Stopped in their tracks

Feb 19 2009 by Andrew Mernin, The Journal

A PROMISING online start-up has been forced to put its launch date back six months after semi-nationalised bank RBS turned down its bid for funding for the second time in less than a year.

Directors behind Newcastle’s Urban Digger said they are appalled at the lack of support from the bank, which this month announced plans to invest £3bn in loans for small businesses as part of the Government’s drive to boost the SME sector.

Urban Digger, which will provide online information about European cities with a social networking facility, had been due to launch last November, and says it had agreed a loan with RBS for the final piece of investment it needed to enter the market.

However, the company says it was given "no reasons" after RBS withdrew its offer of a loan, and was told to come back when it had more investors on board.

The firm then secured more backing from David Shiel – managing director of Jesmond-based Explain Market Research – who invested his own money in the company and became a director.

Mr Shiel and Urban Digger’s young entrepreneurial founders Sarah Taylor and Chris Gifford approached RBS again this year for the final £50,000 it needed, but say they were "categorically dismissed within 24 hours", again with no reasons given.

Mr Shiel said he was appalled by RBS’s reluctance to support a company which he believes will ultimately create jobs and add value to the North East economy.

He said: "It’s absolutely appalling that small businesses can’t get funding. I have bought a majority share in the company and I’m furious that those two people have a great business idea but can’t get the funding they need.

"We are finding it incredibly difficult to get finance and it’s a company that is going to create jobs c and a company of the future. RBS is 70% owned by the taxpayer and we are extremely concerned that the bank isn’t lending to SMEs."

The company now hopes to launch by May and is confident that talks with HSBC alongside two other potential backers will finally result in the funding it needs in addition to the £100,000 which has been invested in the business so far.

Ms Taylor said: "What RBS is marketing to the world is totally different to the reality. They pulled the plug on agreed funding and told us to go away and come back when we had brought in new investors. We came back and were just dismissed – and this was dealing with people right at the top.

"The whole point of Urban Digger is that we will promote tourism here and abroad, helping to build the economy back up, as well as employing more people.

An RBS spokeswoman said: "Each case is viewed on its own merit and a detailed assessment is made on the viability of each business proposition to ensure that companies taking on debt have the ability to repay.

"We are determined to support SME customers that need our help, but this has to be on a viable commercial basis.

"It is in no-one’s interest to advance lending to a company that cannot afford to repay"

Earlier this month, RBS unveiled a £250m funding package for North East SMEs as part of its wider £3bn national package to back business through the recession.

Meanwhile, small business leaders this week called for a renewed effort to free up credit for North East companies after research showed the Government’s £1bn loan scheme was not working.

A report found that only £12m of funding had resulted from the scheme nationwide – a fact which the Federation of Small Businesses (FSB) said proves that the scheme is not working.

A survey by the FSB this week said that only 8% of small businesses were finding that their banks were making lending available to them under new guarantee arrangements made by the Government.

Around 68% of RBS is now owned by taxpayers after it was given £20bn in state support following a year of financial turmoil resulting in heavy losses.

Urban Digger, which has been supported by Business Link and the Arts Council, aims to become a constantly-updated online travel guide similar to Lonely Planet, with the social networking capability of Facebook.