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Social enterprise sets up loan that repays in line with growth

By David Ainsworth, Third Sector Online, 24 February 2010

HCT Group agrees quasi-equity offering with Bridges Ventures and Social Investment Business

The HCT Group, a community transport social enterprise, has arranged a £3m loan deal in which investors will receive a return on their money based on growth in its turnover rather than flat-rate repayments.

The deal, called a quasi-equity loan, involves lenders sharing in some of the risk faced by the company, which is also a charity.

Lenders working on the deal said it was the biggest of its kind involving a UK social enterprise.

It was led by social lender Bridges Ventures, with backing from Social Investment Business, and is made up of a mix of quasi-equity and regular loan finance.

"We're trying to demonstrate that you can invest in social enterprises in a sustainable way," said Antony Ross, executive director of Bridges. "It's important to demonstrate to the market that you can lend money to social enterprises and receive a risk premium.

"There are a growing number of investors, charitable and private, who are willing to invest at below-market return, but who want their capital back. If we can demonstrate it can be done here, we can show it will work elsewhere."

HCT wants to raise another £2m.