Carolyn Sims, head of banking at Charity Bank, provides answers to some popular questions on loan finance.
Can charities and loans be a good match? We think so, without claiming that loans will work for all charities. In surveys we carried out in 2012 and 2014, 95% of our borrowers told us that their loan had helped them towards achieving their social mission. When considering a loan it’s always important to ask questions. These are four of the questions we hear most often and, we hope, four answers that will help guide you through the terrain of loan finance.
What are the key things to think about before you apply for a loan?
Some areas you will need to think about in order to make a successful loan application include
- your aims – what will you use the loan for?
- your activities – can you show you’re delivering social good?
- your governance – who is running the charity, how long has the team been there, and does it have the right skills?
- your income – do you have diverse income streams and are you generating surpluses?
- your business plan – how do you aim to sustain and/or grow your organisation over the coming years?
What do charities and social enterprises use loans for?
Charitable organisations use loans for a number of purposes including
- buying property, community assets and development sites
- developing buildings or property to be used by communities
- refurbishing existing property
- funding new projects or increase the reach of an existing one
- supporting running costs during the time it takes for a grant or other funding to arrive (bridge finance)
- funding day-to-day operations (working capital)
Can you give some examples of how charities and social enterprises are using loans?
Our borrowers can give diverse examples of how charities are using loans. Here are three:
Growth: Tim Morfin, chief executive, TLG, The Education Charity
When we started, our organisation was a small community centre. We used seven Charity Bank loans over 13 years to provide accommodation, sport and music facilities to young people. Today we have 11 education centres that give young people a second chance for an education, and 39 early intervention centres across the UK that provide extra support to children at school.
Ambition: Ann Harding, co-founding director, Settle Hydro
We used three loans from Charity Bank to achieve our vision and today I can proudly say that we are the first community-funded hydro-electric project in Settle. We produce enough electricity to power 50 homes. Not only that, the hydro has attracted many visitors to the town, bolstering business for local B&Bs, pubs and restaurants.
Impact: Tessa Stickler, general manager, Folkestone Sports Centre
When we needed to bring our centre up to date, Charity Bank saw our potential and gave its full support for a major regeneration of a 45-year old building. The Charity bank loan also enabled us to attract further funding, which meant we could pay for the next phase of our plans. As a result, in addition to increasing the services we offer to the community - in particular those with learning and physical disabilities - we now host local, national and international sports events.
Why borrow from Charity Bank?
Charity Bank exists to lend to charities and social enterprises; our mission is to support your mission. Here are few more things you might be interested to know:
- we’re a social enterprise, the only bank with the Social Enterprise Mark, and we exist to help social sector organisations access loans.
- we’re not profit-driven and have charitable objectives.
- we have been lending to charities and social enterprises for over a decade and have approved over £200m worth of loans to small and large organisations with charitable goals.
- 100 per cent of our borrowers would recommend us (out of 68 organisations that responded to our 2014 borrower survey).