Finance and business
models for community asset
ownership
#communityassests
An overview of the social
investment journey
Hugh Rolo
Director of Innovation
Locality
My experience
www.thekeyfund.co.uk
www.adventurecapitalfund.org.uk
www.communityshares.org.uk
Stages of Growth
Pre-Pre Start
Pre-Start
Start Up
Early Growth
Consolidation
Crisis / High Growth
Typically: medium sized (5-10
staff), reputation for quality,
opportunities for expansion
Needs: financial review, peer
learning, seed-corn finance,
loan/social finance advice
pically: an emerging group of
dow trustees with one or two
y players
eeds: Visioning, business planning,
nstitution, start up capital
urced, policies and procedures
Typically: very small staff team,
may be grant dependent and dealing
with short-term issues
Needs: small grants, ideas,
networking, reassurance, business
plan review/reworking, mediation re
teething troubles (governance/HR)
Typically: small staff team (3-5),
established single business model,
looking to expand and/or diversify
Needs: financial review, peer
learning, seed-corn finance,
loan/social finance advice
Typically: Income streams
dried up/not replaced, CEO
in denial, Board unaware
Needs: financial review,
emergency finance, HR
support, tough love
Typically: Trading on
reputation, rapid diversifying
danger of overstretch
Needs: Strategic review,
financial analysis, critical
friend
Matching financial mechanisms
to funding needs
HIGH
CHANCE OF
REPAYMENT
Secured loan
Standby
Facility
Overdraft
Unsecured
Loan
Patient
Capital
LOW RISK
Hard
Development
Capital
HIGH RISK
Working
Capital
(closed)
Pre-funding
Capital
Fundraising
Working
Capital
(open)
Soft
Development
Capital
Quasi-equity
Equity
LOW
CHANCE OF
REPAYMENT
Grant
INCREASING SUPPLY
LITTLE SUPPLY
Social Finance Timeline
www.cdfa.org.uk
CDFIs lent a record £200m, up 77% in 2009/10.
• The value of CDFI loan applications rose to £437m
(from £360m previously)
• The CDFI loan portfolio stood at £531m as of March
2010
• CDFIs helped their customers leverage an
additional £100m from other mainstream sources
• Earned income accounted for 40% of all income
reported, up 14% from the previous period.
Social Investment Business
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Communitybuilders Fund
The Communitybuilders Fund, previously owned by the Department of Community and
Local Government is now an endowed fund, owned and administered by the Adventure
Capital Fund. It supports neighbourhood-based, community-led organisations to become
more sustainable through a mixture of loans, grants and business support.
The fund is currently closed to new applications but we expect to be able to reopen within
a few months.
Social Enterprise Investment Fund
We manage the Social Enterprise Investment Fund (SEIF) with Local Partnerships, on
behalf of the Department of Health. SEIF is a fund that provides loans, grants and
professional support to social enterprises involved in the delivery of health and social care
services.
The Adventure Capital Fund (ACF)
The Adventure Capital Fund is an ambitious style of funder for community enterprise. The
pioneering packages that we offer have the potential to transform neighbourhoods across
the country.
Futurebuilders England Fund
We manage the Futurebuilders England Fund on behalf of the Office for Civil Society. This
fund is a £215 million Fund that provides loan financing, often combined with grants and
professional support, to third sector organisations in England that need investment to help
them bid for, win and deliver public service contracts. The Futurebuilders England Fund is
now currently closed for new applications.
Changing public attitudes
• Most people are savers not investors, (and
some people aren’t even savers)
• Most people donate to good causes,
rather than invest in them
• But most people can invest more than they
can afford to donate!
• Shift from purely philanthropic to
community investment proposition
Growth in community share
offers
50
45
40
35
30
cics
ips
plc
25
20
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Social Impact Bonds
Current Ideas
• Growing the Social Investment Market OCS
• 3 Nesta papers:
• Twenty Catalytic Investments to grow the Social
Investment Market
• Investing for the Good of Society
• Understanding the Demand and Supply of
Social Finance
Looking Forward
• New regulatory environment: FS Regulation Bill
/Vickers Independent Commission on Banking
• CRA /Robin Hood tax??
