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.

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 aim to do this by funding organisations to run grant and support programmes for, or make small loans to, charities and social enterprises. To date, they have funded a number of programmes and have more in the pipeline.
  • Social Investment Business
    The Social Investment Business exists to raise and connect capital to achieve social impact in the UK. They manage feasibility and capacity building grants from a variety of sources that provide loans, grants and other investment products to charities and other social enterprises. An example of the support available from the Social Investment Business is the Big Potential Fund, which provides grants to socially motivated organisations who are looking to raise repayable finance either for the first time (Breakthrough) or a larger amount of over £1m (Advanced). There are specialist providers who can help to assess eligibility and assist with capacity building and capital raising, some of which combine investment expertise and sports development.