Community transport organisation HCT Group has teamed up with Bridges Ventures to design a new financial instrument for the sector that allows returns to investors to rise or fall in line with the organisation’s revenues and social impact.
The ‘social loan’ as it is dubbed, is being piloted by HCT Group as part of a new £5m financing deal that will comprise a £2m social loan and £3m traditional fixed rate loan.
The transport body wants the funding to grow its business over the next three to five years.
HCT Group has already raised £3m out of the total £5m being sought. Bridges Ventures, lead investor, has invested £1m in the social loan and committed to invest a further £500,000.
The Futurebuilders fund, administered by the Social Investment Business on behalf of the Office of the Third Sector, has invested £1m in the fixed rate loan and £500,000 in the social loan.
Rathbone Greenbank Investments, the Bristol-based fund manager, is expected to invest in the second round and other investors have also expressed interest.
The creation of the ‘social loan’ concept aims to level the playing field for social enterprises which have to compete with private sector companies who, by the nature of their business model, have better access to credit. The social loan aligns returns to investors with growth or falls in the enterprise’s turnover and social outcomes.
David Brinsford, head of investments for the Social Investment Business, described the loan as an excellent example of Futurebuilders providing backing for a social enterprise that “wouldn’t otherwise be able to get investment”.
HCT has turnover of around £20m and employs 500 people from eight sites across London and Yorkshire.