Social investment is the use of reimbursable funds to help an organization achieve a social purpose.
Charities and social enterprises may use reimbursable funds to help them increase their impact on society, for example, by developing their business, providing working capital for contract delivery, or purchasing assets.
Social investments are repayable, often with interest. Charities and social enterprises can generate surpluses through trading activities, contracts for the provision of public services, grants and donations, or a combination of some or all of the above. These surpluses are then used to repay investors.
Social investment is not for everyone and it should be considered along with other options. It is important to research the range of financing options available to your charity or social enterprise before making a decision.
Social investment is not a grant or an endowment.
There are two main types of social investment
1. Borrowing (debt)
A loan that you agree to repay over a specified period of time. Most debt investments are repaid with interest – a fee you pay to the investor for the use of his or her money.
For example, if an investor lends your organization £10,000, you repay £11,000 per month over four years at £229 per month.
2. Shares (equity)
Selling shares in your organization to an investor. Equity investors receive a share of any profits paid by the organization and have a say in the running of the organization.
For example, an investor pays £10,000 to own 10% of your organization.