Securing Finance

Successful fundraising happens through good planning and investing time and energy in the process. Generally speaking, prospective funders will look more favourably on community based organisations which can demonstrate their credibility in the following ways:

• A proven track record in the field.
• An appropriate structure.
• A thorough feasibility study.
• A business plan.
• Support of partner organisations, (which themselves have credibility).
• Community support.

New organisations generally need to start small and build up a track record to access larger amounts of funding and there are several small grants that may be suitable for piloting projects.

The finance that can be accessed depends on the legal structure of the community based organisation looking for funds, what type of project is being financed and when and how much funding is required.

• Grant Funding
• Equity
• Loans
• Patient Capital
   

Grant Funding

Grants are non returnable funds provided for projects. Sources of grants may include:

• Charitable Trusts and Foundations: Primarily fund registered charities. They are unlikely to fund statutory library services viewed as the responsibility of the council, but they may well fund related or complimentary activities.
• Local Authorities: In addition to procuring service contracts, local authorities might be a source for grants, but they may have very specific requirements in terms of activity targets, evaluation, etc. Local authorities can be important sources of professional or technical expertise to support funding applications.
• Public Agencies: Police, Fire, or Health Authorities sometimes offer local grants for projects that contribute to their objectives.
• Government Departments: Offer grants for specific programmes from time to time. Government funding programmes may also come with conditions related to the development of the project, (e.g.: tendering options). Grant conditions may also affect the use of any revenue generated by the project in the future and may require re-payment or "clawback" of the grant.
• Private Companies: Sometimes offer grants linked to their corporate social responsibility policies. For example, local branches of some supermarkets may offer local community grants.

A good free to use grant research tool is ‘Funding Central’, see featured resources for other sources of grant funding. Grants available from central and local government and other government bodies are sometimes affected by State Aid rules. Where the grant is considered to give the organisation that is receiving it an unfair competitive edge on other business organisations, it is called State Aid and is illegal.

the mycommunityrights website provides information on support and funding available to organisaions seeking to take on the delivery of pubic services or management and ownership of public buildlings.

Equity

Equity finance is capital invested in a business for the medium to long term in return for a share of the ownership and sometimes an element of involvement in the operation of the business / organisation. Rates of return on investment that may be required by investors will vary.

Equity can be raised from a share issue, venture capitalist or a 'Business Angel', (who will provide some support to the organisation’s development as part of the arrangement).

This type of finance is not available to some kinds of organisations and is often unsuitable when the project aims to provide ownership and control of the assets and income from them to a community based organisation.

There is particular and growing interest in Community Shares as a model of raising equity finance. See the featured resources for more information.

Loans

These are funds made available over a set period. The main loan has to be repaid as well as the costs of the loan, (interest), with an agreed repayment schedule. They come in a large range of shapes and sizes and have varied rates of interest. There are fees to pay when they are arranged.

Some loan funds require security to cover the loan and lenders may wish to 'take a charge' on the property involved. This is registered at the Land Registry and although it does not convey ownership or possession rights, it provides that if the property is sold, the value of the charge will go to the lending organisation.

Sources of loan finance include the major commercial banks, many of whom have specialist teams dedicated to the community and voluntary sector, e.g.: RBS Nat West https://www.rbs.co.uk/corporate/sectorexpertise/g1/notprofit.ashx

Specialist lenders for community asset development include:

• Unity Trust Bank (UK wide) https://www.unity.co.uk/
• Charity Bank (UK wide https://www.charitybank.org/Home.aspx
• Triodos Bank (UK wide) https://www.triodos.co.uk/
• Cooperative and Community Finance (UK wide https://www.icof.co.uk/
• Big Issue Invest https://www.biginvest.co.uk  
• Venturesome (UK wide https://www.cafonline.org/default.aspx?page=6903

Many English regions have specialist lenders supporting asset development, e.g. Key Fund Yorkshire https://www.keyfundyorks.org.uk/, Wessex Reinvestment Trust https://www.rise-sw.co.uk/modules.php?op=modload&name=Sections&file=index&req=viewarticle&artid=11 Foundation East https://www.foundationeast.org/ and London Rebuilding Society https://www.londonrebuilding.com/.

The Carbon Trust offer 0 percent loans to purchase energy efficient equipment. Repayments are calculated to be offset by monthly savings. For more information see www.carbontrust.co.uk.

Patient Capital

These are loan and grant combinations which take a long term view of the development of community based organisations and their activities. Some are available for community based organisations who want to acquire and develop land and building assets; others are focussed on organisations that want to deliver public service contracts in the areas of health and social care, crime reduction, education and support for children and young people.

Key Questions:

• Is there a fundraising strategy in place that is prioritised at those prospects most relevant to the community organisation, the project and the sums required?
• Are all stakeholders satisfied that any capital costs required can be secured?
• Have pre-application discussions taken place with potential funders?
• Has the time required to raise the necessary funds been factored into the development process?