Accessing the Growth Fund for social investors

How a social investor applies to the Growth Fund, the criteria and decision making process.

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Who can apply to the Growth Fund?

Access’s Growth Fund is open to applications from existing or aspiring social investors. These are organisations or partnerships which provide investment or loans to charities and social enterprises and which are focused on creating social outcomes.

Charities and social enterprises seeking investment cannot apply directly to Access. 

The roles of a social investor include:

  • Knowledge of the financing and support needs of charities and social enterprises in a particular area 
  • Strong networks and reach into charities and social enterprises and ability to market the opportunity to apply for a loan
  • Ability and experience of running an application process for grants and loans
  • Ability and experience of making investment decisions based on detailed social impact and financial information from an applicant 
  • Ability and experience of actively managing a portfolio of investments and supporting organisations if they need it 
  • Ability and experience to report on the social and financial impact of a portfolio of investments  

Our Growth Fund guidance details the requirements of applicants in more detail. 

To be eligible to apply, a social investor must meet the following criteria:

  • Operate in England
  • Have legal authority or powers to manage grant funding
  • Intend to make unsecured loans/ investments of less than £150k to eligible charities/ social enterprises using a blend of grant and loan financing. 
  • Be a social investor or a partnership of organisations which together can fulfil the role of a social investor. 

No further licences or authorisations are required to be a social investor as lending to incorporated entities is not a regulated activity in the UK. 

Partnerships:

We are particularly keen to see applications from partnerships which can fulfil all the roles of a social investor to ensure that they reach those charities and social enterprises that are not already making use of social investment but for whom this could make a real difference, both to their businesses and to the lives of those whom they support.

We think there are strengths in both social investors and front line organisations partnering together to offer loan finance to their peers.  The kinds of partnerships that might arise are:

  • A social investor might have experience in lending and partners with a network of charities and social enterprises.
  • A national federated charity might partner with a social investor to support the independent charities they are associated with.
  • A support agency focused on earlier stage charities and social enterprises which are new to social investment might partner with an experienced investor.

If you are interested in applying for the Growth Fund and need a partner in order to be able to fulfil the roles of a social investor then visit our Supporting Partnerships page for more information and links to organisations who have registered interest as potential partners.

We refer to social investors as applicants throughout the application guidance, but this should be read to include partnerships which fulfil the roles of a social investor. 

Loan administration service

Access has a preferred supplier for loan administration services and we can help to broke a partnership with them. For more information please follow this link. 

What can a social investor apply for?

Social investors can apply to Access in one application for a combination of loan finance and grants, up to a total of £10m.

Under the Growth Fund, Big Society Capital will provide the loan finance at an interest rate of 5% to successful applicants. The amount of loan applied for must always be greater than the total amount of grant. The Big Society Capital loan is made to a new subsidiary and does not have any recourse to any of the other assets or operations of the social investor.

The Big Lottery Fund will provide the grant component for:

  1. to make a contribution towards the higher transaction costs associated with managing smaller amounts of finance to these organisations.
  2. blending with BSC loan finance to offer charities and social enterprises an unsecured, smaller sized loan allowing the social investor to take greater risk.
  3. to provide a grant component alongside an unsecured loan, or can be used with a certain degree of flexibility to support the development of risk finance products within the parameters of the Growth Fund. This is optional.

Application and Decision making process for social investors

The following diagram shows the application process for social investors to access the Growth Fund. For guidance on the stages of the application to the Growth Fund, click on each stage for more information. 

GF Flow Chart 1 EOI

GF flow chart 2 Business Plan

                   GF Flow Chart 2.5 JIC 1

GF flow chart 3 DD

                   GF Flow Chart 3.5 JIC 2

GF flow chart 4 Legals

GF flow chart 5 Ongoing Monitoring

In the first instance, the social investor completes an Expression of Interest (EOI) . If the EOI is deemed suitable and the social investor is eligible, the social investor will be invited to submit an application (including a Business Plan and a detailed financial model) outlining their proposal for use of Growth Fund finance.

