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A £30 million loan fund is being formed to help charities and social enterprises create jobs, develop their services and expand.
The Third Sector Loan Fund, managed and launched by Social and Sustainable Capital (SASC), is designed to encourage mainstream financial institutions and banks to invest in game-changing funds to finance social enterprises and charities.
The launch and management of the Fund is in partnership with Santander, Social Investment Business (SIB) Group and Big Society Capital.
Santander has committed a £13.5 million investment, which is thought to be the biggest single investment by a mainstream UK financial institution into a third party lending to social ventures.
The fund has also attracted £15 million from Big Society Capital, its biggest investment to date, and a £1.5 million repayable grant from the SIB Group.
CEO of SIB, Jonathan Jenkins, said: “Our £1.5 million investment has catalysed a fund 20 times that size, creating the UK’s biggest fund offering straightforward loans to help charities and social enterprises make even more impact.”
The Third Sector Loan Fund, which will run for 10 years, will be the UK’s largest fund investing in a wide range of charities and social enterprises across all social sectors, and will make both unsecured and secured loans of £250,000 to £3 million. Its first investments are due to be announced in the next few weeks.
Chancellor George Osborne said that tackling difficult social problems with social investment and the power of finance was one of the government’s priorities.
“Investment into social enterprises can play an important role in our long-term economic plan as well as in addressing the toughest social issues,” the Chancellor said.
“I congratulate Santander, Big Society Capital and the Social Investment Business in developing the Third Sector Loan Fund, managed by Social and Sustainable Capital, and would hope to see other High Street banks following their lead.”
CEO of Santander Nathan Bostock feels that supporting positive social change can be a commercial endeavour.
“Santander’s investment will help social ventures grow, provide services to more people and boost their local economies,” he said.
“Banks need to look at alternative ways to support all sectors of the UK economy,” Nathan added.
“The Third Sector Loan Fund follows other innovations in financing smaller enterprise, which Santander has made, such as our Breakthrough programme to support high growth enterprises and the launch of the Santander $100 million Venture Capital fund to develop the Fin-Tech sector.”
UK charities and social enterprises contribute more than £55 billion to the economy and employ nearly 3 million people.
However, according to a recent survey, the single largest barrier to their growth is access to finance.
CEO of Big Society Capital Nick O’Donohue feels that the Fund demonstrates that banks can meet their commercial requirements whilst supporting charities, if they use their creativity and commitment.
“This is an important milestone in unlocking finance from mainstream financial institutions and exactly the sort of thing we want to use our investments to enable,” he said.
Managing Director of Social Enterprise Ben Rick felt that social enterprises and charities providing solutions to our social challenges needed access to finances to let them do their important work.
“We have raised £30 million in this fund by catering for investors with different priorities on risk, financial return and social impact,” he said.
“The fund absorbs this complexity so that frontline organisations get what they need – simple, straightforward loans.”
SASC, itself a social enterprise, will identify suitable organisations for the Fund to invest in, and make secured and unsecured loans, charging interest of 6-12 per cent.
SASC intend to work with SIB to develop similar funds with organisations who wish to use their money as catalytic capital to stimulate multiples of investment for the causes they care about.
A £30 million loan fund is being formed to help charities and social enterprises create jobs, develop their services and expand.
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