Posted on 10th June 2010
Leading national disability charity Scope has launched a new investment vehicle which combines donations, tax breaks, matched funds, soft loans and commercial loans so that each £1,750 donated will create a value to the charity of £18,000.
The Grangewood Venture Philanthropy Project (GVPP) was developed with the advice and input of Scope supporters familiar with the world of private equity and aims to raise £1.8m.
The money will mean that Scope can develop 15 new flats for disabled adults currently living in an unsuitable building on the Grangewood site.
Scope’s head of philanthropy and social investment, Tom Hall, told Philanthropy UK, “Scope delivers good quality care but many of our buildings are outdated. As capital finance is difficult to raise, and government grants are not an option, we decided we had to create new ways to find the money we need to provide more modern services that disabled people need and want.
“This method means that people can donate and loan money and we can then use that to lever commercial finance. We already have 10 investors interested in our scheme and we’re talking to Charity Bank, Triodos and Unity Trust about commercial loans.”
The GVPP fund is offering 100 units for sale. Per unit, each venture philanthropist donates £2,800, (with Gift Aid increasing that to £3,500 gross,) and then lends £7,000.
With top rate tax relief, that gives a net cost to the investor of £1,750. Scope will repay donors the £7000 loan when they sell the existing property after completion of the new building, expected to be in three years.
Scope receives a total of £10,500 per unit sold and will then use this to support a commercial loan of £7,500 to ‘match fund’ each investor unit. This means that every donor who gives £1,750 net and lends £7,000 for three years generates £18,000 of investment.
The costs of the £750,000 loan element (both interest and payment of principal) will be serviced from the circa £7,000 annual housing cost allowance to which Scope clients are entitled.
“Given the climate of government cutbacks, I believe we’ll see charities increasingly turn to more creative, and sustainable, methods of funding like this,” continues Hall. “This is also a good way to introduce new donors – none of the ten people who have expressed an interest in buying one of our investment units is an existing donor.
“I’d also encourage charities to emphasise the tax breaks when they promote this kind of investment – many donors are enthusiastic about the idea that a relatively small donation can have a much larger impact than its face value. The fact that part of the investment is in the shape of a repayable loan is another major selling point – donors like the idea that they can recycle their money to other causes or back to the same charity for a different purpose."
