Guide to applying: Finance Fund

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Priorities - what we fundAudio version of guide to applying

The Finance Fund aims to complement the Foundation’s grant programme by financing projects or organisations that need investment and have the capacity to manage the demands of non-grant funding. By providing money as loans, quasi-equity and other forms of returnable finance, the Foundation will share the risk and return of the investment. As part of the return on our investment, the Foundation hopes to prove a new model for funding the sector: increasing its capacity, building balance sheets and proving that our funding can be recycled.

Our Finance Fund makes loans and other investments into charities and social enterprises in our four grant making sectors; the arts, education and learning, the environment and social change.  At any one time, we have 35 - 40 investment commitments. At the end of 2012, we had over £20 million committed as offers to invest in charities and social enterprises, of which £11.9 million had drawn down. Historically, we have offered over £23 million of facilities to charities, social enterprises and the intermediaries that support them.

We implement these objectives in three ways:

Indirect funding
Putting money into intermediary funds, thereby reaching beyond existing grant-holders to the wider voluntary and social enterprise sector.  Intermediaries like these should be the first port of call for a charity or social enterprise seeking social investment.

Direct funding
Making additional, returnable funds available to charities and other not-for-profit organisations with whom the Foundation has an existing relationship, usually current or recent grant-holders.

Development funding
We internally allocate funds to trial and test new market areas that are not yet considered viable by individual charities or intermediaries. These are experimental and not open to application for funding.

Alongside many others, we have supported the development of a range of social investment intermediaries.  While we are not offering financial advice, our understanding is that the majority of organisations seeking a social investment would go to one of these intermediaries. They have specialist teams dedicated to understanding the propositions put forwards.

To apply for a direct investment in a charity or social enterprise, you can only apply if:

  • you are a current, or recent grant-holder, and
  • your plan is financially viable, but beyond the risk threshold of one of the financial intermediaries operating in the sector.

To apply for us to invest in a social finance intermediary or fund

  • the fund must have charitable objectives
  • the social, environmental, artistic or educational benefits should be primary and clearly articulated
  • its work must predominately be for the benefit of people in the UK.

Further information on what we support

The projects and organisations we support through the Finance Fund have the following characteristics:

  • Charitable

What we support through the Finance Fund must serve one or more charitable purposes.  For guidance on charitable purposes, see the Charity Commission website

  • In line with our mission

The organisation or project must be one that is broadly in line with the funding interests of our Main Fund; arts, education and learning, the environment and social change. We can by exception go beyond these four sectors in the Finance Fund - where an investment will clearly benefit the quality of life of those in the UK, help develop the social investment marketplace, or pioneer a new product or innovative approach.

  • Additional

If a mainstream bank, social finance intermediary, or community development finance institution could finance the organisation or project, they should, rather than us.

  • Reusing and Recycling our money

We aim to recycle our funds and maintain their value for re-use by other organisations.  This means we want our money back, ideally with some kind of financial return, on top of the social return.

  • Co-investing

The Finance Fund may fund alongside another lender to take a higher degree of risk, or different return, or be repaid on a different timescale. If needs be, we will invest by ourselves.

  • Exit

In instances where the need is for very long term funding, or funds are non-returnable (e.g. equity where exit is unlikely), the applicant would have to demonstrate that our funds would result in exceptional leverage of other funding.  We would only invest in this way by exception.

  • Learning

We aim to learn as much as possible from each investment made in the Finance Fund in order to develop both our theory and practice in making investments and grants in the future.

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What kinds of investment instruments do you use?


We are generally not constrained in the kind of instrument we use to make an investment.  We have made secured, unsecured and subordinated loans, bought shares in private companies, limited liability partnerships and industrial and provident societies, as well as revenue participation rights.


What return do you seek?


Ideally we would like our initial investment back, with a financial return to match long term inflation and the risk we are taking.  We are prepared to lower the expectation of return to reflect the social impact achieved by the investment.  In practice, this has meant committing to returns projected to vary from -5% (i.e. we expect to lose 5% of our investment each year), to +20% per annum returns.


How long do you invest for?


We would like to recycle our funds to re-invest them in the next wave of social investments, so we are reluctant to invest where there is no exit, or defined term.  The longest we have invested for is 10 years.  The shortest, 22 months.  Most investments fall in the 4 to 7 year duration.