CHARITY LOANS: QUESTIONS TO CONSIDER BEFORE YOU APPLY

Make sure your charity or social purpose organisation is ready to prepare the case for a loan before you apply. This checklist will help you work out if loan finance could be a suitable funding option.

  • When should you talk to lenders?

    First, make sure you have the fundamentals in place. To apply for a loan you’ll need at least three years of published accounts.

    If that’s in order, our team can offer you hints and tips on the best way to present your case. Have a chat with us before formally applying – this can help you tap into the team’s expertise, so you get your application right first time.

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  • Have you checked your governing documents?

    Your charity needs permission to borrow money. Your governing documents set out your charitable purpose and dictate how your charity is run.

    What is a governing document?

    It’s a legal document that acts as a rulebook. It sets out your organisation’s charitable purpose, who runs it and who can be a member – amongst other rules and features. Crucially, it should contain information about how to handle funds.

    If your governing documents don’t state if loans are allowed, you’ll need to get them updated before applying for a loan.

    The governing documents will also state if you can borrow against your assets, for example on a building that you own. This is essential for a secured loan. Some documents also set a maximum amount that can be borrowed.

    The Charity Commission has guidance on how to change your charity’s governing documents. Or, if you’re based in Scotland, read this guidance.

  • What information will lenders ask for?

    You need to be clear on the costs of the project, how you’ll use the money and pay back the loan. To get a handle on your finances, you should create a business plan with projections of income and expenditure - backed up with financial statements, market research or statistics.

    Make sure your plan considers potential risks and offers ways in which your organisation can respond to keep finances on track. Lenders will look over this in detail to make sure you’re not cutting things too fine.

    It’s important to also think about the additional costs, including good quality legal advice, surveyors, VAT and other expenditure.

  • Have you prepared a plan B?

    Your finances could change over the term of your loan. How resilient is your plan?

    If income changes or costs rise, will you will still be able to repay the loan? If you’re building or refurbishing and there’s a problem, will you have enough contingency?

    Our loan experts can help you to consider the various scenarios and make sure you’re prepared for the unexpected, so you can adapt you plan to changing conditions with confidence.

  • Does your team have the skills to manage the project?

    Lenders want to see strong internal processes, management and governance. So check that you have the right mix of financial and project management skills.

    You should also flag any strengths and weaknesses in your management process, particularly in areas where you need to bring in additional skills. This might mean short-term contracts for project managers, finance experts or legal professionals. These costs will need to be factored into your plans.

  • Are your goals and timelines realistic?
    Being ambitious is a great trait, but it can be costly. Keep the scope and scale of your project in line with what you can realistically achieve. Give yourself room to adjust plans if anything changes. Often it helps to both explain the overall goal, and its forecast impact, along with the immediate project outputs.
  • Does the lender share your values?

    Sharing the same values is vital when it comes to making impactful decisions that truly suit your organisation. You need a lending partner which understands the unique challenges charities and social purpose organisations face. At CAF Bank, we look at every lending application on its own merit, using our vast sector experience to make recommendations. Ultimately, we’re as committed to achieving your goals as you are.

Ready to take the next step?

Borrowing with CAF Bank


Discover our approach to lending, and find out how to apply.

What to expect from the application process


Learn the steps involved with taking out a CAF Bank loan, as well as information on typical costs.

Loan finance in action


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CAF Bank loans are non-regulated products.

Loan applications subject to credit assessment. Security will be required.

Charity assets may be at risk if you do not keep up with the repayments for a mortgage, loan or any other debt secured on them.

If you're thinking of consolidating existing borrowing, you should be aware that you may be extending the term of the debt and increasing the total amount you pay.

CAF Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 204451).

CAF Bank Limited Registered office is 25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4JQ. Registered in England and Wales under number 1837656.


Charities Aid Foundation © | Registered Charity Number 268369
25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4TA
10 St. Bride Street, London EC4A 4AD
Telephone: 03000 123 000