• Aligning Pension Funds
• Preventative Investment
• SVIs
• Crowdfunding
• Demand push/supply glut = new usage.
Big Society Bank/CDFA RGF
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£60mn of “unclaimed assets
£200mn pledged from Commercial Banks
(on “commercial terms”)
Will be a wholesaler investing through
CDFIs
• More to come up to £400mn plus new
unclaimed assets £20-£40mn per year
• CDFA RGF £60mn
contact
• www.locality.org.uk
• h.rolo@locality.org.uk
• www.communityshares.org.uk
LOCALITY CONFERENCE
in Manchester
November 1st and 2nd 2011
Finance and business
models for community asset
ownership
#communityassests
Asset transfer and development funding:
the Hebden Bridge experience
www.hebdenbridgetownhall.org.uk
The slow decline…
• Loss of births/deaths registry
• Loss of housing office
• Council staff no longer customer-facing
• Closure of cash desk
What role for the Town Hall in the 21st C?
Community engagement
• 2004 Sale of HB adult ed building/toddler pool
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2006 Town Hall Working party established in community
2007 Quirk report: Making Assets Work
2007 Community Assets programme
2008 Establishment of HBCA, as charitable trust
2009: Launch of Friends of the Town Hall
Summer 2009: Asset transfer submission
Dec 2009: Asset transfer agreed
April 2010 Asset transfer takes place
A new form of public ownership
“Hebden Bridge Community Association will
maintain Hebden Bridge Town Hall in
public ownership in perpetuity, as a
centre of community and civic life”
A new form of public ownership
“Our concept of public ownership looks back
to the earlier nineteenth century models of
mutuality and common interest, as well as
forward towards new 21st century models”
[Draft Community Participation and Inclusion Strategy, 2008]
A new form of public ownership
“Hebden Bridge Community Association will
operate on the basis that it is
demonstrably democratic and
accountable”
• Launch of the Friends scheme
• About 550 Friends/members at present
A new form of public ownership
Legal structure:
- Company limited by guarantee
- Registered charity
- Trustees/directors elected by members
Also considered:
- IPS Community benefit society
- CIC
The asset transfer
The arrangement with the council:
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40 year leasehold ownership (now 125 years)
Calderdale as anchor tenant
Principle of no net gain or loss to council
No on-going grant funding
The asset transfer
“The desire to see the building used to its fullest
extend for community and civic purposes”
• Immediate changes – from recycling to
replastering
• Creation of new ‘meanwhile’ hall
• Weddings/civil partnerships licence
• Increasing use of meeting rooms
• Sorting out the dry rot!
The capital build
“We are determined to ensure that the future of
Hebden Bridge Town Hall is secured for the very
long term”
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Working for long-term sustainability
Move away from dependency on anchor tenant
Make building DDA compliant
Provide much greater range of community
facilities
• Provide small enterprise facilities required
The capital build
• 10 year business plan - £3.5m capital build
• Architects appointed summer 2009
• £2m investment from Communitybuilders fund
agreed (£1.25m loan, £0.75m grant) Sep 10
• £1.2m ERDF grant agreed Mar 11
• Planning permission granted Oct 2010
• Builders on site April 2011
• Completion due April 2012
The capital build
• Business plan development and funding bids
undertaken by Board of Trustees
• (Small) paid consultancies: market research,
business plan refinement
• Professional consultants, including disability
consultant, ecologists etc
• Project Manager
• Centre Director to be appointed late 2011
The capital build
Feasibility funding essential
• c £5000 to get started (town and parish councils)
• c £25K to reach RIBA Stage B (ACF, local trust)
• c £85K to reach planning (CB, ERDF Access)
Substantive funding
• Problems of coordinating two funding bids
• Late variations/conditions create difficulties
• Loans: interest/repayment holidays essential
The business model
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HB Creative Quarter: 34 enterprise units
‘Business associates’
Business conferences and seminars
Community events and meetings
Catering concession
Existing tenants
The challenges
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Attracting business/sales
Running an efficient operation
Meeting funders’ criteria
Meeting other responsibilities
Servicing the £1.25m borrowing
Should communities really have to
do this?
