Things to think about

While social sector finance differs from traditional finance in that it expects (or supports) delivery of social impact, the core things to think about are the same

For loan funding, you will need to consider:

  • Whether the loan is affordable – can you meet the interest and capital repayments when they fall due?
  • What, if any, security you need to provide
  • What other terms and conditions are attached to the loan – more detail is set out here.

On top of normal considerations, social sector finance organisations will also need to be clear whether they meet the eligibility criteria for funding and finance, in particular, whether they have the appropriate legal structure and deliver the impact an investor is seeking.

For example, some social sector finance may be available only to charities while others will be open to a range of enterprises that deliver social impact. Other funds may be focused on a certain geographic location or sector.

Most social finance providers also require you to have a legal structure that to a greater or lesser extent ‘locks in’ how the organisation’s finances must be used to further its mission (which usually means a registered charity, a  community interest company or an asset-locked or charitable community benefit society).

The other key area to consider is to fully understand and be able to demonstrate and report on what impact your project or organisation makes – and to ensure that this fits with the impact an investor wants to see delivered. 

For example, finance may be targeted at projects that deliver on mental or physical wellbeing outcomes or have a benefit to the wider community. Your organisation will need to be able to monitor and evaluate what you are doing and the impact this has.

All these things combine to mean your organisation needs to be ‘investment ready’ before it takes on finance – in particular, having a robust business plan in place and the capability and capacity to deliver on it.

Social investment market

The social investment market infrastructure is being developed and supported by a number of key organisations including:

  • Big Society Capital (BSC)
    BSC has been set up to support the social investment market both as a champion and investor. As a champion, its aim is to help increase awareness of, and confidence in, social investment. As an investor, its aim is to provide capital to social investment finance intermediaries that in turn provide appropriate and affordable repayable finance and support to charities and social enterprises.
  • Access – The Foundation for Social Investment
    Access was set up to make it easier for charities and social enterprises in England to access the capital they need to increase their impact. They offer a variety of grants to enable organisations looking at securing social investment to get ‘investment ready’ by doing what they need to do to be more attractive to social investors (such as get the right legal structure, undertake capacity building for their board or get their impact monitoring systems in place).