Fast funds and flexibility promised under UK's Resilience and Recovery Loan Fund

Senior figures behind the UK’s new emergency fund for charities and social enterprises hope to be issuing loans within a month – and have said they're willing to adapt what’s on offer if it’s not meeting the needs of potential borrowers.

Last Thursday social investors announced a £100m loan package to support organisations struggling as a result of the Covid-19 pandemic. It includes a £25m Resilience and Recovery Loan fund (backed by the government's existing Coronavirus Business Interruption Loan Scheme) and a £29m fund to lend to small businesses in deprived areas of the country, plus up to £50m more from Big Society Capital as needed.

Social Investment Business will run the Resilience and Recovery fund, and applications should be open by the beginning of next week with a turnaround time of three weeks or less, according to SIB CEO Nick Temple, who was speaking on a webinar on Tuesday hosted by the Impact Investing Institute.

Big Society Capital’s outgoing CEO Cliff Prior – due to take up a new role as head of the Global Steering Group for Impact Investment next month – acknowledged that most social organisations right now need grant funding. Debt finance would help only “some, by no means all” organisations: “Loans… can’t replace revenue. They can only help if you believe you will have revenue now or later.”

Fortnightly reviews

The Resilience and Recovery Loan fund aims to fill the gap left by CBILS, which few social enterprises and charities have been able to access – partly because the high street banks authorised to issue the government-backed loans are not doing so quickly enough, and partly because they are often unfamiliar with social enterprise business models. Now, businesses will be able to apply for loans from social investors including Charity Bank, Social and Sustainable Capital and Big Issue Invest.

The new fund is expected to offer loans of £100,000 and upwards. But, with criteria being “developed at speed”, this figure is so far based on anecdotal evidence of needs, and Temple said that if there was significant demand for smaller loans they would try to accommodate them. Social Investment Business is looking to review the process at least every fortnight, he added, to allow for changes “if we’re not getting it right”. 

'Funding in two months’ time is no use, it’s got to be quick' - Cliff Prior

Prior echoed this, saying things were “moving very fast” since last week’s announcements – and that his organisation would be looking at how things evolved, ready to “make improvements if needed”. Speaking about the need to balance both “revival and survival” phases of the crisis, Prior said that in many cases, funding in “two months’ time is no use, it’s got to be quick”.  

The Resilience and Recovery Fund aims to help otherwise viable organisations facing an interruption in income, for example through delays in trading income, contract payments or delayed receipt of furlough payments. Temple said it could also support increased demand or scaling up existing services, but would be unlikely to be available for pivoting a business or for refinancing.

More money needed

Prior also revealed that Big Society Capital has undergone a “total replanning” of committed money to reevaluate how much would be drawn down, how quickly returns would come back in, and which loans could be repurposed, among others. This had turned up “about £100m” that the wholesaler can commit to Covid-19 efforts – which reduces how much it can commit to new investments in future (expected to drop from around £75m-£100m yearly since 2013, down to about £40m-£60m for the next few years).

Big Society Capital's Covid-19 replanning means new investments will drop to about £40m-£60m a year for the next few years

Social investors have not put a figure on the level of current demand, but it is expected to be much bigger than what social investors could provide and Big Society Capital and partners hope other investors will soon add to the pot. (The government has already committed money from previously committed dormant bank accounts.)

Asked if the UK banks that co-funded Big Society Capital’s setup in 2012 (Barclays, HSBC, Lloyds Banking Group and RBS) would be likely to contribute to either or both of the emergency loan pots, Prior said none of the four had yet declined: “We hope they’ll say yes.” It is also hoped that they will continue to lend directly to social enterprises or charities where there is an existing relationship. 

Impact Investing Institute CEO Sarah Gordon said the current crisis has underlined the importance of “building resilient and fair societies where everyone can access affordable healthcare and a decent job”. Her organisation is hoping to encourage and enable more investment to help achieve this.

• In other news yesterday, the Esmée Fairbairn Foundation – one of the UK’s largest independent grant-makers – announced £14m in fast-response grants to existing grantees/investees plus £2m contributed to emergency funding schemes in collaboration with others (in 2018 its grants totalled £40.5m). More details are expected soon.

We're working hard to provide the most up-to-date news and resources to help social businesses and impact investors share their experiences and get through the Covid-19 crisis. But we need your support to continue. As a social enterprise ourselves, Pioneers Post relies on paid subscriptions and partnerships to sustain our purpose-led journalism – so if you think it's worth having an independent, mission-driven, specialist media platform for the impact movement, please click here to subscribe.