Loans and social investment

New facilities, new funding: A proposed financing model from Scope

Sarah Hedley and Iona Joy

June 2010

Fundraising for capital appeals is enormously time consuming and runs the risk of cannibalising the charity’s other donations. Alternative models that speed up the process of replacing unsuitable buildings are therefore needed.

This paper explores how charities can use loans and social investment successfully to finance capital projects. It is the result of a project NPC carried out for the disability charity Scope, exploring the potential benefits and challenges of a financing model developed by the charity. The report is split into three sections:

• The first part gives some background about the use of loans and other types of non-grant finance to meet charities’ and social enterprises’ funding needs.

• The second section examines Scope’s financing model in more detail, including the different types and layers of finance involved.

• The third section explores whether donors should fund Scope’s model. It examines the advantages for donors, as well as the risks and drawbacks. It also examines how other charities have financed similar redevelopment projects and the different models, instruments and funders they have used.