Loans: Frequently Asked Questions

By Jul 14, 2014

Posted in

We answer your commonly asked questions about borrowing from Charity Bank and how the loans process works.

We lend to charities, social enterprises and other organisations where
their activities are compatible with our values and social purpose.


Q: Do you lend to organisations that are not based in the UK?

A: We lend to charities and other organisations based in the UK which have activities overseas.


Q: Who can borrow from Charity Bank?

A: We lend to charities, social enterprises and other organisations where the loan is being used for a social purpose.

Most commonly our borrowers are:

  • Registered charities
  • Community associations
  • Voluntary organisations
  • Community businesses
  • Social enterprises
  • Social landlords and social housing providers
  • Churches and other faith organisations

Eligible borrowers must also have governing documents (e.g. a constitution or memorandum and articles of association) which give the legal powers to borrow and, if necessary, to pledge assets as security for the loan. Sometimes this is not clear, so you may need to consult your solicitor or the Charity Commission. Unincorporated organisations have an implied power to borrow but will still require a specific power to charge assets. Changing your powers to allow borrowing or the giving of security is usually a relatively straightforward and simple process.


Q: What happens when a loan is approved?

A: When your loan is approved, we will prepare your loan agreement, a formal legal document, which provides details of the terms and conditions of your loan.

Your regional manager will be available to guide you through the documentation and overall process, and answer any questions you may have. Once the paperwork has been completed and the pre-conditions met, you will be able to draw down your loan.


Q: How much will you lend?

A: We can provide loans of up to £3.5 million. Larger loans can be arranged in partnership with other social lenders. We will not generally make loans of less than £50,000. However, in these circumstances we will suggest alternative organisations, which may be able to assist you.


Q: What other costs are there?

A: In addition to the interest rate, Charity Bank charges an arrangement fee to contribute to our administration costs. Typically this is 1% of the loan amount, but may be more for small or more complex loans. Arrangement fees are non-refundable. Once the loan agreement has been issued the borrower will have up to 30 days to accept the terms and, unless otherwise agreed, a further 60 days to start to draw down the loan. After this period, if the loan remains undrawn, a commitment fee will become payable to cover the costs of having loan funds available to be drawn but not utilised by the borrower.

Borrowers are also required to pay for any legal and related expenses incurred (for example security valuation fees or costs associated with taking charges over property). Early repayment penalties are not charged regardless of whether the loan is repaid in whole or in part. The sole exception is when the loan is re-financed through another lender in the first five years in which case a fee will be charged. The borrower may cancel its loan at any time without charge but any arrangement fee paid will not be refunded.


Q: How are loans repaid?

A: The majority of our borrowers are required to pay capital and interest repayments on their loan by monthly direct debit. Depending on the specific circumstances, interest-only repayments or a single repayment may be agreed.


Q: Do you require security?

A: Charity Bank seeks to take security where available. This can take the form of a fixed charge over property assets or investments or a mortgage debenture over the assets and undertakings of the borrower. Where there are no material assets available for security, we can consider lending on an unsecured basis with loans to be repaid within five years. Charity Bank does not seek personal guarantees from trustees or directors other than in exceptional circumstances.


Q: Do you have another question for us?

A: We would love to hear from you. Email us or call our loans team on 01732 441919 and we will be happy to get back to you with a response.