The FSE Group has launched a new loan fund, backed by Big Society Capital, which will provide unsecured flexibly structured loans of between £200,000 and £1m to regulated social sector organisations to support their expansion strategies.

Speaking to civilsociety.co.uk, Jeff Dober, head of debt funds at the FSE Group, said that the loans will be priced at a premium to to asset-backed or traditional bank lending to reflect the risk the Group will be taking.

“We are taking a risk and going further than conventional banks will do. We are looking to fill a gap in the part of the social sector which struggles to get funding which is not covered by tangible assets.”

Dober says rates of return will be settled on a bespoke basis for each transaction and the loans would be flexible, meaning, in some cases, it would not be a straightfoward loan with monthly pay backs. 

"We can be creative, for example, offer repayment holidays," he said. "Or an organisation would not have to pay back the same amount each month."

Last year, a report found the social investment market had grown by 22 per cent in a year to £202m, but secured loans made up 90 per cent of the market by value. In contrast unsecured lending almost halved in value since 2010/11 from 11 per cent to 5 per cent of the market this year (just over £10m).

The loans from the FSE Group will be considered for capacity-building and expansion initiatives such as investment in marketing, product development, geographic rollout, deposits for strategic asset purchases and more generally to enable organisations to increase their scale of impact and financial resilience.

Eligible organisations will have to have some kind of social regulation, such as charities or community interest companies.

Big Society Capital has invested £10m. The FSE Group is currently in talks with other investors. 

The fund will be available UK-wide.