The time when charities and social enterprises can apply for finance through the Growth Fund - part of Access, the government's new social investment foundation - came a step closer at a meeting of the foundation's joint investment committee in September.
The committee gave its approval to one of six social investment finance intermediaries that have applied to be financed by the fund. The SIFIs will receive and decide on applications from smaller third sector bodies to get a blend of loans and grants to continue or develop business ideas.
A formal legal agreement has to be drawn up before an announcement is made about the first SIFI, but Seb Elsworth, chief executive of Access, says he hopes this will happen by the end of the year, and the allocation of money can begin soon after that.
The maximum for each organisation funded through the SIFIs will be £150,000, of which at least 50 per cent must be loan: Elsworth says a typical investment might be £60,000, with a £20,000 grant. If there is a grant, the SIFI can take up to 10 per cent of it to help it cover operating costs.
Three more SIFIs were approved in principle by the investment committee's September meeting and are now the subject of due diligence before confirmation. In all, 16 SIFIs have so far expressed an interest in the Growth Fund: 11 were invited to apply, six did so and two were rejected.
Elsworth estimates that in two years' time the fund will be working through about 15 SIFIs, some of them England-wide and some in particular regions or conurbations. He expects about 400 awards to be made over seven years from the £45m at the disposal of the Growth Fund - a £22.5m grant from the Big Lottery Fund and the same amount in a loan from Big Society Capital.
The Growth Fund is intended for smaller organisations interested in loan finance but considered too high-risk by other institutions. It works through intermediaries partly because it has only five staff and partly because it wants to stimulate the SIFI market rather than compete with it. Some well-known SIFIs are Bridges Ventures, Charity Bank and Big Issue Invest.
Elsworth, appointed when Access was set up in March, says the Growth Fund will be suitable for entrepreneurial organisations that want to grow and earn more of their income. He hopes it will help to make loan finance in the third sector less controversial and as familiar as grants.
But social investment of this kind is not a straight alternative to grant funding, he says. "It's to help organisations to develop a business model, not to keep the lights on," he says. "It's not in anyone's interests to give or receive loans that can't be paid back.
"We're encouraged by the progress in blending loans and grants to achieve a new kind of social investment. It means working in new partnerships, and we're pleased with the interest we're getting."
The other work of Access - distributing capacity-building grants to charities and social enterprises - will not start until April next year. This will run for 10 years, funded by £60m in loan repayments to Futurebuilders, the £145m fund for loans and grants, closed in 2010, that helped charities win public service delivery contracts.
This work is intended to build on other capacity-building programmes, such as the Investment and Contract Readiness Fund, now closed, which helped 51 organisations reach a position to raise £117m of social investment, and the Big Lottery Fund's Big Potential programme, which helps organisations that are trying to raise finance or win contracts. It will be done through existing grant-making organisations, national or local.