Published: September 14, 2021
Unity Trust Bank and Big Issue Invest took part in a webinar for SEUK members to give an insight into what social enterprises should consider when applying for finance.
They focused on the common mistakes organisations make and offered tips on how to avoid them.
The full webinar featured David Chick, Unity’s Head of Underwriting, and Kevin Lloyd-Evans, BII’s Head of Lending, but this is a summary of how to overcome the key pitfalls:
Remember that focussing on social impact is just as important as presenting your financial position and forecasts. When talking to social lenders, you should be very clear about your objectives and how you will achieve them, and be able to articulate what your social impact is and how you measure it.
Think about what you actually want from a lender and look around for the best one to suit your needs. Good Finance is a website which offers a list of organisations that provide finance and support so that you can understand whether you’re speaking to the right organisation.
Doing a bit of research before you approach a lender can be really useful. Speak to other organisations that have been through the same process with a particular lender as this will give you a valuable insight into what to expect – in the same way you would ask a friend for a recommendation for a plumber!
Reach Fund is also a good tool and mechanism for getting support, especially if you’re a smaller organisation and need advice from a consultant who can put the finishing touches to your proposal.
Applying for investment is completely different to applying for grant funding which is often determined via a written application. A lot of social enterprises are not prepared for the questions they will be asked, but social investors will want to talk to you one-to-one and really understand your business. They will spend time going into a lot of detail and this sometimes catches people out.
So, be open in your pitch and presentation. Social investors want to know the true reality of your situation. They will gather lots of information and go through a due diligence process. Everyone who applies for a loan will say the repayments are achievable, but lenders will want to know why they are achievable.
Don’t look upon this process as a negative. There are lots of social investors out there that want to help people. Understand why you are being asked the questions and be very open about the information you provide.
Lenders will want to know what key risks are involved in lending you money. These include key person dependency, as while it’s often the passion of individuals and founders which make an organisation successful, if they leave then this could also be a risk to your future plans.
Lenders will also want to look at things that may prevent them from getting their money repaid so understand your cash flow risks, and as part of your overall proposal consider different scenarios that might affect your plans.
Most social lenders are keen for mixed funding opportunities so explore what other options are available to you. Be clear at the start of the journey whether you would be eligible for part of the funding from other sources. For example, obtaining 50 per cent of the capital you need from a grant funder could be quite attractive to social lenders.
For more information on how Unity Trust Bank can help your social enterprise, contact us directly on 0345 140 1000 or visit www.unity.co.uk/contact-us/.