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Employing staff (including TUPE transfer)
VAT accounting
Health and safety
Charitable legislation
Company law
Licences etc for public buildings
Building maintenance; capital works
Cash flow… money in the bank when it’s
needed
Can communities really do this?
• Is it appropriate to deliver public services
in this way?
• Is volunteer effort acceptable?
• Are the skills there within the community?
• Will volunteers suffer burn-out?
• Are the volunteers really accountable to
their community?
Can communities really do this?
• Does this undermine local democracy?
• Does this replace work which should be paid?
• Does this open the door to eventual privatisation
of the public realm?
• Does encouraging a more business-like
approach by community groups bring
inappropriate areas of life into the marketplace?
Moving forward
• Other public buildings potentially at risk
• Look to community’s own financial resources
• Work on our democracy
• Offer something back for others
Where to find out more
Asset transfer and development funding:
the Hebden Bridge experience
www.hebdenbridgetownhall.org.uk
Finance and business
models for community asset
ownership
#communityassests
Investment
readiness and the
social investment
journey
Joseph Rowntree Foundation
Seminar
4th May 2011
Tony Curtis
Business Support
Advisor
The Social Investment Business
• a social enterprise wholly owned by a charity
(Adventure Capital Fund)
• a large scale UK social investor
• manages nearly £400m of investment
• works to help civil society organisations do more of
what they do best – supporting people and communities
most in need
• aims to transform the civil society sector by helping to
create powerful, well capitalised and thriving
organisations
Our Services to Civil Society Organisations
• loans / grants to third sector providers
• business support / consultancy to third sector providers
including consortia & social enterprises
• services to national and local commissioners
• interim management
• training & mentoring
• sharing ideas and approaches
“Scope” of investment readiness criteria
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governance
financial capability (including forecasting)
management capability
clarity on market opportunity
clarity of business model (clear routes to success)
establishing a clear commercial market focus
developing and demonstrating track record including
relevant accreditations
• human resources management
• the adequacy of key processes including business
planning
• relationships with partners, customers, funders
Assessing investment readiness
The applicant must…
● present a cash flow forecast with well argued rationale re:
income forecasts
● demonstrate business / enterprise mindset
● have up to date and controlled finances
● have buy-in from its Board and supporting governing
documents
● have the financial capability to track a loan
● have identified risks reasonably
The real reasons that organisations don’t get
offered grants, loans, commissions …
• standards have gone up and few reach the
standards set by the funders because:
– the board / management committee is weak
– the organisation is not managing its resources
well and cannot prepare financial forecasts
– there is no clear plan as to where future income is
going to come from
• the proposal is badly presented on paper with
a poor business plan and lacking adequate
financial projections
What the best organisations are doing
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achieving investment readiness
diversifying income streams
securing accreditations and quality marks
getting balance right – “business like” but “mission
driven”
• refreshing, reviewing, upgrading and upskilling the board
• articulating clearly why they are still here and still
needed
Common problems and issues (1)
• third sector / civil society organisations are at risk of
being as “siloed” as public sector (hampering new
business development)
• public facing image out-of-date and not pitched at
securing new opportunities
• organisation is “timed out” (overlaps, duplication)
• organisation has “lost sympathy” during recession
Common problems and issues (2)
• approach not “on message” with government agenda
• “falling down gap” – funders withdrawing and public not
engaged with the mission
• indistinguishable from public sector
• no contingency plans
• unclear how to restructure / reduce costs / downsize
• private sector taking over contracts for work
Contact details:-
www.thesocialinvestmentbusiness.org
enquiries@thesocialinvestmentbusiness.org
Tel: 0191 261 5200
Finance and business
models for community asset
ownership
#communityassests
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2005
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“People, not spreadsheets, make
things happen”
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£50,000
£50K - KeyFund Loan
£350K - Venturesome Loan
£1.4m - LEGI Grant
£700k - ERDF Grant
£1.6m - Santander Loan
£350k - Charity Bank Loan
Construction / Renovation
Full Team
Partial Resource
AutoPilot
balAnce
focus: market, cash
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next?
Finance and business models
for community asset
ownership
#communityassests