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Patient capital

A type of social investment which offers long-term loans with typically low or no interest, suitable for projects predicting significant social or environmental impact

What does it mean?

Patient capital is a loan with soft terms (typically low or no interest rates) and over a longer periods (usually more than 5 years).

Who might use it?

Due to the higher risk appetite of patient capital, organisations that might be deemed too risky for conventional investors, and even some social investors, might be able to use this type of financing. Patient capital is utilised in the social sector as some investors might be willing to forgo financial returns for social and environmental impact in the long run. The long-term time horizon allows funds to be used effectively for growth and high-risk, high-impact initiatives.

Most providers of patient capital are also willing to support management with advice as they grow the organisation, so that the probability of high social impact is increased..

Who provides it?

  • Acumen Fund makes debt or equity investments in early-stage enterprises providing deprived consumers with access to healthcare, water, housing, energy, or agricultural inputs from $300,000 to $2,500,000.
  • Big Issue Invest can provide loans between £50,000 and £1m and is able to partner with other organisations for investments above this limit.
  • CAF Venturesome offers loans between £25,000 and £250,000 specifically designed to meet the needs of small and medium sized charitable organisations.
  • Charity Bank can provide charity loan funding from £50,000 up to £2 million for up to 25 years.
  • Esmée Fairbairn Foundation provides patient capital to charities and other not-for-profit organisations with whom the Foundation has an existing relationship, usually current or recent grant-holders.
  • Impetus Fund provides unrestricted funding between £200,000 and £500,000 over a longer term (4-6 years on average), combined with hands-on management support and specialised expertise.
  • Social Business Trust helps established social enterprises scale-up their operations regionally and nationally with loans and support.
  • Social Investment Scotland loan finance is available for social enterprises in Scotland, with loans from £10,000 to £250,000, or more if appropriate.

Case study - Esmée Fairbairn Foundation

Esmée Fairbairn Foundation is one of the largest independent grant-making foundations in the UK and funds organisations that have the ideas and ability to achieve change for the better.  In 2005 they approached Cockpit Arts, the UK’s only business incubator for designer-makers, to explore the impact of offering small loans to micro craft businesses.

The overall purpose of the project is to studio holders at Cockpit Arts to maximise their business development and growth potential through the provision of soft loan finance and intensive business support.  This was achieved via:

  • Investment in Cockpit Arts in the form of a £160,000 grant over 6 years to support capacity building, salary costs of a Business Development Manager
  • A loan fund of £100,000 to lend to Cockpit Arts studio holders
  • A £10,000 grant to undertake an independent Social Return on Investment evaluation of the pilot project

The project began in March 2006 with the appointment of the Business Development Manager to set up and manage a pilot loan fund over a period of three years.  The pilot has provided £ 94,780 in loan funding through 21 loans to 15 individual applicants and was evaluated in 2011.  The scheme has been highly successful and has a zero default rate.  Loan recipients have reported an average increase in turnover of 28%, and an average in profits of 75%.  The success of the scheme has enabled Cockpit Arts to secure a loan fund partner beyond the pilot and become an authority in business development for craft businesses.

Page last edited Oct 22, 2015

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