Why the New Enterprise Allowance will turn jobseekers into start-ups
Chief executive of Youth Business International Andrew Devenport, the charity behind Global Entrepreneurship Week in 10 countries on the importance of the loan scheme
The news last month that the government is set to extend the New Enterprise Allowance (NEA) scheme has been received with interest by us at Youth Business International (YBI).
As a global network of charities devoted to helping young people start their own businesses, you’d expect ears to prick up at the news of anything that helps entrepreneurs. But, more specifically, we’ve seen the finance and mentoring model the NEA uses at work when it comes to setting up new businesses, and we know how successful it can be.
What does the NEA scheme offer?
There are two main areas of support offered by the NEA scheme, which has now been extended to potentially help another 33,000 jobseekers start their own business.
Firstly, financial support – a weekly allowance payable for up to 26 weeks, and the potential to apply for an unsecured loan of up to £1,000 to help with start-up costs. Secondly, and crucially, access to a mentor to help develop a business plan.
For us, this is a model that really works to break down barriers to entrepreneurship. Many ideas flounder before they even get to start-up stage for the want of surprisingly small sums of money, with young people in particular struggling to attract investment. It’s a global, rather than just a UK problem, and something that Youth Business International’s network seeks to address around the world.
For example, the winner of our recent YBI Entrepreneur of the Year competition, which we run in partnership with Barclays, China-based Naibo Yu, 27, runs an educational software company turning over $20m a year and employing 200 people. Yet he couldn’t get the start-up funding he needed from banks, investors or government, as he had no income or assets – only an idea.
Youth Business China providing him with a $5,000 loan for research and development made all the difference, and has helped create an innovative, fast-growing new business.
The value of mentoring
But the real wins come when you can overcome the barrier of start-up funding at the same time as offering start-up knowledge. Every start-up we work with around the world is also given access to a mentor – with 37% of the young people that we work with actually viewing their mentor as more important to them than their initial loan.
With there being so many potential pitfalls out there for new businesses, having someone who can help them develop and implement a business plan can often be the difference between success and failure.
For example, our winner of this year’s Mentor of the Year Award, Viswanathan Lakshmanaswamy from India, has over 50 years of business experience he shares with his mentees, helping them analyse problems, develop their business planning and thinking, and even accompanying them to meetings with banks and investors.
Of course, there’s no ‘magic bullet’ for creating start-up success – businesses will still fail, and entrepreneurship will never be the ideal career for everyone. But schemes that marry funding and mentoring, like the NEA and the work we do around the world, should help create more business success, for even more people.
Andrew Devenport is chief executive of Youth Business International, a global network of non-profit initiatives helping young people to start and grow their own businesses and create employment.