Recently the government has announced the new Enterprise Allowance scheme to support people who have been unemployed for more that 6 months into self employment.
The support is 3 fold
1. A financial package of £2000
2. Business mentors
3. £1000 loan for equipment
What has not been made clear is the amount of cash being made available for the first 6 months of trading. In the past schemes such as test trading offered unemployed people the opportunity to test their business idea by enabling them to stay on their benefit whilst trading.
Details have not been announced how the £2000 will be distributed. Is it is going to be a weekly or monthly payment or is it be
used for training and support With the new Enterprise allowance scheme is has not been made clear if entrepreneurs will sign off their benefits before starting there business.
The other thing which is not clear is if they can go back onto the same benefits if there decide to cease trading. With regards to the £1000 loan for equipment, details have not been announced if there is any interest on the loan and the consequences of not paying the loan back, should the business fail.
One of the biggest barriers to an unemployed person wanting to start up, is how they will support them selves when they first start to trade. As we keep on hearing, the majority of businesses do not make or make a modest profit in the first year of trading. If the cash payments replace their benefits, it could persuade people to come off there benefits and start up in business. £1000 loan – If the loan is a “soft loan” with a low interest rate and no legal penalties for non payment, then it can only be a good thing.
It seams that funding for business start up is decreasing every year and although not a grant, the loan could provide the capital needed for a small business to start up.
Experience business mentors
Having advice from an experienced person can save a business time and money. Often people start up in isolation and don’t have the time, know where to go or who to trust for business advice. A good mentor not only can advise from first hand experience, but could also introduce a new business to valuable contracts.
If the government want to archive their target of getting 10,000 businesses to start up by next year then I feel they need to do a combination of the new Enterprise Allowance scheme and the old Test Trading Scheme. Some people are going to be sceptical about coming off their benefits unless they have a guarantee that the will be able to get back on them and quickly.
The advantage of the Test Trading scheme was if the person did not want to carry on with the business (for what ever reason) the could cease trading and stay on their current benefits. The Government has realised that experience business mentors can have a huge value to a business. I felt the old Test trading Scheme had too many business mentors who had not been in business them selves and were inexperience in business start up and development.
I also feel that too much emphasise is put on teaching people the principles of business, like business plans, marketing, legal structures etc. Instead on focusing on the reasons people do not go into business.
For people with a disability, an holistic approach needs to be taken to address issues, such as,
• Lack of own financial resources (savings, home ownership).
• Poor credit rating after long-term benefit receipt.
• Disinterest / discrimination on the part of banks/business advisers
• Lack of accessible information on sources of grants and loans.
• Fear of losing the security of regular benefit income.
• Lack of information on financial support whilst in business, such as; Working Tax Credit, Test Trading or Permitted Work.
• Lack of access to appropriate training and support.
• Lack of and inaccessible advertising of self employment services.
• Lack of information produced in alternative formats.
• Lack of transport/funding for transport to and from advice centers.
• Inaccessible training centers.
• Training not tailored to individual needs.
This new Enterprise Allowance scheme has the potential to make a real impact in enabling disabled people to start up in business. But until the details of the scheme have been announced the true potential will not be known.
What is stopping you from going into business? Please comment below