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Bridging loan

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How to secure finance to cover short-term cashflow shortfalls - a type of social investment

What does it mean?

Many grants are paid in arrears (and some are also paid late) and some contracts will also be paid at the end of the term. This can lead to short-term cashflow shortfalls. A bridging loan enables an organisation to manage these mismatches in the timings of income and expenditure (i.e. temporary shortfalls). The loan is repaid when the delayed payment is finally received.

Who might use it?

A bridging loan can underpin a short-term cashflow shortfall before a committed grant or other secured income is actually received by an organisation. It is a low risk facility as there is a guaranteed repayment of the lender’s funds once the income in arrears is paid. Therefore, the interest rate on this type of facility will typically be low.

As long as an organisation can show that there will be a grant or other income being paid at a specific point, a bridging facility can help solve tricky timing issues where there is a mismatch between the timing of income and expenditure. 

Who provides it?

  • Big Issue Invest can provide bridging loans between £50,000 and £1,000,000.
  • CAF Venturesome offers bridging loans between £25,000 and £250,000 specifically designed to meet the needs of small and medium sized charitable organisations.
  • Charity Bank can provide short term bridging loans from £50,000 up to £2 million.
  • Key Fund provides bridging loans from £5,000 to £50,000 to support the development and growth of new and existing enterprise activity.
  • The Social Enterprise Loan Fund provides loans to charities and social enterprises that are unable to secure sufficient funding from mainstream sources.
  • Social Investment Business can provide bridging facilities from £50,000 to the maximum of £1 million.
  • Social Investment Scotland loan finance is available for social enterprises in Scotland from £10,000 to £250,000, or more if appropriate.
  • The Co-operative Bank offers small fixed rate loans between £2,500 and £25,000 where no security is required.
  • Unity Trust Bank offers bridging loans for grants from £25,000 to £4.0m.

Case study - TREE AID

TREE AID was established in 1987 in response to the famine in Africa, seeking to provide a long-term solution once emergency relief efforts ended. It believed that trees could significantly reduce the vulnerability of communities to drought and famine in the future. The organisation works in the drylands of some of the poorest countries in the world, focusing on forest management, and income, food and medicines from trees.

TREE AID was delivering a £2.5m, five-year, Village Tree Enterprise programme funded by the European Commission (EC) when it approached CAF Venturesome for a bridging loan in 2011. The terms of the EC’s agreement would release funds for work that is undertaken each year but up to eight months after the start of the project financial year. This payment expected in July had been delayed in the previous year by 2 months, forcing  TREE AID to tap unrestricted reserves to bridge the grant.

Given their experience of the grant payment schedule in 2010, TREE AID wanted additional finance in place that could be drawn in case of late payment of a £538k tranche for 2011. Grant applications were submitted to other grant-makers but in case this was not approved, a bridging facility of £200k was sought as additional support against the possibility of funding being delayed.

The facility enabled TREE AID to pay all its invoices and continue its good work in these deprived areas.  The £200k facility was not drawn down as the charity had great success with its institutional and corporate fundraising. 


Page last edited Oct 22, 2015

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