In this blog we’ll highlight some of the key advantages of loan finance for charities and provide case studies to demonstrate how charities big and small have benefited from borrowing funds.
Contrary to popular belief, borrowing money has always been an option for charities. Whilst borrowing may be unfamiliar in comparison to grant applications and fundraising, changes in commissioning and greater competition for public sector contracts may mean that your social purpose organisation could benefit from loan finance.
A loan can strengthen and grow your charity
Loans can leave an organisation in a stronger position, both in terms of its ability to carry out its mission and financially. This could be by securing assets by purchasing property or expanding services so that you can offer more for those you support.
For example, Whitley Bay Big Local used their Charity Bank loan for their renovation project for a new and expanded community hub. The renovation work will mean that the new building will be a sustainable asset that has doubled the centre’s usable space for their wide range of weekly activities.
A loan can make your charity’s projects happen faster
While it could take years to fundraise enough money or many months for grant funding to be secured, loan finance can allow your project to get underway within as little as 3 months following a successful application.
Sometimes time is of the essence, for example, without a loan Christ Church Aughton would have had to wait a few more years to start the building work for their Ministry Centre.
Similarly, a speedy loan meant that YMCA Birmingham could cover the shortfall for their building project without having to rely on more lengthy fundraising rounds.
A loan can help your charity secure its own premises
Although funding, daily operations, and staff retention are likely at the top of most organisations’ list of sustainability challenges, the physical space your charity occupies is a vital factor. Whilst charities are often able to lease space at below market rates, owning your own premises can bring both financial benefits and stability for the future.
Head2Head used a Charity Bank loan to purchase a new premises for their operations. Not only is the premises more suitable for the charity to run their services, but the loan repayments are significantly less than the rent they were paying before. The new property is an asset and has given the charity stability and, more importantly, a base for the long-term.
Loans can fund projects that grants don’t
Not only are grants competitive, but they can also come with restrictions. Sometimes the idea you have in mind that will benefit your beneficiaries won’t be able to be funded by a grant. With loan finance you have more freedom and flexibility to use funds to benefit those that your charity supports.
Berkhamsted & Hemel Hempstead Hockey Club desperately needed an artificial grass pitch, but the sports club was struggling to raise enough money through fundraising and grants. Where grant funders said no, Charity Bank were able to step in with a loan to help make the project happen.
A loan can help your charity gain new facilities and reduce costs
Charities can use loan finance to help them move to more suitable premises or make improvements to existing facilities. Whether it’s making the move from renting to ownership or making energy efficiency improvements, loan finance can help your organisation save on rent and reduce running costs.
For example, when Magpas Air Ambulance’s existing site was earmarked for housing the charity decided to create its own purpose built airbase with the help of a Charity Bank loan. With the new development the charity will save around £100,000 per annum in rent, running costs and other outgoings.
Loans can help charities survive and thrive
Charities are no stranger to tough times. Sometimes your organisation might need help getting through a rough patch to help keep operations going. Rather than depleting your charity’s reserves and cutting services, a loan can help cover running costs like payroll or other bills while you wait for other income to come in.
This was the case for Central YMCA. The charity used a Charity Bank loan to help them when one of their main income streams was ravaged by the pandemic. Rather than draining its reserves (which would have meant reducing its community activities), Central YMCA is using a £4 million loan from Charity Bank to support its recovery so that it can continue to help thousands of young people every year.
Why Charity Bank for your loan?
We have over 20 years’ experience lending to charities, social enterprises and other organisations where the loan is being used for a social purpose. We are 100% owned by and dedicated to supporting the social sector. 96%* of our borrowers said that Charity Bank’s understanding of charities and social enterprises influenced their decision to borrow from us.
We tailor the terms of each loan and fit the repayment schedules to suit the needs of our borrowers. If your charity is in need of a loan, get in touch with a member of our lending team by emailing loanenquiries@charitybank.org or call Charity Bank on 01732 441919
* Charity Bank 2023 Borrower Survey
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.
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.