Coronavirus is affecting us all and the impact will be felt most keenly by those vulnerable people in our society. Big Society Capital’s role is to enable finance where appropriate to help social enterprises and charities deliver their work. As an organisation we have mobilised to respond as best we can and offer practical assistance to our investees and the wider sector.
How is Big Society Capital responding?
Our overall approach has three elements:
Information sharing: Since the crisis began, we have been sharing information across our portfolios to help organisations consider their own actions, as well as examples of pre-emptive actions being taken to changing circumstances. We are encouraging organisations to move early, to give themselves the most options for adapting their work. We will share information on emerging new support sources available, including from government and aim to connect social enterprises and charities to resources and expertise, as well as finance.
Adjusting existing funding: We invest in many ways, for example through lending funds, social banks, venture funds or social property funds. How we respond will depend on the social enterprise needs, the investment type and the other investors alongside us in funds. In all areas though, we know a clear and early answer is needed on what is possible in this environment so charities and social enterprises can evaluate their options. We have engaged with managers and investors across our portfolios in a collective approach since the crisis began. As a first step, we put out this statement on Good Finance along with many partners.
Exploring new funding: The funding needs for charities and social enterprises through this period will be significant, and much greater than current resources. We know that grants and business support will be the most vital here. However, investment will also have an important role to play and we have been in discussion with other potential funders, including government to develop solutions.
What practical help is Big Society Capital providing to social enterprises and charities it funds that are facing immediate problems?
Sharing information: We have launched a COVID-19 Resource Hub on the Good Finance website to bring together information, resources and emerging support for charities and social enterprises to help them navigate this crisis.
We have also developed an information page on the Big Society Capital website to keep social investors updated on our plans as we respond to COVID-19. Here you will find regular updates on the three elements of our approach to the crisis, as well as impact stories from some social enterprises and charities that are responding to the crisis to support people.
Adjusting existing funding – We have now largely completed the adjustments across our portfolio to give organisations additional cashflow flexibility where needed in the first stages of the crisis.
Our drawn social impact portfolio roughly splits 40/40/20 between lending, infrastructure (social property and community renewables) and equity & outcomes funding – supporting more than 1,200 organisations.
Our lending funds have been more negatively impacted and will also be the most active in delivering the emergency response. All are now offering capital and interest rate holidays where appropriate and many are offering short-term bridge loans.
In social venture, a tougher funding environment is already emerging, and our own commitments will be constrained as we aim to make emergency liquidity available.
Social property investments have so far been relatively resilient, though the need for their services is increasing, particularly related to domestic abuse and homelessness.
The Growth Fund has moved rapidly to restructure so it can help the 400 plus charities and social enterprises with outstanding loans. Big Society Capital will be waiving all interest to this programme for six months and extending its life to give maximum flexibility for capital and interest holidays where appropriate.
Exploring new funding – We have announced a £100 million programme of response and recovery investments – enabled by the accelerated release of £45 million of previously committed dormant accounts. This has been designed to provide emergency investments to sit alongside the other packages of support announced for the sector.
What is the Resilience and Recovery Loan Fund?
For some social enterprises and charities facing disruption to their normal business model, repayable finance could help them deliver crucial services at a time when they are needed most.
The Resilience and Recovery Loan Fund will enable social lenders to provide emergency loans to social enterprises and charities that are experiencing disruption as a result of COVID-19.
It has been established to make an existing government scheme (the Coronavirus Business Interruption Loan Scheme more easily accessible to charities and social enterprises.
To date, RRLF has approved loans from 30 charities and social enterprises, with a total value of over £10 million.
The RRLF is being run by Social Investment Business (SIB) with an initial £25 million investment and support from Big Society Capital. SIB is the lender, and will work with experienced social investor partners on delivery of the fund: Big Issue Invest, CAF Venturesome, Charity Bank, Resonance, Social Investment Scotland, Social and Sustainable Capital and Wales Council for Voluntary Action. Other delivery partners may be added in future.
A loan may help with this, providing working capital until normal business can commence again. Examples could include:
- Lending until government payments are received (e.g. contracts, furlough etc).
- Lending to cover delays in trade payments (trade debtors).
- Lending to support the rapid scaling up of an existing business model to meet an increased demand for services during the crisis.
- Lending to provide a bridge to cover revenue shortfall for proven and profitable trading activity.
- Lending to provide a bridge to cover charitable donations or fundraising shortfalls for registered charities that have proven historical ability to raise philanthropic money.
Purposes that are excluded:
- Organisations that apply for a loan to provide an additional financial cushion.
- Loans that refinance an organisation’s existing borrowing, except where part of the loan is being used to refinance an existing Bounce Back Loan.
RRLF can make loans alongside other lenders or grant providers. However, consideration will be given on how the overall investment will affect an organisations financial position and its ability to repay.
Applicants cannot have both a loan supported by the Government-backed Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) at any one time. If you take out a loan supported by the BBLS and subsequently wish to take a loan supported by the CBILS scheme (as the RRLF is), you would need to refinance the BBLS loan in full with the CBILS/ RRLF loan.
If you would like to apply for more than one loan supported by the CBILS scheme e.g. with your bank and the RRLF, you can as long as the total of all CBILS supported loans does not exceed £5 million.
Loans will not require personal guarantees and there will be no fees or interest for 12 months. Big Society Capital will provide the initial funding, with underlying loans backed by the Government’s existing Coronavirus Business Interruption Loan Scheme (CBILS) and issued through SIB working with Big Issue Invest, CAF Venturesome, Charity Bank, Resonance, Social Investment Scotland, Social and Sustainable Capital and Wales Council for Voluntary Action.
RRLF closes to new applications at 5pm on Friday 13 November. Applicants will be considered on a first come first serve basis and the closing date of the fund is subject to constant review.
