Sir Stephen Bubb, head of the chief executives body Acevo, has called on the government to ensure its planned state business bank also lends to voluntary sector organisations.
Bubb has today sent a letter to Francis Maude, the Cabinet Office minister, and Nick Hurd, the Minister for Civil Society, in which he asks for a sum of money from the bank to be set aside to finance charities.
He says state bank for small business lending, which the government hopes will make loans totalling up to £10bn and was announced by the business secretary, Vince Cable, last week, should have a ring-fenced fund to provide loans to charities "quickly and at scale" to help the sector grow.
Bubb says the move is needed to deal with the difficulties charities have in getting loans. He quotes an ongoing survey of 188 people by the Social Investment Business, which found that 169 felt they needed a total of £343m in order to grow. Most could not get the money but 70 per cent would take a loan or similar repayable mode of finance.
Bubb says Big Society Capital – which was set up by the government to stimulate investments, rather than loans, to organisations with social purposes – is welcome but does not fulfil this purpose.
The letter says that lenders willing to make loans to third sector organisations are "few and far between".
"It’s time the government acted," Bubb’s letter says. "We need access to loans so that we can step up to the challenges we all face. As the CBI report last Monday indicated, there are still many savings that could be made if we diversified more of our public services. Many of the business surveyed by Social Investment Business want to expand in this area. We should support them."
Cable said last Monday that the government would put £1bn towards the new state-backed bank to lend to small businesses, and hoped it could attract private investment to finance up to £10bn of lending.
A Cabinet Office spokeswoman said the government was "committed to growing the social investment market and making it easier for charities, social enterprises and community groups to access affordable finance".
"We recognise the sector is made up of a diverse range of organisations, from large to small, and that’s why we have introduced a range of tailor-made initiatives," she said. "Big Society Capital, the world’s first-ever social investment market builder, has recently committed £37m to established organisations that can take on repayable finance.
"And last month we pledged £1m from the new £10m Investment and Contract Readiness Fund to help eight small social ventures scale up and do more for society. For those start-up organisations that need help to get their ideas off the ground, we’ve also launched a £10m Social Incubator Fund for early-stage investment."