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Finance and business models for community asset ownership #communityassests.

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Presentation on theme: "Finance and business models for community asset ownership #communityassests."— Presentation transcript:

1 Finance and business models for community asset ownership #communityassests

2 An overview of the social investment journey Hugh Rolo Director of Innovation Locality

3 My experience

4 Stages of Growth Typically: an emerging group of shadow trustees with one or two key players Needs: Visioning, business planning, constitution, start up capital sourced, 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: medium sized (5-10 staff), reputation for quality, opportunities for expansion 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 Pre-Pre Start Pre-Start Start Up Early Growth Consolidation Crisis / High Growth

5 Matching financial mechanisms to funding needs LOW RISK Hard Development Capital Working Capital (closed) Pre-funding Capital Fundraising Working Capital (open) Soft Development Capital HIGH RISK INCREASING SUPPLY LITTLE SUPPLY HIGH CHANCE OF REPAYMENT LOW CHANCE OF REPAYMENT Secured loan Standby Facility Overdraft Unsecured Loan Patient Capital Quasi-equity Equity Grant

6 Social Finance Timeline

7 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.

8 Social Investment Business 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.

9 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

10 Growth in community share offers

11 Social Impact Bonds

12 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

13 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.

14 Big Society Bank/CDFA RGF £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

15 contact LOCALITY CONFERENCE in Manchester November 1 st and 2 nd 2011

16 Finance and business models for community asset ownership #communityassests

17 Asset transfer and development funding: the Hebden Bridge experience






23 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 21 st C?

24 Community engagement 2004 Sale of HB adult ed building/toddler pool 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

25 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”

26 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 21 st century models” [Draft Community Participation and Inclusion Strategy, 2008]

27 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


29 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

30 The asset transfer The arrangement with the council: 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

31 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!

32 The capital build “We are determined to ensure that the future of Hebden Bridge Town Hall is secured for the very long term” 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

33 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



36 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

37 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

38 The business model HB Creative Quarter: 34 enterprise units ‘Business associates’ Business conferences and seminars Community events and meetings Catering concession Existing tenants

39 The challenges Attracting business/sales Running an efficient operation Meeting funders’ criteria Meeting other responsibilities Servicing the £1.25m borrowing

40 Should communities really have to do this? 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

41 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?

42 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?

43 Moving forward Other public buildings potentially at risk Look to community’s own financial resources Work on our democracy Offer something back for others

44 Where to find out more

45 Asset transfer and development funding: the Hebden Bridge experience

46 Finance and business models for community asset ownership #communityassests

47 Joseph Rowntree Foundation Seminar 4 th May 2011 Tony Curtis Business Support Advisor Investment readiness and the social investment journey

48 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 The Social Investment Business


50 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 Our Services to Civil Society Organisations


52 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 “Scope” of investment readiness criteria


54 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 Assessing investment readiness


56 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


58 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 What the best organisations are doing


60 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 (1)

61 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 Common problems and issues (2)


63 Contact details:- Tel: 0191 261 5200

64 Finance and business models for community asset ownership #communityassests

65 shine raising aspirations, creating opportunities

66 Risks, Challenges, Success Factors Community Enterprise & What it Means To Take on Debt ?

67 Public Services Vol/Comm Social Business Shine

68 Atlanta

69 60+

70 2005

71 Social Enterprise

72 “People, not spreadsheets, make things happen”

73 2007/8

74 £50,000

75 £50K - KeyFund Loan £350K - Venturesome Loan £1.4m - LEGI Grant £700k - ERDF Grant £1.6m - Santander Loan £350k - Charity Bank Loan

76 Construction / Renovation



79 AutoPilot Partial Resource Full Team

80 balAnce

81 focus: market, cash

82 people

83 next?

84 Finance and business models for community asset ownership #communityassests

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