​Would an ethical bank help finance my community project?

By Sep 24, 2015

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So you’re passionate about finding solutions to housing, energy and other issues facing your local area. But when it comes to funding these sorts of projects, it can be challenging. You could turn to an ethical bank for support.

You can utilise loans from Charity Bank to support community projects, whether you’re running a village hall, providing affordable housing to local people or getting a renewable energy project underway. But how does this work in practice?

We’ve been working with our borrowers to create case studies that give an idea of what it’s like to take out a loan from an ethical bank. It’s important to say at this point that loans won’t be appropriate for all organisations, but when they are they can be a useful piece of the funding jigsaw.

Since 2002, a core part of Charity Bank’s approach to ethical banking has involved making loans available to community organisations and supporting them as they put the money to work. Ann Harding, co-founding director of Settle Hydro and David Graham, chair of Lyvennet Community Land Trust both have experience of using loan finance to support community activities. We asked them to describe their grassroots work and where loans fit in.

Settle hydro: how a loan helped us launch a community energy project

“We wanted to encourage investment in our market town and bolster the local economy, so we set up a registered society, with the aim of generating revenue by selling green hydro-electricity to the National Grid. We’ve generated surpluses enabling us to invest in local community projects, including the regeneration of a local theatre which, as a result, is no longer tied to grant funding.

We used three loans from Charity Bank to achieve our vision and today I can proudly say that we are the first community-funded hydro-electric project in the region. The 50kW plant produces enough electricity to power 50 homes. Not only that, it has attracted many visitors to the town, bolstering business for local B&Bs, pubs and restaurants. We are now repaying our most recent loan from the income we receive from selling the electricity we generate.” Ann Harding, co-founding director, Settle Hydro

Helpful hints: Settle Hydro was able to gain the confidence of both local investors and Charity Bank. The founders created a Share Prospectus, which is available to download from the hydro’s website. The prospectus, along with the information on the website, was the material used to give confidence to prospective investors. It was key to show how revenue would be generated and this information is included in the Prospectus.

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Ann Harding, co-founding director, Settle Hydro

Lyvennet CLT: using loan finance to help build affordable homes for local people

“In Janaury 2009 a local group based in Cumbria comprising county, district and parish councillors, along with interested representatives from the community began exploring the provision of local affordable homes via a Community Land Trust. By August 2009, the Lyvennet Community Trust (LCT) had been incorporated as a company limited by guarantee.

In less than five years, we’ve transformed a brownfield site, provided several affordable homes and saved our village pub. We used a £1 million loan from Charity Bank to build 12 affordable homes for sale and for rent. The loan from Charity Bank was key to enabling us to access a further £660,000 from the Homes and Communities Agency. And without it the project wouldn’t have got off the ground.” David Graham, chair, Lyvennet Community Land Trust.

Helpful hints: If you’re interested in applying for a loan from Charity Bank here are a few boxes you’ll need to tick:

  • Show how you plan to use the loan
  • Demonstrate how you’re delivering social benefit
  • Give evidence of good governance by explaining who runs the charity, how long the team has been there and that they have the right skills
  • Explain how you fund your activities, including details of income streams or your plans to generate revenue
  • Present a clear business plan showing how you aim to sustain and/or grow your organisation over the coming years