Good Finance – Dudley CVS blog

A couple of weeks ago, I headed to Birmingham for the Good Finance Live event on social investment to meet experts, social investors, not-for-profits that had accessed social investment and, hopefully, to bring some useful information and ideas back to Dudley borough.

I’ve become increasingly interested in social investment opportunities that may be appropriate for some not-for-profits in Dudley borough, and I think there’s untapped potential there and it seems to be growing, judging by the number of social investors brought together at the event.

I should say that social investment won’t be for every organisation because of its repayable nature. For instance, it wouldn’t suit an organisation that provides free services because that organisation would find it difficult to raise enough money to pay off the investment. But for an organisation that has something to trade, be it facilities for hire, goods, merchandise or services to sell, social investment could be a feasible source of finance to help it develop. As I’m seeing more requests for support around social enterprise development and community asset transfer, repayable finance might be an appropriate option for these types of organisation (a social enterprise is set up to trade to achieve its social or environmental purposes and an organisation with facilities might be able to generate an income from hiring them out).

So what did I get from the day?

Generally speaking, social investment is repayable finance where the investor wants to receive a social return as well as a financial one. But within that, there are many different types of social investment. The conference centre at BVSC was packed with different social investors that support charities and social enterprises. Between them, they provide a whole range of social investment options, such as:

secured loans
unsecured loans
community shares
social impact bonds
blended finance
equity
social investment tax relief (SITR)

A mind-boggling array of options that may sound very daunting. You can find out more about them here on the Good Finance website.

On top of that, while some investors offer general support to any type of not-for-profit, there are some that are interested in certain areas of work or themes, like:

Nesta Arts and Culture Finance
PICNIC – which is interested in delivering social and environmental impact in parks and green spaces
Sporting Capital – which supports organisations that help communities through sport and physical activity
Homeless Link – which supports organisations that aim to reduce homelessness

As well as meeting social investors, it was incredibly helpful to meet and hear from organisations that had been successful in raising one or more kinds of social investment. Particularly inspiring were contributions from:

Wellington Orbit, a cultural hub owned by the community who raised finance through a community share offer and incorporated social investment tax relief SITR into its funding mix in order to open a community cinema and cafe bar
Creative Optimistic Visions CIC, run by the passionate Stacey who shared her journey from setting up her CIC from scratch, being supported through UnLtd finance and mentoring to taking on blended finance, allowing the CIC to employ staff and expand its work

These examples really demonstrated that social finance is not only for large organisations and already well-resourced organisations.

If you’re interested in finding out more about social finance, I’d always recommend learning from other organisations that have gone through it. Many will be happy to share their experiences and learning with you. As well as the two listed above, a couple of months ago I posted about Stretford Public Hall, which ran a successful community share offer.

I’d also recommend starting with the Good Finance website, which is packed with tools and resources to help you decide whether social finance is a good option for your organisation and what social finance options might be most appropriate. It’s a great source of information.

Finally, I’m doing some work behind the scenes to increase knowledge and understanding of social finance in the Dudley borough. This might include sharing more information about social finance, increasing our skills and bringing in experts who can give support and encouragement. If you’re interested in learning more, or getting involved in any initiatives around social finance in Dudley, please let us know and we can keep you informed.

If you’re thinking of taking on a community building or facility, check out this excellent short webinar from Good Finance. It’s called ‘How to build a cocktail of funding for your community group’, but it covers so much more than that, as we all know that funding is about much more than asking funders, donors or supporters for money!

This webinar covers the things you’ll need to think about before you start and has a useful overview of fundraising options from Locality, as well as an introduction to social investment from Good Finance. It also contains an excellent case study from Stretford Public Hall, whose members brought its community together to bring a disused public building back to life, and ran a successful community share offer to raise the finance needed. Take a look at the webinar below.

Here are the main things that I would take away from the webinar:

Funding options (led by Debbie Lamb, from Locality)

Business planning is incredibly important. You’ll have to be clear about what the running costs will be and what will generate income, as well as having a good sense of the advantages and risks of running a community building.
Be dispassionate. Try to be realistic about how viable this is and don’t let your emotions lead you to take on something that has very slim chance of success.
Think about your organisational structure and the people you have. Does your structure help you to manage risk and liabilities? Does it allow you to borrow (if you plan to borrow)? Does it allow you to raise money through a community share offer (if you plan to do this)? Do you have the right amount of people with the necessary skills and expertise to work as a team?
You’re more likely to be raising money through a ‘patchwork’. It’s very unlikely that you will have just one source of income.

