A Retail Charity Bond is a new way to borrow for established charitable organisations that develop assets, generate revenue and create impact. It is designed to help borrowers in sectors like supported housing, care or education to access affordable finance and deliver their social mission.
With loans starting from £10 million, Retail Charity Bonds offer access to flexible finance on light terms, as well as the opportunity to engage with a wide audience of individual investors.
There is a strong and growing interest in ethical investment. Many individuals want to see their investments doing some genuine good for society, and there are many socially-responsible investment funds that seek to support positive change. These investors however still want their investments to be appropriate, regulated and tradable, and comparable to other offerings on the market.
A Retail Charity Bond enables borrowers to access these investors through a mainstream investment product. The bonds are listed on London Stock Exchange and so are regulated by the Financial Conduct Authority. They’re also traded on the Order book for Retail Bonds, the Stock Exchange’s dedicated trading platform for retail bonds that allows investors to sell their bonds at any time at the best available price, meaning investors are not tied in for a fixed term. As a result, a listed bond offer is able to access a very wide range of investors representing billions of pounds of capital.
To find out more, please contact Allia Impact Finance at firstname.lastname@example.org
If you need investment readiness support to develop your business model and borrowing proposition, or you want advice on the different options for raising debt finance and the appropriateness of the Retail Charity Bonds platform, you could contact one of the support providers listed below.
Each of the advisors listed has been briefed on the details of how this platform works. Please note however that the no verification has been conducted on the description supplied by each provider and the inclusion of any provider in this list does not constitute an endorsement or recommendation by Allia, JC Rathbones and Associates, Peel Hunt or Retail Charity Bonds plc.
If you are a social investment finance intermediary or a charity advisor and would like to be added to this list, please contact Allia.
BWB is a professional services firm providing a holistic service to social sector clients, with a top legal practice alongside a sector-leading Advisory and Impact team. The Advisory and Impact team brings together Chartered Accountants and corporate financiers, strategists and social research specialists to provide financial and strategic advice to charities and social enterprises.
The team are market-leading experts in social investment. BWB Advisory and Impact offers services including investment readiness advice; impact measurement; business planning; social investment fundraising advice, including investment structuring and strategy; financial modelling.
As a firm, BWB has been the leading legal advisor to the social sector for over forty years and is at the forefront of current developments in impact investment.
CAN is a charity and social enterprise that provides space, capital and advice to help social ventures grow and maximise their impact. CAN Invest offers a range of ‘social investment readiness’ services including capacity building and advisory to deliver: social impact measurement, investment propositions, business planning, financial modelling, market selection and sales strategy, and more.
ClearlySo is a leading financial intermediary firm in the UK social impact investment market, providing advisory and fundraising services to businesses and funds that generate high social impact. An approved investment readiness provider to the Cabinet Office’s Investment & Contract Readiness Fund, Big Potential Fund, and the Mutuals Support Programme, ClearlySo supported its clients to secure over £30mn investment in 2013.
ClearlySo’s comprehensive investment-readiness services include business planning support, financial modelling, drafting of investment marketing materials, advising on the terms of investment, and project management of the legal and due diligence process.
Contact: Simon Evill
Numbers4Good supports a number of charities and social enterprises in becoming investment ready and is a provider to the Cabinet Office’s Investment and Contract Readiness Fund and Big Lottery Fund’s Big Potential. Numbers4Good is based in London and works on projects worldwide. This includes business planning, financial modelling and supporting their engagement with investors.
PwC is one of the world’s leading professional services organisations. It provides assurance, tax and advisory services. Within the UK PwC has a dedicated Social Investment and Enterprise team that provides bespoke services to social enterprises, charities, public sector commissioners, impact investors and corporates.
These services include helping organisations become ‘investment ready’ and subsequently securing investment through due diligence, business planning, soft market testing, project and contract management, tax advice and impact measurement.
Resonance has been providing investment readiness support to charities and social enterprises since 2002. It helps them prepare for the questions investors will ask by conducting some forensic analysis in 10 steps: strategy; governance; structure; impact; business model; need; targets; capacity; finances; and risk.
