Securing £400,000 of Property Finance for a Charity

Charities operate to very different principles than those of businesses. They do not generate income by commercial activity, and this his means that although some can call on very high levels of funding and may have substantial reserves as well as multimillion pound budgets, they may not be able to call on commercial funding as simply as a conventional business.

However, many charities operate businesses as part of their fundraising or as part of their charitable activities, and require external funding to meet commercial needs.

At Rangewell, we are able to work with charities and help them find answers to their financial questions - and we recently looked at a finance plan to help a charity make full use of a property that they had acquired. 

Why do charities have problems with borrowing? 

Charities may have sound income streams from donations - but because these donations are voluntary, it may be difficult for commercial lenders to take them into account when considering the viability of a loan or advance.

Charities may be able to call on large sums of money, especially when they make an urgent appeal to their supporters - but there is no way to ensure that funds will be forthcoming at any time.

Many commercial lenders will be unable to lend to charities for this reason  - although they will also be wary to lending because if repayments were not forthcoming, the need to seize assets would put them in a very awkward position.

Do you operate a charity? Contact us for help with your financial needs

Our client was a religious organisation based in Birmingham. They had a large place of worship in the centre of the city, and had used donations from their followers to purchase a rundown office building on an adjacent site.

The property was intended to provide a nursery and meeting areas for followers, but there was ample additional space on upper floors, which the charity’s governers realised could be used to generate revenue for the charities purposes - if it was let out to suitable commercial tenants.

However, the poor condition of the building meant that around £400,000 would need to be spent on refurbishments before the building could be let out.

“The building had been available cheaply enough for us to buy and we knew that as cash buyers we could secure it  at a bargain price - but there was work to be done, and we could not just go back to worshippers and ask them to put their hands in their pockets again.” 

The problems with the building were actually getting worse, and with the safety of children in the nursery in mind, the charity governers started to look at the possibilities of borrowing the money required.

“It was starting to get to the stage when we were worried about the floors that we were using. Electricity and ventilation needed works, and the windows needed attention. We had to solve those problems to make things better for our own people. It made sense to do the work on the rest of the building at the same time.”

We explained that many lenders have a blanket policy ban on lending to charities, and particularly religious charities, because of the potential of being seen as prejudiced in some way. However, we believed that we could find a solution, based on the value of the office building, rather than the income of the charity. 

We helped draw up a business case for the loan.

We found a challenger bank - a new lender based in Scotland - who were prepared to look at the proposal. They saw how the property needed investment, and how with it, it could offer an attractive return which would support the charity’s objectives as well as comfortably cover loan repayments.

They were able to advance the £400,000 over a 25 year period, secured on the property itself.

The charity undertook the work, and has already welcomed in tenants.

At Rangewell, we’re an Access to Finance specialist working across the entire lending market. Our services are completely free to use. 

If you are a charity client, we will work with you for every step of the way, from finding the most appropriate type of funding for your needs, to locating the lenders who may be willing to provide it - and shortlisting those with the most attractive terms and rates.  

We can even help guide you through the application process. Our expertise makes it easier to get the finance you need.

So if you’re looking for a cost-effective way of giving your charity the funds it needs contact us today.  Simply call us at Rangewell on 020 3637 4150 - or email  contact@Rangewell.com. Our service is free.