“If we hadn’t refinanced, our loan repayments would have increased”

Benita Lapthorn, Company Secretary at Keswick Community Housing Trust, shares her experience of refinancing with Charity Bank.

Why is there such a need for Keswick Community Housing Trust?

Keswick is a beautiful part of the Lake District. Unfortunately, that means that when properties come up for sale, they often go to buyers who use them as holiday lets or second homes.

People who were born and bred here, but who don’t qualify for social housing, are having to move away from their friends and family because they can’t afford to buy or rent in Keswick.

Keswick Community Housing Trust was set up to address that problem. Our properties are sold on a 50% shared ownership basis or let out at an affordable rent. And all have local occupancy clauses.

What did you use your Charity Bank loan for?

We refinanced our third development – Calvert Way – and part-refinanced our fourth one – Southey Court.

Why did you want to refinance?

We had loans with two providers. The rapid increases to the base rate meant that our repayments had increased by about 35%. If we hadn’t received improved margins from our existing lenders, they’d have increased by 47% by now.

We were in a fairly comfortable financial position – we’re volunteer-led so don’t have staff costs; our tenants are very happy, so we don’t have empty properties; and the properties are new, so they don’t have high maintenance costs. But with the increase in rates, our operating surplus had been reduced from £41,000 to just £15,000.

We chatted to several lenders about refinancing, and it became clear that the rates we were paying reflected the higher risk of when our developments were first being built, rather than our current situation. We spoke to our existing lenders about that and they did agree to reduce our rates, but Charity Bank’s rate was still lower.

What other things did you consider when you were looking for a new lender?

There was a lot to consider. Some lenders were offering fixed rates. Others were offering rates linked to the base rate. One of our existing lenders required us to have revaluations every five years, which weren’t cheap. Some lenders had a maximum term for new lending of 20 years, and others had 25 years. We were also looking at who would be good partners for us going forward, because we want to do more developments.

How did you find the process of refinancing with Charity Bank?

It was easier than getting previous loans. With Charity Bank, it felt like more of a conversation. Denise Hignett came to see us and visited all the developments. She asked questions, used the answers to write up a case and draw up the loan documentation, and then we went through it all to make sure everything was correct.

There was a lot of back and forth while we decided exactly how much we wanted to borrow and what debt we wanted to pay off with the money, but Denise and the rest of the Charity Bank team were fabulous. They were pragmatic and open to compromise. If they asked for something and we queried it, we could have a conversation and work it out. For example, they agreed that we didn’t have to do a search on every single property on Calvert Way, as it was going to cost us around £5,000.

Also, they originally asked us for a quarterly balance sheet and P&L statement. We explained we didn’t do anything like that, so they agreed we could just send in our management figures showing our income and expenditure against our budgets.

Denise was open to having those conversations with us and having the discussions with people higher up the chain to work things out.

In the end, refinancing actually helped us to improve our internal processes.

Is all your debt now with Charity Bank?

No. We have a small amount of debt left with our original two lenders. We’ve also been very fortunate in that a local charity has offered to place a sum of money with us on a very favourable interest-only basis. We’ll use it to pay off some of our debt. It’s an unusual situation and Charity Bank could have objected as there are certain restrictions to taking on debt with other providers, but Denise has been great.

What would you say to another housing trust who was thinking about taking out a loan or refinancing?

When you’re in the early stages, you’re very focused on raising money and building homes, but you need to make sure you’ve got your budgets drawn up and reporting processes in place. It takes time to get those structures in place, but they will end up saving you a lot of time in the long run.

Also, don’t be afraid to have open conversations with lenders. If you’ve been offered a better rate, tell the other lenders you’re talking to, as they might be prepared to match it.

Do you think it’s helpful to have a lender who specialises in the social sector?

Absolutely. Charity Bank really understands community land trusts and how they work. They understand that volunteer-led organisations aren’t like normal businesses, and they’re prepared to be flexible and to compromise.

If you need a loan for community housing, please visit Charity Loans For UK Charities & Social Enterprises – Charity Bank