This all chimes with my experience of supporting nonprofits with community asset transfer and funding. The strength of the team and its planning is really crucial to success.

The one thing I’d add here is that evidence of community involvement and buy in is equally important. It’s one of the key things Dudley Council will take into account when making decisions on bids for community asset transfer and funders like the National Lottery Community Fund make community involvement a key criterion of all its programmes. You’ll need to be able to demonstrate that the community has been involved in the development of your plans and that the community wants your project to happen!

In terms of community asset transfer in Dudley borough, Dudley Council has made a ‘How to’ guide which tells you what they look for in a robust business case and I’ve made a template business plan which is based on this. What the local authority will look for can be boiled down into a few things:

Realistic costings, projections and sources of income: Do you know what condition the facility is in? Does any money need to be spent to bring the building back into use and if so, where is this money likely to come from? Do you already have some confirmed resources to put into it? What are the likely running costs?
Robust income-generation model / evidence of sustainability: What activities will bring in income? How realistic are these? Have you spoken to people who are willing to spend money here? What evidence do you have to show that your income will be able to cover running costs?
Benefits for the whole community: How will the community benefit? How will people be able to get involved? What positive difference will this make? How will your activities link to local and national strategies? If your building will be used for just one type of activity, it’s less likely to get support.
Evidence of community-involvement in the plan: How have members of the local community been able to have a say on what will happen at your facility? Can they be involved as members or will they be able to have a stake in your project?

2. Social investment (Kieran Whiteside, Good Finance)

Social investment comes in many forms and, although it’s not particularly new, it’s constantly evolving. Not many of the organisations I’ve worked with have wanted to consider social investment, being put off by its repayable nature. In the current climate, though, I think groups should seriously consider it.

The starting point is to learn about what it is to find out about what type might suit you. And in this webinar, Kieran gives us a brief overview of what social investment is and what tools can help you to get started:

Social investment is repayable finance, where the investor looks for a social as well as a financial return on their investment. This means you need to be clear about what you need the money for, whether there’s an income stream that will help you to repay, and what social impact you will create (this is about ‘outcomes’ and I recommend the now archived ‘Getting funding and planning successful projects’ guide from National Lottery Community Fund back when it was known as the Big Lottery Fund).
The Good Finance website can help you to understand social investment. It has a diagnostic tool to help you to understand whether social investment is right for you and the type of social investment you should consider.
Community shares: This involves raising money from the community by issuing shares in the organisation through a formal community share offer. It’s a great way of demonstrating real community buy-in for a project, but only certain types of organisation can issue shares. The Community Shares Unit is a good source of information.
Blended finance: This type of social investment is typically a grant + a loan. It’s more common for investments of £250,000 or less.
Secured loans: Like a mortgage against an organisation’s asset. This means that the organisation needs to own a building / asset for use as collateral. Social banks, some high street banks and some specialist funders offer secure loans with typically lower interest rates.
Finally, crowdfunded investment: Different from rewards-based crowdfunding (Kickstarter, for instance), but more like peer-to-peer lending. You’ll find more information on Ethex or Community Chest

3. Case study of Stretford Public Hall, which ran a successful community share offer (Simon Borkin, Stretford Public Hall)

I was really inspired by the story Simon told of Stretford Public Hall and the power of a community coming together to make things happen!

Stretford Public Hall is a Grade II listed Victorian building that fell into disuse (for the second time) in 2014. In 2015 the Friends of Stretford Public Hall successfully used the Localism Act to get the building listed as an asset of community value. The group secured the freehold of the hall from Trafford Council which meant they could start refurbishment.

To raise money through a community share offer, the Friends of Stretford Public Hall had to set up as a community benefit society (or Ben Comm) so that the organisation could issue shares. This allowed members to invest in the organisation in return for shares, but the principle of the Ben Comm is that each member gets one vote, no matter how many shares they bought.

To set up a community share offer, the organisation had to draw up a business plan and a formal share offer document. Both of these are available on the Stretford Public Hall website, along with lots of other information about how the organisation is run.

What struck me most about this case study was the importance of engaging with the community and the real openness to involving the community in the organisation’s set up and decision-making. It really shows that the friends of Stretford Public Hall did the legwork to make sure the community was engaged and motivated, resulting in the organisation successfully raising £255,000 over 56 days from 790 people in the community and 7 organisations. It’s that kind of community involvement that decides whether a venture will succeed.