- Jump to:
- Secured (debt) loan
- Senior debt (loan)
- Social enterprise
- Social impact
- Social Impact Bond (SIB)
- Social investment finance intermediary (SIFI)
- Social Investment Tax Relief (SITR)
- Social investment wholesaler
- Social sector organisations (Third Sector)
- Standby or revolving credit facility
- Subordinated or junior debt/loan
In relation to an organisation's accounts. a financial benefit recorded on a balance sheet. Assets include tangible property (i.e. a property with a physical form such as buildings, equipment and vehicles) and intangible property, and any claims for money owed by others. Assets can include cash, inventories, and property rights.
A general term used to cover all the provisions designed to ensure that the assets of an organisation, including profits or surpluses generated, are used for the benefit of its community or to further its activities and mission.
Where a charity or social enterprise takes ownership of a building previously owned by part of the public sector; the building is usually one that is particularly valued by the local community.
This is sometimes called the ‘Bank of England base rate’ or ‘Bank Rate’. It sets the level of interest all other banks charge borrowers and its purpose is to help regulate inflation. Some social investors set their interest rates relative to this rate of interest e.g. base rate + 2%. It is important to understand how the cost of interest will be calculated on any money you are looking to borrow.
is mix of investment - part repayable finance and part grant. Specialist social investors and grant makers may offer this, but you can also source blended capital yourself by applying for both grants and loans.
a promise by a borrower (the issuer) to repay money to an investor (the bondholder) usually with interest (the coupon). The issuer borrows money by selling bonds to bondholders; the issuer receives the money and the bondholder receives a promise from the issuer to repay the debt at a later date, with interest (usually through a written contract).
Is a new scheme introduced to help smaller businesses impacted by COVID-19 access repayable finance. Social enterprises and charities can apply online to borrow £2,000 - £50,000. Because of the government guarantee, the loan is interest free for the first 12 months and then subsequently carries a 2.5% interest rate.
A period of time, usually at the start of a loan, where the lender agrees to receive only interest payments, so the borrower won’t pay back any of the original capital lent during this period. This is usually used to allow new trading activities time to generate revenue before the full cost of borrowing kicks in, or to help improve cash flow during tough periods of trading.
the actual cash held by an organisation over a given period. A cash flow forecast shows the total expected outflows (payments) and inflows (receipts) over the year, usually on a monthly or quarterly basis. It is an essential tool for understanding where there will be shortages and surpluses of funds during the year and planning for ways to resolve these.
Is investment capital that is patient, risk-tolerant, concessionary, and flexible and is an approach used to support impact-driven enterprises that lack access to capital on suitable terms and to unlock impact and additional investment that would not otherwise be possible.
a private financial institution that provides affordable loans and support to businesses, social enterprises and individuals who struggle to get finance from high street banks and loan companies.
refers to withdrawable share capital; a form of share capital unique to co-operative, community and charitable benefit societies. Investors are able to take their money out (subject to any conditions) but the shares are not transferable to another person.
is a way of raising finance (donations/grant, equity or debt) from a 'crowd' of people - typically using an online platform. Equity or debt raised using crowdfunding is repayable on an agreed basis with the individual investors, usually with interest on top.
investment with the expectation of repayment (usually with interest). Debt finance usually takes the form of loans, both secured and unsecured, as well as overdrafts and standby facilities or standby facilities (e.g. bonds or loan notes). Generally, debt financing requires a borrower to repay the amount borrowed along with some form of interest, and sometimes an arrangement or other fee.
investment in exchange for a stake in an organisation, usually in the form of shares. Each share represents ownership of a proportion of the value of the company and typically provides the shareholder with voting and dividend rights. Equity finance is permanently invested in the organisation which has no legal obligation to repay the amount invested or to pay interest. Equity investors expect to receive dividends paid out of the organisation’s earnings available for distribution and/or capital gain on the sale of the organisation or on selling their shares to other investors. See product types for more information.
This may also be known as an arrangement fee. It is the cost charged by an investor to structure a deal and will cover staff time, overheads etc covering their professional services to the investee.
the monetary surplus generated by an organisation on an investment. It may be expressed as "not" (i.e. after deducting all expenses from the gross income generated by the investment) or "gross".
it is possible to have different tiers of investors so that one set of investors accepts that, in the event that the investee suffers financial difficulties, it will lose the money it invested before any of the other investors lose any money. This investor will bear the ‘first loss’.
a collective investment scheme that provides a way of investing money alongside other investors with similar objectives on a pooled basis. This often provides individual investors with access to a wider range of investments than they would be able to access alone and may reduce the costs of investing due to economies of scale. Funds are managed by fund managers for a management fee on behalf of investors.
