Impact Loans England – Two Years On

Eight things we’ve learned about lending to social enterprises

During my time at Big Issue Invest, I’ve made investments in over 150 social enterprises and charities. For me, the most satisfying investments are those in smaller enterprises – they are often the unsung heroes of their communities, delivering effective solutions to social problems on a local level.

These social businesses can find it difficult to raise finance to make projects happen. That’s why I was so pleased to secure funding from The Growth Fund managed by Access – The Foundation for Social Investment with funding from the Big Lottery Fund and Big Society Capital.

When we launched Impact Loans England, we set ourselves the target of making 60 loans of under £150k to social businesses and charities. Two years on and we’ve deployed all available funding. We’ve made over £6 million in loans to 104 organisations – that’s a deal a week. It’s been a real success. So much so, that the Growth Fund Joint Investment Committee has agreed to invest a further £3.9 million to extend the Fund.

As we enter our third year, I’d like to share some of our learnings to date:

1. There is unmet demand for repayable finance in the social sector.

I thought it would take three years to deploy 60 loans. Instead, we did a deal a week.

The limiting factors to making investments has been the size of our funding pot and staff numbers – not demand for investment.

2. Social funders should be open to as wide a range of applicants as possible.

Most social investors focus on niche markets or sector themes. This approach fails to meet demand for finance from the wider social sector as it arises.

We’ve learnt not to implement artificial Fund criteria. These narrow investment options and lead to bad investment decisions (or worse, no investments being made).

We keep it simple: will the funding do good and will we be repaid?

3. There are cultural and social barriers to those seeking finance.

Barriers to accessing finance work on many levels – geography, language, process, experience, education and prejudice.

We had to change our approach to broaden the diversity of our portfolio. As a consequence, we have made more loans than ever before to enterprises that are working class-led, women-led, BME-led and / or raising finance for the first time.

To do this, we have taken more risk. Not every investable proposition looks like something done before.

To make our process accessible, we have refocused credit decisions towards an assessment of people and skills, and focused less on business plans and financial forecasts.

4. Borrowers are customers.

Social investors tend to treat loan applicants as if they have applied for a grant. This is reflected in attitude, relationships and lengthy application processes.

Borrowers pay interest and repay capital. They should be treated accordingly. For all parties, the application process is a good indicator of how you will be treated in the long run.

5. Good governance matters.

The highest risk loans are to enterprises that rely on a single individual and have no non-executive directors.

These are the type of enterprises in our portfolio that have failed.

A good Board with the right skills and attitude will add real value. It is imperative for small enterprises to have a non-executive director who is good with numbers and has keen interest in cash forecasting.

6. Social impact reporting should be proportionate and useful.

As a funder making small value loans, we need to think about better ways of measuring our impact.

Part of the issue is around the collection and integrity of data. None of our investees have an issue with measuring and monitoring social impact, but the challenge is around cost and the ability to do so. Costs become disproportionate as the size of investment decreases – this reinforces the sense that “social investment” is grant-like with similar reporting obligations.

7. It’s about your people.

Recruiting staff with knowledge of the sector and the right approach to social impact is important. Skills can be taught – attitude less so.

8. Being nice is good business.

We try to help our clients when we can. This means supporting investees to access grants or allowing flexibility on loan repayments without applying supplementary charges. When we can reduce interest rates, we do.

Our approach helps our clients to deliver their mission and, in turn, to repay us. This helps us raise further funds to invest in the social sector.

If you’d like to speak about investment don’t hesitate to contact us by filling out our form here. Alternatively, you can contact us by phone at 0207 526 3234. 

Daniel Wilson-Dodd–Deputy Chief Executive

Access – The Foundation for Social Investment exists to help make charities and social enterprises in England more financially resilient and self-reliant so that they can sustain or increase their impact.

Access does this through two main strands. The first strand is the provision of blended finance and the Growth Fund is the first such finance programme. Made possible through grant funding from The National Lottery Community Fund and loan finance from Big Society Capital, it is focused on enabling the provision of the simple and affordable investment products that charities and social enterprises tell us they need. The second strand is Enterprise Development, through which a number of grant and support programmes are provided for charities and social enterprises who wish to develop earned income and start to investigate the possibility of accessing social investment.

Twitter: @si_access
Phone: 020 7084 6833

The National Lottery Community Fund – We are the largest community funder in the UK – we’re proud to award money raised by National Lottery players to communities across England, Scotland, Wales and Northern
Ireland. Since June 2004, we have made over 200,000 grants and awarded over £9 billion to projects that have benefited millions of people.

We are passionate about funding great ideas that matter to communities and make a difference to people’s lives. At the heart of everything we do is the belief that when people are in the lead, communities thrive. Thanks to the support of National Lottery players, our funding is open to everyone. We’re privileged to be able to work with the smallest of local groups, right up to UK-wide charities, enabling people and communities to bring their ambitions to life.

Instagram: Instagram:
For funding and general enquiries call:
Advice Line: 0345 4 10 20 30
Text Relay: 18001 + 0345 4 10 20 30

For press enquiries call:
Press Office: 020 7211 1888
When people are in the lead, communities thrive 4
Out of hours media contact: 07867 500572

Big Society Capital

  • Big Society Capital improves the lives of people in the UK by connecting social investment to charities and social enterprises.
  • We know that investment can help charities and social enterprises achieve more. We believe the greatest chance to improve lives comes when investors and enterprises are both motivated by social mission.
  • Big Society Capital engages with investors, fund managers, charities and social enterprises to make it easier to use social investment. With their co-investors, they have made over £1.7bn of new capital available to organisations with a social
    mission, through investments into fund managers and social banks.
  • Big Society Capital have a special focus on: providing homes for people in need; supporting communities to improve lives; and early action to prevent problems.

Twitter: @bigsocietycap
Press office: 020 7186 2540 / 0788 587 9500

The Growth Fund(RGB)-horizontal