Social Investment Scotland Pierre Stadnik Moray Fundraising Seminar 27 th April 09 Moray Fundraising Seminar 27 th April 09

sis fundamentals SIS Joint venture public/private sector Started lending operations in March 2008 Initial loan fund £3M Current loan fund £9M Set up to improve access to loan finance Work to develop demand for loan finance

the story so far DRAWN BALANCE £2.7M UNDRAWN CAPITAL £2.3M WIP VOLUME 28 APPLICATIONS WIP VALUE £4.1M

eligibility criteria ‘More than profit’ organisations Based and operating in Scotland Unable to obtain any/or all of funding requirements from conventional sources

what sis offers Loans from £10,000 - £500,000 Term Loans, Working Capital, Bridging Conventional lending products, unconventional approach to lending. Fixed interest rate No personal guarantees Absence of security not a major drawback Loans up to 7 years (10 years for property purchase) No early repayment fee Arrangement fee 1% V most other banks 2% Loans from £10,000 - £500,000 Term Loans, Working Capital, Bridging Conventional lending products, unconventional approach to lending. Fixed interest rate No personal guarantees Absence of security not a major drawback Loans up to 7 years (10 years for property purchase) No early repayment fee Arrangement fee 1% V most other banks 2%

sis clients include Cue & Review Recording Service Gigha Renewable Energy Ltd. Spruce Carpets Glasgow City Mission Highland Opportunity (Communities ) Ltd. sis clients include

overview A new £30m fund being subscribed over three years to invest in building the capacity, capabilities and sustainability of third sector organisations Investment based approach (outcomes-focused) A fundamentally different approach to previous grant regimes Investments tailored to individual organisations requirements Loans, ‘patient’ capital, and strategic investments Investment packages from £100,000 to £1 million

target characteristics have been operating successfully, partly through income generation, for at least three years have established successful experience in public service delivery or trading in other markets have potential to grow their turnover and/or become financially sustainable are ‘investment-ready’ in terms of management, governance and financial position Established third sector organisations located and trading in Scotland which reinvest surpluses for social or environmental purposes and:-

ineligible proposals that seek to replace existing debt finance subsidiaries of public bodies (e.g. local authorities) housing construction and management operations of registered social landlords proposals that relate only to delivery of existing services support agencies or intermediary organisations organisations with no track record of generating income other than grants organisations that are insolvent or at risk of insolvency

investment priorities employability environmental action the underlying causes of health inequality Other priorities will emerge as the fund develops. 2008/09 investment priorities will focus on organisations with social missions that address issues of:

investment products loans - business plans will assessed for loan first (including commercial loans) before any other investment is considered. risk/’patient’ capital - devised to deliver a mix of financial and social returns. strategic investments - (non-repayable) amounts based on social outcomes and will not comprise more than 50% of any funding package development support – for organisations ‘almost but not quite’ investment- ready. SIF will consider funding to pay for accounting or legal advice/support in relation to areas such as marketing, human resources, investments will be tailored on a case by case basis and may contain a mix of :-

investment process initial screening against published investment criteria to establish eligibility and ‘investment-readiness’. collection of brief details of the organisation and the investment being sought. discussion/feedback to assess ‘fit’ with investment priorities. rigorous assessment of business plan, focused on four elements – business model – organisational development – financial stability – projected social outcomes. development of investment package, submission to investment panel with recommendations. approval and documentation monitoring and evaluation.

the story so far Total ‘completed applications’ - 60 (2/09) SIF Applications £30M (Capital £23M & Revenue £7M) Projects worth £92M (Capital £71M & Revenue £21M) Stage £11M (Capital £9M & Revenue £2M) Note: 120 organisation have started the ‘online appraisal’ but not completed it

case study Momentum provide training, employment, social care and commercial services for some 60,000 people every year Clients are people suffering from mental health and brain injury problems which limit their ability to work Funding was required to purchase a new H.O. plus some revenue funding to develop activities to support business growth The purchase of the building will provide an asset base which will make the company more attractive when tendering for contracts with bodies such as the DWP Momentum Scotland Ltd (‘Momentum’)

case study * Interest rolled up over period and waived if agreed social impact achieved Momentum - Investment Term Loan £200,000 (5% over 10 years) Patient Capital £100,000 (*no repayment for 5 years) Strategic Investment £200,000 (non-repayable) Total SIF £500,000 Term Loan (RBS) £700,000 (6.5% over 15 years) Total Cost £1,200,000 Term Loan £200,000 (5% over 10 years) Patient Capital £100,000 (*no repayment for 5 years) Strategic Investment £200,000 (non-repayable) Total SIF £500,000 Term Loan (RBS) £700,000 (6.5% over 15 years) Total Cost £1,200,000

case study OOTB focus mainly on supporting artists through the provision of affordable studio space Studio space provided for 118 artists (waiting list 200) Funding was required to help fund a refurbishment programme to provide additional studio/workshop facilities in Dalmeny Street, Edinburgh Work will add 14 studios, 2 large work/meeting rooms Out of The Blue Arts & Education Trust (OOTB)

case study OOTB - Investment Term Loan £250,000 (5% over 10 years) Strategic Investment £175,000 (non-repayable) Total SIF £425,000 Grants (3) £312,200 Total Cost £737,200

Social Investment Scotland Second Floor 1/2 St Andrew Square Edinburgh EH2 2BD