For more information, eligibility criteria and application details, visit the Social Investment Business website.
Will this be enough?
The Resilience and Recovery Loan Fund is just one of a number of measures, which we have put in place together with other social lenders and the Department for Digital, Culture, Media and Sport. The measures also include changes to £29 million of the Community Investment Enterprise Facility (CIEF) and the repurposing of up to £50 million of existing capital.
We know the investment need is urgent, so we are aiming to invest first to establish structures, while actively engaging in discussions with other investors about committing additional money alongside ours. As with all funders in this environment, we are aiming to radically shorten timelines to get capital flowing as quickly as possible.
What changes have been made to the Community Investment Enterprise Facility?
The Enterprise Finance Guarantee was replaced by the Government’s Coronavirus Business Interruption Loan Scheme, meaning CDFI’s could provide smaller, emergency loans on a no fee, no interest basis for 12 months.
How many organisations will benefit?
The Fund’s initial investment is £25 million and the loans organisations can apply for are between £100K to £1.5 million. The number of organisations we expect to be able to lend to depends on demand, eligibility, and size of loan applied for. Applications are assessed based on eligibility criteria set out in the customer guidance documents, and the viability of the proposal.
We expect to see 400-600 organisations benefitting from the Community Investment Enterprise Facility.
How is Big Society Capital adapting existing investments to help social enterprises and charities helping people during the crisis?
We recently re-confirmed a £3 million three-year commitment to Bethnal Green Ventures (BGV) and waived our co-investment requirement for the first year - to enable BGV to continue to run its leading accelerator and invest in tech for good through this period. Some BGV ventures are already leading the response to COVID-19, such as DrDoctor rapidly scaling its platform in the NHS.
In our Community Owned Renewable Energy programme with Power to Change, the manager Environmental Finance, has brought forward local community benefit payments which were due to pay out in future and is targeting them now to provide emergency grants to organisations affected by COVID-19.
Initial evidence suggests incidences of domestic abuse are rising in lockdown. We recently re-confirmed our £10 million commitment into the Women in Safe Homes fund managed by Resonance and Patron Capital which supports survivors of domestic abuse – the fund is targeting a launch in June.
Many more organisations in our portfolio are responding to the crisis to support people across the UK.
How is Big Society Capital trying to help the wider sector?
We believe that the social enterprise and charity sectors should have a level playing field with the kind of support that has been offered to the business sector. That is why we have been working to ensure the Coronavirus Business Interruption Loan Scheme (CIBLS) is accessible to the social sector as well via our Community Investment Enterprise Facility, managed by Social Investment Scotland. We have also worked with other social investors and DCMS, to create the Resilience and Recovery Loan Fund which will provide emergency loans to social enterprises and charities facing cash-flow problems and disruption to their trading without requiring personal guarantees and charging no fees or interest for 12 months.
We are seeking to increase the scale of our £100 million package by bringing further investors alongside us, as we do with all of our investments. This will increase the amount of capital available for the sector.
We have launched a COVID-19 Resource Hub on the Good Finance website to bring together information, resources and emerging support for charities and social enterprises to help them navigate this crisis.
We have also developed an information page on the Big Society Capital website to keep social investors updated on our plans as we respond to COVID-19.
Why doesn’t Big Society Capital simply turn its lending facility into grants?
We recognise that many organisations in the VCSE sector at this time will be seeking grant support which will be vital, and this is emerging from existing grant makers and also from the Government, which has announced a £750 million grants package for charities to help mitigate the impact of coronavirus. We have a different role in the sector, providing loan finance and investment, not grants, so we are serving a different need. If we were to give our money away as grants, we would then be unable to offer this finance service and the VCSE sector would lose out. Some of the organisations affected by the coronavirus have business models which can and do need repayable finance to grow and recover and it is our job to help them now and in the future. Although of course, we are creating as much flexibility as possible on the terms they are offered.
Could the Government help Big Society Capital do more?
The overarching goal is to ensure that the social sector receives all possible support to continue to work with those most vulnerable people in our society. We believe this should be at least equivalent support to that announced for the private sector, through channels that work for its needs. We believe the existing social investment infrastructure has an important role to play here and we are looking at how the fund managers we work with could be involved in delivering government schemes as well as new funding sources.
The Government recently announced the release of an additional £71 million of dormant assets, alongside £79 million recently announced.
The total £150 million comprises:
- £30 million of new funding to our sister organisation, Access – the Foundation for Social Investment – this will allow more ‘blended’ funding, such as grants alongside loans. This will enable a broader range of charities and social enterprises to be supported by social investment
- £65 million to Fair4All Finance to support affordable credit providers
- £10 million brought forward to the Youth Futures Foundation to help tackle youth unemployment
- £45 million of previously committed and announced investment to Big Society Capital
How is Big Society Capital working in the current crisis?
We have acted to ensure our operations and services continue uninterrupted, including drawdowns, investment decisions and legal agreements. At the same time, we acted early to ensure our colleagues and wider network were safe through working from home. We are also streamlining our processes to allow quicker responses to requests from existing fund managers for extensions, repayment holidays and other contract changes arising from the consequences of coronavirus.
With Big Society Capital reopening its London office in September an independent, comprehensive Risk Assessment exercise has been undertaken to ensure appropriate steps have been taken to ensure the safety of staff. The recommendations of the Risk Assessment have been fully implemented. Download the detailed risk assessment.
What is the timeline that you are planning for?
We have moved quickly to set up systems and processes which will serve social enterprises and charities in this new crisis situation and provide the best possible options, regardless of how long the uncertainty goes on.
However long the epidemic lasts, it is likely the underlying economic conditions will be affected beyond this time period. We are beginning to plan not just for the current emergency but also to help the sector rebuild afterwards.