In light of the Covid-19 crisis, social investors are looking at a number of options to help the sector, including exploring new funding and adjusting existing funding. You may have seen that the Growth Fund has announced significant changes to the Fund in response to the pandemic.

In this post by Melanie Mills (Social Sector Engagement Director, Big Society Capital) we explore what these changes mean and what is important for charities and social enterprises to be aware of.

1. What is the Growth Fund?

The Growth Fund is a partnership between Big Society Capital, Access and other partners. It was designed to provide the finance that charities and social enterprises need for growth, or diversifying their business models. The fund is aimed at organisations which are unlikely to have taken on social investment before.

The finance offered is principally in the form of small, flexible, unsecured loans, to organisations seeking to use the funds to create more social impact. Those social investors delivering the Growth Fund can offer charities and social enterprises up to £150,000 of flexible finance by combining grants with loans into simple products. The Growth Fund is delivered through social investors.  You can find a full list of the Growth Fund Investors here.

2. What are the changes?

The changes include:

  • A six month interest-free period for the Growth Fund social investors on their loans from Big Society Capital and a term extension; and
  • Relaxing of some of the parameters, covenants and reporting requirements of the programme.

You can find out more about the changes via this blog post.

3. What does the Growth Fund announcement mean to social enterprises and charities?

There are over 400 social enterprises and charities that have received investment from the Growth Fund and could now benefit from these new measures.

The Growth Fund partners have worked together with all the social investors delivering Growth Fund investment to create maximum flexibility. The aim of this action is that no enterprise in receipt of Growth Fund investment should be required to make any cash payment on a loan or investment they can’t afford at this time.

Big Society Capital have prioritised working with their partners to focus the response on borrowers from the Growth Fund first. Many of the recipients of Growth Fund loans are small organisations, which tend to be more fragile with limited sources of income and small teams and are likely to be disproportionately affected by the COVID-19 crisis.

4. Will every social enterprise and charity which has borrowed money via the Growth Fund see an automatic or blanket approach to their borrowing?

It’s anticipated that these changes will enable all Growth Fund social investors to respond to the individual circumstances of each of their social enterprise or charity customers.

There are, of course, always exceptions. For example, where a borrower is unaffected and has a steady income from rent – then the borrower might not actually want to suspend repayments. There is no one size fits all solution. The aim is to make it possible for all Growth Fund borrowers who need help, to get it.

If you have received investment via the Growth Fund, lenders are expecting and will welcome your call. Please get in touch so you can work out the best course of action for your own organisation.

5. What happens if my lending is not via the Growth Fund, but another social investor, and my social enterprise or charity is experiencing difficulty?

The overriding message from all social investors, whatever the source of your borrowing has been, is that if you are experiencing difficulty, then please contact your social investor as soon as possible.

They are all here to help and each organisation can expect personalised and individual support. You can find a full list of social investors here

4. Are social investors, including the Growth Fund, still open for business?

The Growth Fund is still open for business; however, most investors are focusing on their existing relationships as it may be that they require more immediate assistance.

We are conscious that in some cases emergency liquidity and cashflow might require further lending. We have been working closely with Growth Fund partners to relax current conditions, wherever this is deemed helpful to the social enterprises or charities that might be looking for this type of support.

5. Who is supporting the social investors who lend Growth Fund money?

The Growth Fund partners are also looking at ways to support the social investors, many of whom are social enterprises themselves.

6. Why doesn’t Big Society Capital repurpose its £600m as talked about in recent news articles?

Big Society Capital has received £580m of funds to date. Much of this is from dormant bank account money, and some is from its mainstream bank shareholders. To date, Big Society Capital has committed £600m. Of this, £348m has actually been drawn down and spent.

Of the remaining £252m, Big Society Capital is currently working with all the investors who they have currently committed funds to in order to understand their needs at this time. The impact of committed funds is being reviewed, so that options available to Big Society Capital and to the organisations where this investment has been assigned can be considered.

You may have seen the call from NCVO for an aid package of £400m, or the forecast that over the next 12 weeks, charities will lose over £4bn of income - this amounts to more than the top 300 foundations give in grants in a year. We know that what remaining money we have is not enough, and we are actively supporting our sector partners as they lobby for dedicated support for charities and social enterprises; including grants, which is likely to be the most needed type of income required now #EveryDayCounts.

We agree with the sentiment expressed by others that not acting now would be unforgivable and we are committed to exploring every option. Alongside this, we stand united with the social enterprises who are needed now more than ever, and we are exploring how to put our remaining capital, current resources and considerable networks to best use.

7. How do I find out the latest information from social investors?

Good Finance has just launched a dedicated resource hub with all the latest information, signposting and government advice.

Our advice, as always before but especially during Covid-19, is if you have received social investment to get in touch with your social investor as soon as possible. Read more about building honest and strong relationships with social investors in our 7 Lessons Learned series.

If you have a question not answered there or think there are resources we are missing, please do get in touch: