Carolyn Sims, banking director at Charity Bank, explains why social organisations should take the time to research and consider different lenders before taking out a loan.

It is understandable that many charities and social organisations feel some trepidation at the idea of taking out a loan at a time when the sector seems to be facing such financial uncertainty. Of course, loans are not always right for every situation and careful consideration of the financial commitment involved should be taken. 

In the right circumstances and from the right lender, however, loans can be a valuable tool for a charity or social enterprise to further its mission and have greater control over its future. 

How a loan can help your organisation 

A loan can empower charities to seize opportunities, extend their reach, unlock other loans or grants, smooth cashflow and improve sustainability.

Folkestone Sports Centre, an inclusive sports and community centre in Kent, is one example of a social organisation that has made use of loans in order to expand its services and reach. 

General manager Tessa Stickler explains how loans from the right lender helped the centre to reach its potential and unlock other financial support: “We spent a long time looking for a lender to support our redevelopment. As a not-for-profit organisation, it can be difficult to find the right lender who understands what you’re trying to do so it’s worth taking the time to ensure the relationship is right. Getting that initial investment also unlocked access to other grants and loans as well so that we could continue to grow.”

Finding the right lender for you

Taking the time to choose a lender that can offer the conditions, support and understanding your organisation needs is really important.
The best way to do this is to ask questions and make sure you’re clear on what is being offered and what will be expected of you:

•  Does the lender understand your loan requirements and what it is you’re trying to achieve?
• Will you receive a dedicated manager or be working with different people for different stages?
• What will the lender expect you to provide before approving a loan?
• What are the conditions precedent for drawing down the loan and are these realistic for your organisation?
• What will happen should you encounter difficulties? How would the lender manage your account?

As well as open discussions with a lender, speaking to other organisations who have received loans and hearing their first-hand experiences can be a helpful way to get a third-party perspective.

Sharing a social mission

As a charity, it is likely that your social impact could be one of your main strengths when applying for a loan. If you can illustrate and provide tangible examples that your organisation is delivering social good, there are certain lenders that will be much more willing to provide you with a loan. 

Some other benefits of working with a social lender is that they are more likely to understand the social sector and how charities operate.

A number of socially motivated banks exist in the UK. One example is Charity Bank, which is owned entirely by charities and social purpose organisations and has a mission to use money for good.

As part of its pledge to do more to support the social sector, Charity Bank has launched its ‘Bank On Us’ campaign to reduce the costs associated with taking on a new loan and refinancing an existing loan. For full details of Charity Bank’s loan offer, visit www.charitybank.org/BankOnUs.  

Carolyn Sims is banking director at Charity Bank. She is also a trustee and in some instances treasurer of a number of charities. 

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