Analysis: loan finance

Is borrowing an attractive option for charities today? David Ainsworth talks to the experts

Charities have been encouraged to borrow more money over the past few years, and the option to do so has become more attractive as interest rates have dropped.

But what does the market look like for charity borrowers? And is now a good time to get into it?

John Brooks, director of sales and marketing at Unity Trust Bank, says charities usually get good rates of interest on borrowing compared with similar-sized commercial firms.

"Charities are usually risk-averse," he says. "They don't present different risks from any other borrower, but they're likely to have considered the risks carefully and have a good idea of how they can pay the money back."

Charities are likely to get a good deal whether they approach third sector lenders or high street banks, says Charles Middleton, managing director of social lender Triodos Bank.

Brooks agrees: "There's less desire among all lenders to maximise their profits when lending to charities."

He also says there is spare capacity among social lenders: "We could lend more than we do."

Jonathan Lewis, chief executive of Futurebuilders, says his organisation has seen a steady growth in interest from charities looking for loans. "We've put a reasonable amount of effort into letting people know we're out there and we've seen a large rise in demand," he says.

It's the same story at Triodos Bank, says Middleton. "There's a growing appetite for borrowing among charities," he says. "In fact, we've never seen it stronger.

"Rates are currently low and prices are depressed for a number of assets that charities might want to acquire, particularly property," he says.

"Perhaps this is why many charities are seeing this as a good time to borrow money." 

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Unity Trust Bank

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