This useful blog from Civil Society Finance, points out that a loan, in the right circumstances, can be a self-empowering way for charities like museums to fast-track their plans to increase income, reduce their reliance on donations and reduce their long-term costs and is an option that Trustees should look at more readily than perhaps they do, in many cases.
Carolyn Sims, head of banking at Civil Society’s banking partner Charity Bank, provides a guide to charity loans and explains why many charities find loan finance empowering.
It is understandable why charities may be put off by the idea of taking on a loan when they face an uncertain future, particularly if much of their income comes from contracts with the public sector at a time when spending continues to be cut.But, in the right circumstances and with the right kind of loan, debt can help a charity to thrive and to have greater control over its future.
Trustees and management need to understand what loan finance can offer in order to determine whether it is a suitable option for them.
How can debt be a good thing?
A loan can help organisations become more sustainable. For instance, it can allow you to buy a property rather than continuing to pay rent. This is one of the most popular purposes for Charity Bank’s loans.
Loan finance can empower: it can help you to grow and expand your services, diversify your income streams, or make the most of a newly available opportunity.
Loans can help you to grow and increase your income. Borrowing to invest in a new activity that increases income can be a fast track to growth, with the additional income repaying the loan. In this way, loans can reduce reliance on grants and donations, while allowing you to broaden your range of services.
Loans can help bring in grants. Charity Bank’s recent social impact study revealed that 41 per cent of the organisations to which it has lent were able to leverage additional funds from sources such as local trusts.
The article goes on to explain that Charity Bank is one source of loans. It is a social enterprise that exists to help social sector organisations to access loans; it is not profit-driven, has charitable objects itself and cares about social impacts.
Read more of this article at Banking blog: Could your charity benefit from a loan?.