Helena Neave

Helena Neave

Private Client Advisor
Charities Aid Foundation

E: philanthropy@cafonline.org

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CAF Venturesome Private Client Webinar 5 June 2020

CAF Venturesome, established in 2002, is CAF’s social investment arm, providing repayable finance to charities and social enterprises across the UK.

Now more than ever, Venturesome is seeing that charities need long-term and flexible finance that can help them recover and thrive in the future. On June 5th, we hosted a webinar for our private clients with Holger Westphely, the new acting head of CAF Venturesome, Joanne Wedderspoon, Development Manager, and Martin Kirk, Chairman of Bright Futures Nursery, one of Venturesome’s investees.

A summary of the discussion, and most salient points, is below.

History and information on CAF Venturesome:

To date, Venturesome has made 650 social investments to over 500 social organisations. Thanks to 130 generous funders, Venturesome has been able to commit £55 million. It is funded exclusively by philanthropic capital provided by CAF private clients, corporate clients and also other corporate foundations and grant-making trusts.

Unlike grants, which once paid cannot be recouped, loans made by donors to CAF Venturesome from their philanthropic capital are then able to be repaid to the donor after a minimum of three years, and maximum of six years.  The loans can be rolled over at maturity or granted to Venturesome for it to use in perpetuity.  Venturesome estimates 85-90% of the initial capital will be repaid.   

CAF Venturesome Development Fund

Venturesome has three funds: the Development Fund, the Community Led Housing Fund, and the SE-Assist Fund. Our virtual event focused on the Development Fund.

The Development Fund supports UK charities and social purpose organisations working at home and abroad. The fund provides cash flow support to help transition to sustainable business models, investment to help deliver on growth plans or generate unrestricted income, and invests in charity and social impact bonds.

The question of risk was raised by a panellist, and indeed accounting for this is an important part of Venturesome’s work. Venturesome conducts rigorous risk assessments of a prospective investee against their comprehensive risk matrix, which is then reviewed by an independent committee, before making any loans. It is important to remember though that a big part of Venturesome’s mission is to achieve social impact and so it may choose to take on more risk if an investment stands to be particularly impactful. Equally, as loans are mostly unsecured Venturesome anticipates that some of its portfolio will default. Interest rates on Venturesome loans are higher than high-street banks, at around 6.5%, as the organisations that Venturesome supports would not be able to get a high-street bank loan due to lack of assets to use as security.  The money earned from interest charges contributes to Venturesome’s operating costs.

Another question raised was whether Venturesome provides advice and guidance to organisations within its portfolio. Whilst it does not do this formally, the Venturesome investment officers remain in constant contact with an organisation while conducting due diligence and offer help where they can. They can also try to connect interested investors with investee companies if there is a special request to do so. Private client managers can also facilitate here.

Impacts of COVID and the need for longer-term financing

Venturesome has been responding to the COVID-19 crisis in a number of ways. In the short term, loan repayment and interest holidays have been offered where needed, and the team have pointed charities in the direction of emergency funds and other funding sources if they are unable to help. They also anticipate that shorter term loans will now be harder for many investees to pay back in light of lockdown induced cash-flow issues.

In the longer term, Venturesome is exploring new loan products to support social organisations to recover and to enable further growth.

Venturesome is working to increase awareness among funders, as it would like to offer more social investment loans of up to £400,000 repayable over up to 10 years. This longer term financing could include a scaled fee and interest rate charge depending on the length of the loan, capital repayment holidays, and an early repayment option. To successfully do this, Venturesome needs funders to allow them to invest their charitable funds for up to 12 years.

 Investee case-study: Bright Futures Nursery

We were joined by Martin Kirk, Chairman of Bright Futures Nursery, a non-profit day nursery and Venturesome investee.

An excellent example of longer-term finance, Bright Futures Nursery received a 10 year £300,000 social investment loan to open a second, 90 place nursery in a deprived area. The loan will be used to support the internal fit out stage, and initial business growth of the nursery. The longer repayment period means that they will be able to retain higher surpluses earlier in the project for charitable activities.

Working with CAF Venturesome has also been beneficial to the organisation’s planning and operations. The due diligence processes they had to go through was extremely thorough, but as Martin said “conducted in a spirit of partnership and for common goals”. Venturesome’s financial modelling requirements were also exceptionally rigorous and on par with commercial loan standards. In response to COVID-19, Venturesome did request further, last minute, due diligence to assess the impact of the pandemic on their business model.

COVID-19 has impacted Bright Futures Nursery, although in a manageable way. The impact was minimised due to continued “free hours” payments from the local authority and furlough support, meaning that there has been relatively little impact on the actual project beyond pushing back the opening from July 2021 to September 2021.

If you would like to find out more about Venturesome, please get in touch with your Private Client Manager or Joanne Wedderspoon.

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