Music industry body the Association of Independent Music (AIM) is launching a new personal loans scheme that could help British indie labels and startups alike get their businesses off the ground.
The AIM Start Up Loans initiative will be unveiled at an event in London later today, and will see AIM become the first music industry organisation to partner with the government's Start Up Loans scheme, which has so far lent more than £76m to businesses in the UK.
AIM will assess applications from people running independent music companies for personal loans of up to £25k to be used for their businesses, with multiple founders able to each apply to the scheme, which will kick off at the end of March.
The interest rate for the loans will be fixed at 6%, with AIM also providing training, networking events and mentors from within its community of more than 800 labels. Only companies that have been trading for less than one year will be eligible for the initiative.
"Everyone knows that small companies have difficulties accessing finance, but music companies have very particular problems. Subjectivity pervades decision-making when it comes to music: issues like the nature of intellectual property in the balance sheet make it impossible for traditional bankers to evaluate these companies," AIM's chief executive Alison Wenham told The Guardian.
"We are the first significant organisation in the music industry to be appointed as a delivery partner to the Start Up Loans company, which is a really well-thought-through initiative. And we understand our companies better than anybody else."
Ultimately, AIM plans to open up the initiative beyond music to startups in other creative industries such as film and games, which Wenham says suffer from similar difficulties persuading banks to lend.
"We're going to be servicing the creative industries," she said, adding that music technology startups may also be eligible to apply for the loans. Even for pure independent labels planning to apply, technology issues are likely to be a key factor in their business plans, with Wenham saying that digital disruption is proving to be an opportunity for indie labels.
"In digital, the costs of setting up and going into the market are considerably less, and considerably less risky: there is no stock sitting around, and no distributors that might not pay you. Once you get three or four bands and position them correctly, you don't need much money to get them going and be innovative in the digital space," she said.
"Digital becomes a very reliable global income stream, once music is on the platforms, motoring away. And labels can be far more imaginative and innovative with digital engagement, feeling that they're not completely clueless about where their bands' fanbases are. You can become more sure-footed, and won't suddenly implode because you make a single mistake."
Wenham stressed that the initiative is about more than simply doling out money. AIM's mentors – drawn from established, successful independent music firms – will hold quarterly business meetings with the loanees, while AIM will provide training for areas including budgeting and further grant applications.
"It's massively confidence-building when you know you're in a big community of people who not only share a solid common denominator with you – independence – but they also care about you and want you to succeed," she said.
"They believe in the diversity and benefits that small companies growing up bring to the whole industry. Successful independent companies don't believe in pulling up the ladder behind them and kicking new market entrants down the cliff."
AIM hopes that the Start Up Loans scheme will build on the independent sector's growth in recent years, including the global success of indie-signed artists like Adele and Arctic Monkeys.
"Last year, the independents had their best year for 10 years. The market is open," she said. "The independent sector has always been agile, pragmatic, adventurous and smart, and very close to the ground on A&R. In 2014, those are the ingredients for success if ever I heard them."
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