A blended finance programme to provide patient and flexible social investment for organisations post-Covid.
In May 2020 Access received £30m of grant funding from dormant accounts to create new blended finance programmes in the social investment market.
That funding has been earmarked for two main purposes:
- Grant to provide blend to support emergency lending to charities and social enterprises, facing financial challenges due to the impacts of Covid-19 (“Emergency Lending”)
- Future blended finance initiatives, which create more sources of more patient and flexible repayable finance, to serve the capital needs of charities & social enterprises (“Flexible Finance for the Recovery”)
This programme relates to the second of these initiatives, to which Access will commit at least £21m. The programme is seeking to address gaps in the supply of more patient and flexible social investment products for charities and social enterprises which are not widely available in the current market place. This is partly caused by the low or uncertain expected financial returns of these investments (for the borrower, social investor and capital providers). It aims to address a different, longer term, and potentially riskier financing need than is met by (for example) the Growth Fund or other Access programmes, whilst also trying to attract capital providers with differing risk appetites to blend with our grant.
Our Investment Committee (see further below for a list of members) has agreed three primary objectives for the programme:
- Delivering sources of finance to the market which are patient and/or flexible, and different to what is currently available
- Effectively facilitating the flow of capital, demonstrating efficient use of subsidy to ensure capital can flow from different sources or in a different way
- Reaching parts of the market still underserved, usually including diverse-led organisations, and committing to strong equalities practices within both the blended fund and the investor/partnership as a whole
For investors interested in applying to this programme please note the process for registering Expressions of Interest further below.
Access is a wholesaler of grant subsidy into social investment funds and other initiatives. Therefore we do not make funding available to charities and social enterprises directly. If you are a charity or social enterprise looking for support or to find out more about social investment please visit Good Finance.
First cohort of investors
Following a period of consultation on the design of the programme in summer 2020, Access invited applications into a first development cohort for the Flexible Finance for the Recovery programme. We were very encouraged by the level of response to the opportunity that the programme can provide, with many more applications to join the cohort than we had expected.
The cohort includes nine emerging ideas covering a range of different proposed investment products to meet different financing needs in the future. All cohort members have demonstrated how they could develop products which meet the key definitions of “patient” and “flexible” which are fundamental to the aims of the new programme.
A series of workshops between December 2020 and February 2021 helped to further shape the concepts, and members of the cohort are at different stages in their development, with full proposal submissions now being received by our Investment Committee (see list of Committee members below).
The nine proposals being worked up are:
Charity Bank expansion of small, unsecured lending programme with flexible repayment terms complemented by ‘patient capital’ grants
Crowdfunder/Triodos blended finance solutions combining reward based crowdfunding with crowdfunded equity and debt
Key Fund a flexible finance facility which will allow investees to draw finance as required, up to a maximum amount, and also repay flexibly when cash is available
Resonance – two proposals (1) helping communities to own assets and meet local needs, through sustained support (local partnerships and community coordinators) and access to patient and flexible finance (2) a suite of products to facilitate bespoke investment solutions, tailored to individual enterprise growth needs – including equity-like options, flexible loans and grant blend
SASC providing a blend of grant and loan to small and medium sized non-profits, typically to acquire property or other community assets
Social Tech Trust quasi-equity (revenue participation) for established but early stage tech for good organisations
Sumerian provision of quasi-equity alongside pre and post investment business skills support to start-up/growth stage charities and social enterprises
UnLtd/Big Issue Invest patient and flexible capital (including quasi-equity products) to Social Purpose Organisations (with a particular focus on those that are diverse-led) tackling inequality in the UK
First funds approved
Two of the proposals coming forward from this first cohort have received signed commitments from Access so far, both completing and launching in August 2021.
Resonance Community Developers (at least £2.06m from Flexible Finance) is a fund designed to help communities create and own income-generating assets such as affordable homes, sports facilities or renewable energy and will initially invest in community projects across three initial areas: Devon/Cornwall, Gloucestershire and the North West. The plan is to grow to operate nationally. Investments will be in the form of equity or sub-ordinated debt, typically in the range £500k-£2m (average £1m), with an aim for projects to refinance once established (typically after three years).
Sumerian Foundation (£700k from Flexible Finance) will offer diverse forms of patient and flexible capital (including, but not restricted to, quasi-equity or equity, revenue share agreements, profit share agreements and preference shares). The typical investments range from £70k-£200K (averaging £120k) and with repayment terms of 10+ years. Sumerian Foundation provide in-house pre-investment support and post investment mentorship to all investees.
Expressing interest in the programme
Until September 2021 Access is inviting further expressions of interest in the Flexible Finance for the Recovery programme. We are interested in progressing proposals from social investors who want to develop patient and flexible social investment products to meet an identified market need/gap. No expressions of interest will be considered after September, although it remains possible that a further window may be re-opened at some point in the future.
All expressions of interest will be subject to a two-stage assessment process. The first stage will require short summary information to be provided, to be considered by our Investment Committee. This will need to be complete by 30 September 2021. If the concept is felt to be sufficiently aligned (please refer to the three primary objectives listed above) and realistic, then a Stage 2 full proposal may be invited.
If you would like to discuss a potential expression of interest, in the first instance please contact firstname.lastname@example.org
Members of the Flexible Finance Investment Committee
Kate Kuper– Chair
Anna Shiel– Head of Origination at Big Society Capital
Bayo Adelaja– Founder and CEO of Do it Now Now. Bayo has some significant trustee roles in high profile organisations as well as experience in working with foundations to advise on EDI policies and creating new funding programmes to specifically support the BAME sector with COVID response.
Bonnie Chiu– CEO of The Social Investment Consultancy and a founder of the Diversity Forum for Social Investment. Bonnie has been involved in a number of other specific projects within the social investment space including supporting BSC on the Women in Safe Homes fund.