THE COST OF CAPITAL

In September 2013, Charity Bank released the results of a survey on bank lending to charities. In summary, it says...

• almost 30% of charities who approached a bank had their application turned down
• 23% of potential borrowers were put off as they thought it was too complicated
• 46% of all who thought about borrowing were put off by cost
• 31% who approached high street banks for a loan ended up taking one.

How does this compare to bank lending to mainstream business?

Well, BDRC Continental report (roughly, as these numbers fluctuate over time)...

• 45% of businesses were initially declined a new loan
• nearly 40% of potential borrowers were put off by the process and the hassle
• somewhere between 20% and 30% thought it would be too costly
• around 60% ended up with a loan

So charities appear to be rejected less frequently. They also find the process of negotiating with the bank less off-putting than wider businesses do. So much for the much heralded problem of access to finance, particular to the social sector. There's a wider credit crisis on, don't you know?

But there is a problem here - which means that charities are less likely to end up with what they want from the banks. The critical statistic here is that 40% of charities offered a loan did not take it up, and the most significant reason appears to be the cost of capital.

Right then, "Social Investment Market", over to you...