The Business Plan is reviewed and either submitted for consideration by the Joint Investment Committee (JIC), returned for further information, or rejected if not viable. If the JIC proceeds with the proposal, due diligence is carried out on the social investor and the proposal presented. The outcome of the due diligence and any other amendments to the Business Plan will inform the final decision of the JIC. If the social investor proposal is accepted by the JIC they will receive an in-principle offer at this point.

The Joint Investment Committee (JIC)

The JIC is the decision making body of Growth Fund awards and meets approximately every six weeks. The JIC comprises two representatives from each of the partner organisations, Big Society CapitalBig Lottery Fund and two representatives from Access. It is chaired by Access.

The current membership of the Joint Investment Committee is: 

Chair: John Kingston (Access)

For Access: Ann Oldroyd, Victoria Hornby

For the Big Lottery Fund: Dawn Austwick, Geeta Gopalan

For Big Society Capital: Jeremy Rogers, Geetha Rabindrakumar

You can view the terms of reference of the Joint Investment Committee here. 

You can view the summary investment policy as agreed by the Joint Investment Committee here. 

You can view the conflicts of interest policy here.

office meeting

Timescales

The Growth Fund is now open to Expressions of Interest

Forthcoming dates for the Joint Investment Committee are:

  • September 6th 2017 (cut-off 23rd August)
  • October 18th 2017 (cut-off 4th October)
  • December 6th 2017 (cut-off 22nd November)

Each committee will consider initial (pre due diligence) and final (post due diligence) proposals as required.

To be considered for the initial round of the JIC, an application (including the Business Plan & financial model) will need to have been received and approved at least 14 days in advance of these dates in order to be assessed and distributed to the committee members. 

Legal considerations

A successful social investor or partnership will enter into a contract with Big Society Capital (via a standard loan document) for its loan finance, and a grant agreement in the form of an external delegation agreement with the Big Lottery Fund. Access oversees and co-ordinates this process and ensures it all fits together.

Access supports the social investor to complete the negotiation of the detailed terms and conditions of both agreements.

The Growth Fund utilises public funds and is therefore subject to EU State Aid rules. For more guidance and support, click here for Access’s State Aid guidance or follow this external link for standard government information on state aid

Current Priorities for the JIC

Across its portfolio as a whole, the Growth Fund will seek to achieve a geographical spread of social investors and charities and social enterprises across England, as well as support a range of social issues. The portfolio seeks to fund a range of investments across three strategic themes:

New Approaches Reach Efficiency

  • Efficiency: Social investors who can meet current demand from charities and social enterprises for smaller unsecured loans in an efficient way
  • New Approaches: Social investors who offer creative and relevant new products for charities and social enterprises, or new ways of delivering social investment to the sector
  • Reach: Social investors who can offer social investment to, and make it relevant for, groups of charities and social enterprises who have not been able to benefit to date

The Joint Investment Committee is now particularly encouraging applications which meet the New Approaches and Reach themes.

These may come from organisations who have not considered their role in being a social investor before but who offer excellent reach and networks into parts of charity and social enterprise sector who could benefit from taking on a loan but have not previously had the opportunity to do so.

This may include organisations such as:

  • Federal charities
  • Membership bodies
  • Infrastructure organisations
  • Community Foundations
  • Larger charities

The Joint Investment Committee is also interested in seeing new approaches to meeting the investment needs of smaller charities and social enterprises. This might mean experimenting with new investment products. For example the JIC is especially keen to see proposals which include revenue participation deals or other forms of quasi-equity products which suit the needs of charities and social enterprises, or new approaches to accessing the finance, such as introducing more automation.

Further information

To view our guidance documents please click on the links below. 

The Growth Fund – An Introduction for an overview of The Growth Fund

The Growth Fund – Expression of Interest (EOI) for guidance on the EOI, how to complete and what comes next

The Growth Fund – The Business Plan for guidance on the business plan, how to complete it and what happens next

State Aid guidance – The Basics for an overview of State Aid rules and how they might apply to Social Investors providing finance to charities and social enterprises via the Growth Fund

The Growth Fund – Due Diligence and Assessment for guidance on how the business plan will be assessed, including the due diligence process

The Growth Fund – Execution Process, including the legal agreements for guidance on the process, post approval by the JIC and signing of the legal agreements

 

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