Carolyn Sims, head of banking at Charity Bank, provides answers to some popular questions on loan finance.

The first thing you need to do when considering different types of finance is to ask questions and make sure you understand your options.

Borrowing carries certain risks and you should be aware of what these are when you start thinking about a loan. Here are some quick-fire answers to some frequently asked questions to help guide you through the terrain of loan finance.

What are the key things to think about before you apply for a loan?

Some areas you will need to think about in order to make a successful loan application:

• Your aims – what will you use the loan for?
• Your activities – can you show you’re delivering social good?
• Your governance – who is running the charity, how long has the team been there, and does it have the right skills?
• Your income – do you have diverse income streams and are you generating surpluses?
• Your business plan – how do you aim to sustain and/or grow your organisation over the coming years?

What do charities and social enterprises use loans for?

Loans can be used to:

• Buy property, community assets and development sites
• Develop buildings or property to be used by communities
• Refurbish existing property
• Fund new projects or increase the reach of an existing one
• Support running costs during the time it takes for a grant or other funding to arrive (bridge finance)
• Fund day-to-day operations (working capital)

Can you give some examples of how other charities are using loans?

YMCA Birmingham used a Charity Bank loan to help build a block of apartments with training facilities. Our loan was part of a mix of funding which included a Homes and Communities Agency grant to support the project.

Emmaus Glasgow used two Charity Bank loans, one loan to support its running costs as it waited for a grant (bridge finance) and another loan to help fund day-to-day operations (working capital).

Heron Corn Mill received a grant from Heritage Lottery Fund (HLF) because it had a loan from Charity Bank. It borrowed to fund its trading activities and to finance a project to generate its own hydro-electricity. It was able to demonstrate that these activities would cut costs and generate a sustainable income, so the HLF agreed to provide a refurbishment grant.

Why borrow from Charity Bank?

Your choice of your lender matters. Charity Bank exists to lend to charities and social enterprises, so you can be confident that Charity Bank’s team will understand what you are trying to achieve.

• We’re a social enterprise that exists to help social sector organisations to access loans.
• We’re not profit-driven and have charitable objects ourselves.
• We have approved over £200m worth of loans to charities and social enterprises.
• 100 per cent of our borrowers would recommend us (out of 68 organisations that responded to our 2014 borrower survey).

Call Charity Bank’s loans team on 01732 774050 or visit www.charitybank.org/charity-loans for more information, to discuss the suitability of loan finance for your organisation or to apply for a loan.

Carolyn Sims is head of banking for Charity Bank. She is also a trustee of a number of charities and sits on a regeneration advisory board.

The Charity Bank Limited, 182 High Street, Tonbridge, Kent. TN9 1BE. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority No. 207701. Company registered in England and Wales No. 4330018.

With thanks to Charity Bank for their support for this blog.

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