'Unsuitable' applications hinder social enterprise loan success with CDFIs

Finance | Vibeka Mair | 4 Dec 2009

Over 70 per cent of social enterprises failed to get a loan from community development finance institutions (CDFIs) in 2009, according to the Community Development Finance Association's report Inside Out: Weathering the Storm.

The report charts this year’s performance and outputs of CDFIs – organisations which lend to those who cannot access finance from traditional sources.

It shows only 29 per cent of loan applications from social enterprises were successful, slightly down from 2008 where a mere 31 per cent of applications resulted in a loan.

The report said the consistently and relatively low conversion rate for social enterprise loans was due more to an excess of unsuitable applications rather than lack of CDFI capacity, where, it said, supply of funding for investment-ready projects is understood to be relatively ample.

Conversely, the amount lent by CDFIs to social enterprises was up a massive 72 per cent this year from £55.2m in 2008 to £72.5m in 2009. On average a social enterprise was loaned £78,796.

Nearly half of the loans (48 per cent) were lent for a building purchase, followed by 20 per cent of loans being used for building renovation.

Some 63 of CDFAs 68 members took part in the survey, including Charity Bank and Triodos Bank.

Overall those quizzed lent £113m this year, up more than 50 per cent from £76m in 2008. Their loan fund assets rose from £585m in 2008 to £781m this year.

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