“Charity Bank took a lot of the stress away”

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“Most lenders weren’t willing to offer us a loan, but Charity Bank worked with us in a really creative way to come up with a funding plan.” Read our interview with Cathy Taylor, Executive Head of Red Balloon NW London.

Why did you need a loan from Charity Bank?

Red Balloon educates students who won’t go to mainstream school. These students might have sensory issues, which means attending a normal school is too difficult. They might have been badly bullied or have learning needs that haven't been met.

When I first started here in 2016, there were 16 students. There are now 60. Our students can't cope with large numbers of people. Having everyone in one big building wouldn't work, so all Red Balloon classes are held in houses. This means the school is really homely and cosy, so students feel more comfortable attending.

Back in 2019, we decided to expand and buy another house in Harrow, which meant that we needed a loan.

Why did you choose Charity Bank for your loan?

As a charity and a small independent school, there aren’t the same pathways to funding as there are for other organisations. The building we bought was also basically un-mortgageable because we could only get permission for change of use – from a home to a school – if we agreed that only Red Balloon could use the property. If a bank were to repossess it, they'd have to put another planning application in before they could sell it. So most lenders weren’t willing to offer us a loan.

Charity Bank was recommended to us. They also said ‘no’ to begin with, but they came back to us with some suggestions and worked with us in a really creative way to come up with a funding plan. What we’ve done is secure the loan against a building that we already own outright. That building doesn't have the same covenant, meaning Charity Bank could sell it on if they needed to repossess.

The property wasn’t worth quite as much as the one we wanted to buy, so Charity Bank also organised an additional unsecured loan for us from NatWest’s Social and Community Capital fund. So, Charity Bank really was instrumental to the purchase.

Did you have any concerns about taking out a loan, particularly as it was secured against a property that you previously owned outright?

No. We needed to expand and we're in a stable position financially, so I wasn’t concerned about taking out a loan. Obviously, we don't want to take undue risk, but I feel quite comfortable with our capacity to make the repayments.

Our trustees felt the same way. They could see that it made sense and was the only way that we could move forward. The only other alternative was to spend years trying to accrue the funds to buy something outright, which wasn’t really viable when there was already such a large unmet need.

Why did you want to buy a property rather than renting one?

There aren’t any houses to rent that have planning permission to be used as a school, so we’d have to apply for planning permission ourselves. It makes sense to buy because otherwise we’d have to put in a lot of work to make someone else's property fit for what we need it to be.

Our plan is to buy another property in the next two to three years. We now own two properties, which should stand us in good stead for getting an additional loan.

How did you find the process of applying for your Charity Bank loan?

I don't think it was particularly complicated. We had a relationship manager, Wesley Lovett, who supported the whole process and took a lot of the stress away. It was really useful having that one point of contact. It meant we didn’t have to keep speaking to someone in a call centre and re-explaining the situation every time. We had someone who knew what was going on, and who could keep us informed all the way along.

Did you come up against any challenges?

The purchase itself was a lengthy process, which was slowed down enormously by COVID. We were trying to get planning permission for change of use, but all of the planning processes just ground to a complete halt. We’d estimated at the beginning that it would be about a six-month process, and it ended up taking four years.

Is there anything charities should be aware of before they apply for a loan?

Be prepared to be a bit more creative with how you get your funding together, and willing to borrow from different sources if needs be. If we hadn't done that, we wouldn't have been able to buy this property.

If you need a loan for a property, please contact Charity Bank by emailing loanenquiries@charitybank.org

About Charity Bank

Charity Bank is the loans and savings bank owned by and committed to supporting the social sector. Since 2002, we have used our savers’ money to make more than 1,200 loans totalling over £450m to housing, education, social care, community and other social purpose organisations.

Find out more about us here.

Nothing in this article constitutes an invitation to engage in investment activity nor is it advice or a recommendation and professional advice should be taken before any course of action is pursued.