The investment proposal distilled from this forensic work is designed to answer investors’ questions with the clarity that creates confidence and offers of financial support. Its investment readiness work is recognised by being approved providers to the Investment and Contract Readiness Fund and the Big Potential Fund; and by being authorised by the Financial Conduct Authority to promote and arrange deals for its clients.
Social Finance is a not-for-profit organisation set up in 2007 to help build a social investment market in the UK. Social Finance brings together individuals with substantial expertise in finance, strategy consultancy and the social sector to drive innovative, sustainable and scalable investment propositions. The team combines a deep understanding of social issues with expertise in financial modelling, business case development and investment structuring.
Triodos is the leading sustainable bank with £8 billion under management and more than 355,000 customers across Europe. Triodos’ mission is to make money work for positive, social, environmental and cultural change.
Triodos Corporate Finance has raised over £60m in the last 3 years for 12 different clients ranging from large charities to early stage social enterprises. Triodos’ investment readiness service includes:
1. What are the criteria for raising finance through Retail Charity Bonds?
2. What can the money be used to fund?
3. Where can I get some advice?
4. What are the costs of raising finance through a retail charity bond?
5. Who determines the appropriate terms of the bond?
6. How can we be certain of raising the amount of money we need?
7. How is our application assessed?
8. How long does the whole fundraising process take?
The minimum eligibility criteria include:
Organisations seeking to borrow must be charities in the United Kingdom which are registered with the Charity Commission of England and Wales or the OSCR in Scotland or the Charity Commission for Northern Ireland (or any replacement bodies fulfilling the role of those regulators) or with exempt charity status.
Investors in the bonds are relying on the charity for payments of interest every six months and repayment of their investment on maturity, in each case in full and on the due date for payment. Charities must therefore be able to demonstrate firm cashflows from dependable sources that are resilient to economic downturns and sufficient to service the proposed debt. Income should principally be generated by the charity’s activities rather than coming from voluntary sources.
Charities must be able to demonstrate a track record of delivering positive social impact. They do not need to commit to using the funds for a specific project, but will be required to give an annual impact report to investors.
Finance raised via retail charity bonds may typically be used to fund capital assets, investment in facilities or to finance existing assets more efficiently. It is not for day-to-day operations or investment in fundraising activities.
The initial application fee is £5,000. This is a non-refundable contribution towards the costs of commissioning independent due diligence. The balance of the issue costs will be deducted from the funds raised and may be between 1.5% and 2% depending upon the amount raised.
The borrower will also pay an annual fee during the term of the bonds of 0.1% plus trustee and paying agent fees. A detailed breakdown of costs and expenses can be provided on request.
Peel Hunt as the bond arranger will assess the appropriate covenants, term and interest rate, based on, amongst other things, the particular circumstances of each borrower, market conditions and distributor feedback. They will agree these with the directors of Retail Charity Bonds plc and with the charity before an offer is launched.
The bonds will be distributed on a ‘best efforts’ basis, which means that there is no guarantee of raising the full amount of money required. There is however a substantial market for retail bonds, with over £5 billion raised through the Order book for Retail Bonds since its launch in 2010. Previous Retail Charity Bonds have all seen strong demand and closed early.
An independent consultant will carry out due diligence on your application. The consultant will meet with your senior management team and will, amongst other things, talk through your past financial performance and your forecasts, seek to understand your business model and strategy, and identify risks and what you are doing to manage them.
A due diligence report will then be provided to the Review Committee of Retail Charity Bonds plc, who will make a recommendation to the Board whether or not to accept the charity’s application.
The typical time from application to receipt of funds is around 3 months. The timetable will depend on how quickly you and your lawyers are able to provide information as required, and may also depend on the timings of other Retail Charity Bond issues.
If you need investment readiness support to develop your business model and borrowing proposition, or want advice on the different options for raising debt finance and the appropriateness of the Retail Charity Bonds platform, you could contact one of the support providers listed here.
If you have any further questions that are not answered above, please contact Allia Impact Finance at email@example.com.