Charity Bank issues a guide for charities on borrowing money
Howard Lake | 7 November 2013 | News
When is a loan a good choice for a charity or social enterprise? While fear of debt, especially in the current financial climate, is sensible, the right kind of loan can help organisations thrive.
Charity Bank has issued a Guide to Borrowing for Charity Trustees to help them decide if a loan could be right for their charity or one of its projects. It has been published in blog format by Charity Bank’s Head of Banking, Carolyn Sims. It appears on the National Council for Voluntary Organisations’ (NCVO) website and also on Charity Bank’s own site.
Sims said: “Loans can help organisations become more sustainable – for example, by enabling them to acquire a property rather than paying rent. But charity loans are not right for all projects or all organisations, so trustees need to understand what loan finance can offer to determine if it is a suitable option for their charity.”
The guide describes five main benefits of loans over grants:
1. Fewer restrictions
2. Non-competitive
3. Money when you need it
4. A relationship with financial experts
5. Cash flow
The guide then describes what lenders look for in potential borrowers.
As well as ensuring that an organisation can pay the loan back, Sims explains that lenders will look at the charity’s governance, including whether its trustees and staff have a suitable skill set that includes the key business areas of finance and law.
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.