Loans FAQs

Who can borrow from Charity Bank?

Charity Bank is able to provide loan funding to organisations that can demonstrate that they are constituted with social objectives and are non-profit distributing to private individuals. Most commonly our borrowers are: • Registered charities • Community Associations • Voluntary Organisations • Community Businesses • Social Enterprises • Social Landlords • Churches and other faith organisation We can also lend to ‘for profit’ companies if the loan is for exclusively charitable purposes. Eligible borrowers must also have governing documents (e.g. constitution or memorandum and articles of association) which give the legal powers to borrow and, if necessary, to pledge assets as security for the loan. Sometimes this might not be clear, so you may need to consult your solicitor or the Charity Commission. Unincorporated organisations have an implied power to borrow but will still require a specific power to charge assets. Changing your powers to allow borrowing or the giving of security can be a lengthy process so it is best checked at the outset.

Where do you lend?

The Charity Bank can provide loans to organisations based anywhere in the UK. We can also lend to organisations working outside the UK where regulations permit and where additional operational risks can be mitigated.

How much will you lend?

At present the Charity Bank is able to provide loans of up to £2 million, however larger deals can be arranged in partnership with other lenders. In general, we are unable to consider loans of less than £50,000. However, in these circumstances we will endeavour to sign-post you to other organisations that may be able to assist.

Is the interest rate fixed?

Our interest rates are not linked to Base Rate or any other external mechanism. Whilst not technically fixed, we have not yet increased the rate of interest for any borrower and have no plans to do so. Any changes to our interest rates will be subject to 30 days notice. There are clear benefits of providing stable, consistent interest rates for our customers. Above all else, our borrowers are able to more effectively assess whether a loan is affordable into the future without the stress of having to manage variable interest rate risk exposure.

What other costs are there?

In addition to the interest rate, the Charity Bank makes a one-time arrangement fee charge to contribute to our administration cost. Typically this is 1% of the loan amount and is payable upon acceptance of our Heads of Terms prior to the loan being drawn. Arrangement fees are non-refundable. Once the loan agreement has been issued the borrower will have up to 30 days to accept the terms and, unless otherwise agreed, a further 60 days to access the loan. After this period, if the loan remains undrawn, a commitment fee will become payable to cover the costs of having loan funds designated for a customer but not utilised. Borrowers are also required to pay for any legal and related expenses incurred (for example valuation fees or costs associated with taking charges over property). Early repayment penalties are not charged regardless of whether the loan is repaid in whole or in part. The sole exception is when the loan is re-financed through another lender in the first two years in which case an appropriate fee will be applied. The borrower may cancel their loan at any time without charge but any arrangement fee paid will not be refunded.

How are loans repaid?

The majority of borrowers are required to pay capital and interest repayments on their loan by monthly direct debit. Depending on specific circumstances, interest only periods or bullet repayments may be permissible upon application.

Do you require security?

The Charity Bank will seek to take security where possible in order to minimise the risk of providing a loan. Where there are no material assets available for security we may consider lending on an unsecured basis but this would limit the size and term of loan provided. Charity Bank would not usually ask for personal guarantees from trustees, directors or management.

What happens when a loan is approved?

If a loan is agreed, we will outline the terms on which we are prepared to lend within our ‘Heads of Terms’ document that will be issued to the borrower. If these terms are acceptable the document will need to be return to us signed with the arrangement fee. Subsequently, we will commence the preparation of the formal legal Loan Agreement which provides additional detail on the terms and conditions of the loan. Your Lending Assessor will be available to guide you through the documentation and overall process, and answer any questions that may arise. Only once the necessary paperwork has been completed and the pre-conditions met, can you gain access to your loan.