context of starting or restarting a business. It emphasizes that banks may overlook a rich talent pool when they rigidly apply credit score criteria without considering personal circumstances. The founder of Purple Shoots, Karen Davies, and the personal story of Tiffany Bramley effectively highlight these issues, suggesting that a more compassionate lending approach could foster entrepreneurial spirit among those facing financial barriers.
Shifting Perceptions in Banking
The article aims to shift the perception of individuals with low credit scores from being labeled as risky to being seen as potential assets to the economy. It suggests that banks should not only provide loans based on credit scores but also take into account the life stories and challenges that have led to those scores. This perspective is supported by the success stories of individuals like Ms. Bramley, who, with the right support, can contribute positively to their communities.
Potential Concealment of Broader Issues
While the article advocates for a more inclusive approach to lending, it may also obscure broader systemic issues within the financial industry, such as the inherent risks associated with lending to individuals with poor credit histories. The focus on personal stories might divert attention from the financial institutions' challenges in balancing risk management with social responsibility.
Assessment of Credibility
The article appears credible as it features real-life accounts and quotes from individuals directly affected by these issues. It also references UK Finance, which adds an authoritative voice to the discussion. However, the persuasive nature of the narrative, focusing on emotional appeal, does suggest a level of bias towards advocating for change in banking practices.
Public Sentiment and Economic Implications
The sentiments expressed in the article could foster greater public support for initiatives aimed at improving access to credit for underserved populations. If banks were to adopt more flexible lending policies, it could lead to increased entrepreneurship, potentially boosting local economies. However, there are inherent risks that could affect the financial stability of lending institutions.
Target Audience
This news piece is likely to resonate with individuals and communities that have faced financial hardships, as well as advocacy groups pushing for financial reform. It seeks to engage readers who are sympathetic to the struggles of those with low credit scores and who believe in social equity in financial services.
Market Reactions
The implications of such narratives could influence investor sentiment in financial sectors, particularly among banks that may be perceived as resistant to change. Stocks of financial institutions that embrace more inclusive lending practices could potentially see favorable reactions, while those maintaining stringent lending criteria might face criticism.
Global Context and Current Relevance
In a broader context, the article touches on ongoing discussions about economic equity and access to finance, which are pertinent in today's world where many are advocating for systemic change. The emotional narratives align with current trends in social justice and economic reform, making the article relevant in contemporary discourse.
Use of AI in News Production
There is no explicit indication that AI was used in the creation of this article. However, the structured storytelling and focus on personal narratives are techniques that AI models could potentially help refine. If AI were employed, it might have shaped the article's tone to evoke empathy and urgency.
Manipulative Elements
While the article itself is primarily informative, the emphasis on emotional storytelling could be seen as a form of manipulation if it does not equally address the risks involved in lending to high-risk individuals. This focus on personal narratives without a balanced view of potential financial implications might skew public perception.
This analysis indicates that the article, while advocating for important changes in banking practices, may also simplify complex issues regarding credit assessment and lending risks. Nonetheless, it effectively highlights the need for a more compassionate and inclusive approach to financial services.