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Social Investment - options for income generation now and beyond COVID-19

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In previous articles over past months we have looked at how the financial challenges require many of us to explore new ways of fund-raising and income generation - and perhaps turn those challeneges into opportunities. Social investment is a well-established but, for some, an unknown approach to formulating an income-generating strategy. CAN’s Community Development team can help and advise on the options and issues. Our contact details are at the end of the article.

What is Social Investment? 

It’s the use of repayable finance to help a voluntary or charitable organisation achieve its social impact or purpose. It usually comes in the form of a repayable loan, with more flexibility than a conventional bank loan. ‘Repayable finance’ may raise cautionary fears of high-interest loans, associated with the pressures of uncertainty of ability to pay back with interest when required. But social investment is geared towards a combination of a financial return on investment combined with helping to make a social or community impact. 

The idea is that it enables a VCSE organisation to generate income through, for example, trading activity, contracts, grants and donations. The surplus is then used to repay the investors. The point is that social investment enables those activities which may not have been possible in the first place. It’s like a ‘kick start’ which is a familiar concept in the business world. 

Two key points to remember: 

  • It’s not a grant – it has to be repaid 
  • It’s not a donation – again, it has to be repaid 

Questions to consider 

Are you prepared to be  

  • innovative in your funding and operating approach 
  • go for growth and impact 
  • future-proof i.e. work towards sustainability? 

Can you demonstrate to potential investors that 

  • you’ll be able to pay it back 
  • you have real social impact​ 
  • the trustees are well informed and has the necessary skills​ 
  • you have a sound business plan  
  • you have, historically, a good track record​ 
  • you are a good match for investors’ interests? 

Trustees need to  

  • understand the options 
  • requirements and/or restrictions in the governing document 
  • be able to articulate the application 
  • involve stakeholders 
  • appreciate their personal liability 
  • ensure due diligence and 
  • financial sustainability 
  • build relationships with investor(s)  
  • seek further advice before proceeding – talk to us at CAN for advice! 

Is it right for us? What might be the alternatives? 

It might not be suitable for every organisation and should be investigated alongside other options - but we all need to constantly reassess our funding strategies. Alternatives are many and varied. Crowdfunding is increasingly popular as a way of raising money from a large number of people, each contributing a small amount of cash to provide the funds needed to get a project off the ground. Any individual, charity or company can create a campaign to promote it, and anyone can contribute. Then there are secured and unsecured loans, grants, overdrafts, social impact bonds and sponsorship. And there are many more options. 

You can find more detailed information at Good Finance ​and at NCVO. And a rather helpful introductory video can be found here.  Perhaps the best way to investigate the potential of social investment for your VCSE organisation is a person-to-person discussion. As always, our Community Development team is available to do just that. Call us on 01362 698216 or email [email protected]  

Who can help? 

Perhaps the best way to investigate the potential of social investment for your VCSE organisation is a person-to-person discussion. As always, our Community Development team is available to do just that. Call us on 01362 698216 or email [email protected]