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Growth / Development capital

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Finance to help an organisation or project grow – a type of social investment

What does it mean?

This is capital that will be invested in a start-up or for the significant growth of a civil society organisation for the development of its products, services or projects which may generate surplus income.

Who might use it?

Organisations that have plans to grow will be able to use this capital as the majority of charities and social enterprises use their income and expenditure directly on day-to-day activities, leaving little surplus in reserves. This leads to an inability to invest in innovation and development, which are important for the long-term robustness and growth of the organisation.

Growth and development may be achieved through investment in “assets” as these have the potential to generate additional income. It may also take the form of an upfront investment to seize a market opportunity. Financial instruments such as equity, quasi-equity and patient capital can support and supplement grant funding for such capacity building.

‘Hard’ development capital refers to investment in property or other tangible assets. ‘Soft’ development capital describes investment in products or services, e.g. additional staff for fundraising support.

Who provides it?

  • Acumen Fund makes debt or equity investments in early-stage enterprises providing deprived consumers with access to healthcare, water, housing, energy, or agricultural inputs from $300,000 to $2.5m.
  • Big Issue Invest can provide growth loans between £50,000 and £1,000,000 and is able to partner with other organisations for investment above this limit.
  • CAF Venturesome offers growth capital between £25,000 and £250,000 specifically designed to meet the needs of small and medium sized charitable organisations.
  • Charity Bank can provide charity loan funding for property purchase, refurbishments or development, capital investments and asset purchases from £50,000 up to £2 million.
  • Co-operative & Community Finance can lend from £10,000 to £75,000 and is able to lend up to £150,000 to organisations that are owned and democratically controlled by their members.
  • Esmée Fairbairn Foundation provides loans to charities and other not-for-profit organisations with whom the Foundation has an existing relationship, usually current or recent grant-holders.
  • Impetus Fund provides unrestricted funding between £200,000 and £500,000 over a longer term (4-6 years on average), combined with hands-on management support and specialised expertise.
  • Key Fund is a social enterprise providing loan tailored investments, and understands the unique difficulties faced by similar organisations when looking to develop and grow. Key Fund is currently offering loan finance from £5000 up to £150,000 throughout the North of England and Midlands.
  • PURE Community Energy Fund provides low-interest loans to cover 50% of the cost of renewable energy installations for small scale renewable energy projects, up to a maximum of £50,000.
  • Social Business Trust helps established social enterprises scale-up their operations regionally and nationally through loans and support.
  • 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 both ‘hard’ and ‘soft’ development capital from £50,000 to the maximum of £1 million.
  • Social Investment Scotland loan finance is available for social enterprises in Scotland, with loans from £10,000 to £250,000 or more if appropriate.
  • Unity Trust Bank offers mortgages to help charity and voluntary organisations purchase new or additional premises for between £250,000 to £6m.

Case study - Fareshare

FareShare is a national charity that redistributes quality surplus food from the food and drink industry to organisations working with vulnerable people in the community. This improves the environmental impact of the food industry by helping decrease waste going to landfill. It typically reduces a food company’s landfill waste from 100% to less than 5%. Using this food, FareShare seeks to help those suffering ‘food poverty’ – people with low or no income with poor access to affordable nutritious food, and who lack the knowledge, skills or equipment to ensure food is safe and prepared properly.

CAF Venturesome provided a loan of £50,000 in 2008 to underpin the charity’s cashflow. The loan  is now fully repaid. In 2010, FareShare decided to expand its food handling capacity so it could provide millions of extra meals each year and generate more income. The organisation wanted to invest in existing infrastructure to maximise the amount of food collected and distributed, trial new methods of redistribution to increase the volume managed and expand the number of its depots to provide a service in every region of England.

CAF Venturesome was able to offer a loan facility of £200,000. This, along with FareShare’s own fundraising, enabled Fairshare to proceed with its business expansion plan.

Page last edited Nov 04, 2015

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