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Secured loan

How to use your tangible assets to raise funds – a type of social investment

What does it mean?

The borrower will pledge a tangible asset (known as 'collateral') such as a building or equipment to receive a loan. In the event of a default, the lender can take possession of the asset which can then be sold to recoup the loan. A long-term, secured loan on property is known as a 'mortgage'.

Who might use it?

An organisation that owns an asset will be able to secure a loan against this asset for a variety of purposes such as  growth, working capital or for specific projects. This security reduces the risk for the lender; thereby reducing the loan interest rate. The lender will have a fall-back option of selling the asset in the event of a default. The security is typically in the form of property or equipment, but can also be cash deposits.

The borrower must still demonstrate that it will be able to repay the loan from its income streams as the lender would rather have this than take the more expensive route of selling the collateral. If a loan has a term of more than five years, it will usually need to be secured as there is less certainty about future income to repay the loan.

Who provides it?

  • Big Issue Invest can provide secured loans between £50,000 and £1m and is able to partner with other organisations for investments above this limit.
  • CAF Bank offer secured loans to charities from £50,000 to £5m.
  • Charity Bank can provide secured loan funding from £50,000 up to £2m.
  • Commercial banks and specialist banks would be likely to provide secured loans to civil society organisations due to the collateral offered (eg HSBC, Natwest, Barclays etc).
  • Co-operative & Community Finance can lend from £10,000 to £75,000, but is able to lend up to £150,000, to organisations that are owned and democratically controlled by their members.
  • The Co-operative Bank offers a medium fixed rate loan from £25,000 and £100,000 for up to 5 years which can be extended to ten years. A variable rate loan can also be offered tailored to each client’s needs.
  • Social Investment Scotland loan finance is available for social enterprises in Scotland, from £10,000 to £250,000 or more if appropriate.
  • Triodos Bank provides secured loans between £25,000 and £15 million for organisations that have been operating for three years or more.
  • Unity Trust Bank offers a variety of secured loans from £50,000 to £6m.

Case study: The Cooperative Bank and Le Personne Homes

Le Personne has provided high quality sheltered accommodation for elderly women at their Banstead Road Almshouse location for more than 50 years.

In 2011, Le Personne completed a major expansion of a sheltered housing complex in Surrey thanks to a £400,000 secured loan from The Co-operative Bank.

The charitable trust used the funding facility from the Bank to refurbish and expand the east wing of its facilities at Caterham on the Hill. Additional funding was provided by a social housing grant from the Homes and Communities Agency (HCA).

The £400,000 loan is the second substantial financial package provided by the Bank’s specialist Charity and Social Enterprise Banking team in the past two years and takes its total lending to Le Personne to about £1.03m.

The first financial injection – a secured loan of £630,000 – allowed Le Personne to replace ten studio flats with hi-spec self-contained units, complete with separate bedrooms and living rooms. This allowed them to attract new tenants and realise much greater income from their existing assets, boosting the long-term sustainability of Le Personne and the social impacts of their service.

John Rawling, chair of trustees of Le Personne, said: 'The support and understanding of David and his team at The Co-operative Bank allowed us to refurbish Le Personne Homes to an incredibly high standard. Our residents are truly delighted with the new accommodation.'

David Bolton, relationship manager at The Co-operative Bank’s Charity and social enterprise banking team in London, said:  'We were pleased to provide a funding package that allowed John and his fellow trustees to provide the residents of Le Personne with truly state-of-the-art accommodation.

'Our support for this outstanding project shows that even in today’s uncertain economic climate we’re still lending to businesses with impressive business strategies.'

Find out more about The Cooperative Bank’s social banking services for charities and social enterprises.

Page last edited Feb 13, 2017

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