Community Matters (Yorkshire)

Loan Funding

This is a relatively new form of finance to the sector which can make things happen quickly. A diverse range of bodies now offer loans including:

  • commercial high street lenders
  • national providers for charities eg Unity Trust Bank, Charity Bank
  • community development lenders working on a regional basis e.g Key Fund

Loans are a financial tool which can be used to ‘bridge gaps’ e.g. between grant payments or when a large sum of money is needed quickly for projects such as developing a building or providing funds for start up costs for a new enterprise.

They are particularly useful to enable groups not to miss an opportunity whilst they are spending time on traditional forms of fundraising. Loans can be flexible (unlike grants which are tied to specific project outcomes) and loans encourage long term planning. Loans can also be used to help start up contract or trading activities, e.g covering the costs of development work, preparing tenders, training new staff, purchasing equipment or managing lead-in times between producing goods and services and receiving cash for sales.

When going for loans you may need to check that your constitution or legal structure will allow you to take out a loan; research a wide range of loan providers; ensure you have financial systems in place; and demonstrate that you have the ability to budget and plan ahead ensuring you can repay the loan.

There is a diverse range of bodies now offering loans, including commercial high street lenders, national providers for charities, and community development lenders that tend to work on a regional basis – some have developed specifically to meet the needs of VCOs such as Key Fund. These lenders are good at assessing the risks of lending and investing to VCOs and often offer support and flexible terms.

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