A Chief Executive’s Perspective: simplifying finances with a loan

Through its own social enterprises, which operate in Birmingham and throughout the West Midlands, it provides work opportunities with wraparound support services to act as a stepping stone towards the mainstream working world.

In 2018, the charity decided to streamline its finances. It took out a loan of £700,000 with Charity Bank in order to consolidate its existing loan finance.

Chief Executive Richard Beard tells us about their decision to take out a loan and how it has helped strengthen their financial position.

Why did you decide to take out loan finance?

We went through a period of restructuring a couple of years ago where we refocused some of our operations to make sure our social enterprises were having the most effective impact both socially and economically. As part of this process, we decided it was necessary for us to look at and rationalise our finances as well. At that point, we had a bit of a potpourri of investors and wanted to consolidate repayments and improve our cash flow.

Did you have any concerns about taking out the loan?

We’ve taken out repayable finance for most of our social enterprises so we weren’t particularly fazed by it. We also had clear drivers for taking out the loan that made business sense. As well as greatly simplifying our finances, there were also cost benefits. The various loans all had different interest rates, a lot of which were no longer competitive.

Has the loan helped to strengthen your organisation as you had hoped?

Yes, taking out this loan has saved us money on interest repayments and freed up working capital. Especially in the current climate with the uncertainty of the next 4-6 months due to the coronavirus outbreak, it feels very timely that we’ve done this. We’ve got the right, most affordable finance in place and that puts us in the best possible position to deal with any challenges that may be coming up.

How did you find the process of applying for the loan?

I’d say it was relatively painless. There’s a lot of due diligence and complicated spreadsheets, but that is normal and necessary when taking out a loan.

Was there anything you wish you had known at the start of your loan journey?

How much higher the legal expenses would end up being than we were anticipating. There were quite a lot of charges that needed unravelling because of changing investors, and some other fees we hadn’t been expecting.

What advice would you give to other charities who are thinking of taking out a loan?

Look at lenders who really value the social impact you’re delivering. A lot of traditional lenders are only focused on one thing: maximum returns. So working with a social investor that’s aligned with your values and goals is really important.

And be realistic about timescales. Don’t leave it until the last minute, as the process can take some time.

What would you say to charities that view loan finance as too risky?

Don’t be afraid of it would be my main message. Charities can often be of a grant mindset and that can sometimes mean missing out on opportunities. As long as you’ve got a sound business plan and can see that you have the ability to repay the finance, then taking moderate, calculated risk can really help fund your growth.

How did you find working with Charity Bank?

Charity Bank really gets our organisation and what we’re trying to do. They’re very aligned in terms of values and also are just really nice people to work with. The positive approach of the individuals involved was really great.

Also, a lot of the initial stages were done around the table through dialogue and discussion. This isn’t always the case when applying for loans but it really helped minimise the back-and-forths and meant we didn’t need to produce a War and Peace amount of initial paperwork.

Do you think it’s important for charities and social enterprises to be able to access social investment?

It’s absolutely crucial. Social lenders understand your values and also value what you’re doing. Whereas mainstream banks are only really interested in lowest risks and maximum returns, social investors are there for completely different reasons.

The views on this page are those of Richard Beard.