fee paid by a borrower to a lender to pay for the use of borrowed money. When money is borrowed, interest is typically paid to the lender as a percentage of the amount owed. Interest usually accrues on a daily basis but is charged less frequently, e.g. monthly, quarterly or annually.
refers to the availability of cash that an organisation has to meet short-term operating needs. It is the amount of liquid assets that are available to pay expenses and debts as they become due.
present value of expected future cash in ﬂows minus the present value of cash outflows e.g. the amount of investment and any initial and ongoing investment costs. Often used in capital budgeting to determine whether or not to make an investment (if negative, the investment should not be made).
share in the ownership of a company that gives the holder the right to receive distributed proﬁts and to vote at general meetings of the company. An ordinary shareholder ranks behind all other creditors/investors if the company is wound up.
an amount agreed between a borrower and a lender (typically the bank of the borrower) up to which an organisation can borrow when it needs funds rather than in one lump sum. Overdrafts are repayable on demand by the lender. Interest is usually paid on the amount of money that is borrowed until it is repaid and rates are usually higher than for standard loans. See product types for more information.
loans or equity investments offered on a long-term basis (typically 5 years or longer). It is often used to describe long-term investment by investors looking for non-financial as well as financial gains and may be offered on soft terms (e.g. capital/interest repayment holidays and at zero or sub-market interest rates).
investors investing directly into borrowers (rather than in a financial institution) typically using online platforms that match (usually individual) lenders with borrowers to create crowdfunded loans for both business and individuals. See product types for more information.
Capital offered for investment which focuses more on the impact that an organisation is delivering on instead of the potential return of investment. As a result this type of capital is usually able to tolerate making higher risk investments.
Social investment products range from well-known mechanisms, such as overdrafts and mortgages, to more unfamiliar forms such as quasi-equity and patient capital. There are two main types of social investment - Borrowing (debt) or Shares (equity). Click here for more information on the full range of products.
also known as an income and expenditure account, it shows income earned for the year and deducts from it all expenses incurred in earning that income. This will show a profit (surplus) or loss (deficit) for the year, depending on whether income is larger than expenses or expenses have exceeded income.
This factors in the likelihood of the investment being paid back. For example borrowing money to buy an asset such as a building which is considered to be lower risk than lending money to a start up organisation with no proven track record.
a loan that is backed by property (in the case of a mortgage) or assets belonging to the borrower. This may be the property or asset that is being bought with the loan itself or other assets held by the organisation. If an organisation defaults on its debt, the lender can sell the asset to recoup, in full or in part, its loan. See product types for more information.
debt that takes priority over other unsecured or otherwise more junior (or subordinated) debt. In the event that the borrower organisation is wound up, senior debt theoretically must be repaid before other creditors receive any payment.
a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. #SocEnt
there is no one definition of the term or concept, but the social impact can be defined as the effect on people that happens as a result of an action or inaction, activity, project, programme or policy. The 'impact' can be positive or negative and can be intended or unintended, or a combination of all of these.
a payment-by-results contract where social investors pay for an organisation to deliver a service - for example, helping homeless people to find a home - and the commissioner (typically government or local authority) repays the investors with interest if the service is successful unlike a conventional bond, they do not offer a fixed rate of return. See product types for more information.
an organisation that provides, facilitates or structures financial investments for social sector organisations and/or provides investment-focused business support to social sector organisations.
offsets the risk to investors by offering a 30% tax relief on qualifying investments. It can be used by eligible social enterprises, charities and community businesses to raise patient, flexible and more affordable capital to support their trading activities.
an investor which makes larger investments in funds or financial organisations (social investment finance intermediaries) that will themselves invest smaller amounts in a number of charities and social enterprises. Big Society Capital is the UK social investment wholesaler.
charities and social enterprises that exist primarily to deliver social impact; that reinvests the majority of surpluses to further their social mission; and that are independent of government. The social sector includes, but is not limited to voluntary and community organisations, charities, social enterprises, community interest companies and community benefit societies. The social sector is also referred to as the "Third Sector".
usually provided in the form of a loan where money can be drawn down over a certain period of time when an organisation needs it (if budgeted income does not materialise), rather than as one lump sum. Interest is charged only on the funds drawn down. This is similar to an overdraft but is typically repayable on a fixed date (rather than on-demand).
debt which is ranked after other more senior debt. In the event that the borrower organisation is wound up, subordinated debt will be paid only after other senior creditors have received payment. This is a riskier investment for a lender and is therefore typically lent at a higher interest rate than senior debt.
approach to measuring a company’s performance on environmental, social and economic issues. The triple bottom line focuses companies not just on the economic value they add but also on the environmental and social value they add or destroy.
when all or part of the value of an asset (e.g. an investment) as shown in an organisation's accounts is reduced. In respect of an investment, this may occur when the investor considers there is no likelihood of any recovery of the amount invested.