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Don’t Be Afraid of the L Word

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The L word. The word that many people struggle with. Some find it intimidating. Some are hesitant to think about it. Yet, often those who decide to go for it never look back.

It means working with someone to build a relationship. It means thinking about the future and what can be achieved together.

No, we’re not talking about ‘love’. We’re talking ‘loans’.

At Social Investment Scotland (SIS), we provide loans for charities and social enterprises across Scotland. Over the years, we’ve seen the hesitance social enterprises initially have to take out loan finance and then the relief they experience when they do.

We’d like to share with you why you shouldn’t be afraid of the L word: Loans. In this blog, you can expect the following:

  • What is social loan investment?
  • Why consider a social loan?
  • What do you need to think about?

 

What is social loan investment?
According to our friends at Good Finance, social loan investment (more commonly referred to as social investment) is the use of repayable finance to help an organisation achieve a social purpose.
Essentially, money is provided in the form of a loan, which is to be used to help a social enterprise or charity create its social impact. The loan is to be repaid using the income generated from the social enterprise’s trading activity.

Note: in the case of a bridging loan, the money can be repaid when grant money is received. Learn more on our Bridging Loans: A Short-Term Cashflow Solution blog.

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Why consider a social loan?

  1. Flexibility of use
    Social loans can be used to grow your business, buy assets, offer working capital or bridge the gap of other funding. There are no set categories that you need to fit into.
  2. Invested support
    Social investment providers, such as SIS, provide a dedicated Investment Manager to support you through your social loan journey. It’s a relationship approach, meaning should you need additional support or come across any challenges, they are they to help.
  3. Increases sustainability
    Social loan finance allows social enterprises to increase the sustainability of their organisations, and in turn, the impact they’re having in communities. A shift towards financial self-reliance helps protects the organisation from the unknown availability of other funding.
  4. Encourages enterprising thought
    Managing your financial matters and borrowing responsibly is key for any social organisation looking to grow or sustain their impact. Having to think about your finances regularly means you are more likely to stay on top of the bigger picture and actively think about ways to increase income and impact.
  5. Not all debt is bad debt
    When taking out a loan, you are taking out debt. However, despite the dark cloud that seems to follow the word ‘debt’, social loan investment tends to offer a brighter future for organisations. It can unlock the potential for organisations to greater deliver their social mission.

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What do you need to think about?
The following questions are points to consider when contemplating social investment.

  • Are you a social enterprise or charity?
  • What is your social purpose?
  • Who are your beneficiaries?
  • Do you have the right team in place?
  • What is your governance like?
  • Do you have trading history?
  • How would you manage to repay a loan?
  • Do you have a business plan?

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In summary, social investment is the use of loans to support social enterprises and charities achieve their social purpose. There are many potential advantages to taking on a social loan, so don’t let the thought of taking on debt put you off exploring your options. There are numerous qualities that we look for in customers, with a focus on the social purpose and enterprising activity.

Our team are more than happy to chat through whether social investment is right for your organisation, so please feel free to get in touch. Also be sure to check out our Support page to see our upcoming workshops, events and programmes.