COULD A LOAN HELP YOUR CHARITY THRIVE?

As a charitable or social purpose organisation, securing your future is a crucial part of doing work that makes a real difference. In other words: the more stability you have, the more you can focus on making an impact on the lives of those who turn to you.

Good planning helps. Of course, fundraising and other sources of income can get you some of the way towards your goal. But for some, financial support can help you map out the future with more confidence. That’s where a loan may be an option to consider.

Why should charities consider a loan?

The UK is home to nearly 200,000 charities and social purpose organisations, each with unique needs and ambitions. Here are some of the ways loans can help.

Loans can help bring in money

Boosting income means investing upfront. For example, organisations which offer supported living facilities might want to set up in a new location – but they need to fund the upfront costs of buying and converting a property. A loan can give you the capital to do this. But you’ll need to make sure your future income will be enough to cover the loan repayments.

We’ll help you navigate all of this as part of the application process. Your first step is to compile a business plan with realistic financial projections. Don’t forget to outline best-case and worst-case scenarios to protect against unexpected risks.

Here are some ideas for diversifying your charity’s income.

Loans can speed up plans

Fundraising for major projects takes time, which means people have to wait a while to benefit from your great ideas. Or, the idea might become unaffordable or unviable as time passes. A loan can help you act sooner.

Imagine a charity providing homes for the most vulnerable, who are looking to expand. They could save for the new home using donations and income, or they could build a deposit and then use a loan to finance the balance, allowing the income from the new property to cover the monthly loan outgoings.

Your business plan will be designed to make sure the numbers add up, and that you can afford to repay. It will give your trustees the chance to examine the “what ifs” and plan for the future with confidence.

Loans can contribute towards new premises

Owning your premises shows you’re in it for the long-term. It can help cement your place in the community, give you freedom to make long-term plans and get a better handle on regular outgoings.

Certainty about your location also reassures staff, commissioners, funders, service users and volunteers.

Loans can help you make an impact sooner

Paying a mortgage on a property can be cheaper than paying rent –it can also save on the costs and uncertainty of dealing with a landlord, putting more control in your hands.

Buying a piece of capital equipment rather than leasing or hiring can save you money in the long term, giving you an asset that can increase in value over time. Improving your capabilities through upgrading IT and other infrastructure all helps in the long run too.

If you’re building or renovating, you might lessen the impact of inflationary price rises by starting sooner rather than later. You can also make sure that your beneficiaries’ needs are carefully considered from the start.

These are all good examples of how a loan can affect where you spend money now and in the future. Speaking of which…

Loans let you plan with freedom

A long-term loan can help you view your projected income and spending commitments in ways that help you achieve your purpose. You also avoid restrictions which can dictate how grant money should be spent or from awaiting clarity of funders’ future priorities.

Ready to take the next step?

Make sure you’re ready

There are a few things to think about before you start an application. We cover them all in this overview.

What to consider before applying ► 

Borrowing with CAF Bank

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

CAF Bank loans ► 

Get the full details

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

Read our guide to the loan process ► 

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.