Social investment is often talked about as a powerful way to enable growth, strengthen credibility, and scale impact. But let’s face it, being ‘in debt’ doesn’t exactly sound appealing.
If you’ve grappled with the dilemma of needing money to run your organisation while delivering impact, you’re not alone in asking the question: ‘what is the right option for my organisation?’
In this blog, Olivia McLoughlin, Senior Programmes & Projects Manager at Good Finance, unpacks some common myths about social investment, shared from social enterprise and charity leaders, as well as practical tips to help you make an informed choice when considering repayable finance.
1 Social Investment isn’t benevolent money
Unlike grants, social investment needs to be paid back (often with interest). That can feel daunting, especially if your organisation has traditionally relied on grant funding.
But here’s the upside:
- It can be less restrictive than grant funding.
- It can strengthen your organisation’s long-term sustainability.
- It encourages you to build income streams that fuel resilience.
Plus, social investment and grants do not have to be mutually exclusive. Social investment is just one tool in your ‘financial toolkit’ and sits alongside other forms of finance. Some investors will offer ‘blended finance’ – a package of both social investment and grants.
Find out more about social investment and the different types here.
2 Impact matters
Yes, investors want you to repay the loan and they’re unlikely to lend to you if they think investment will put your organisation under undue pressure. But financial returns are not the whole picture. Social investors care deeply about your impact, that’s one of the things that sets them apart from traditional lenders.
Did you know? 85% of social investors listed on Good Finance are charities or social enterprises themselves.
If you want to show your impact clearly, explore the Outcomes Matrix on the Good Finance website.
3 It’s about much more than just the money
Think of social investors less like banks, and more like partners. Many offer wraparound support such as business advice, legal connections, or signposting to other resources.
The relationship doesn’t end when the money hits your account, they want to see you succeed.
Finding the right social investor is key. Different investors offer different types of social investment and it’s important to ‘shop around’ to find an investor who really gets your social mission.
To find the right match, check out the Good Finance Investor Directory.
4 Honesty is always the best policy
Like any good partnership, honestly and transparency should form the basis of your relationship with your social investor. Things don’t always go to plan – contracts fall through, sales dip, or unexpected events derail progress.
When that happens, the worst thing you can do is bury your head in the sand. Pick up the phone, your social investor is there to help. This help might come in the form of repayment holidays, restructured loans, additional support, or even negotiating with squatters (yes, this has happened)! but having trust and open communication is key.
Take a look at some of the ways that charities and social enterprises across the UK have used social investment to scale their impact and become more resilient by checking out case studies here!
5 Why isn’t it cheaper if it’s social?
It’s a fair question: if it’s called ‘social investment’, why isn’t it always the cheapest way to borrow?
There are multiple factors which determine the interest rate you’ll pay on a loan, risk being one of them. Aside from wider economic factors, the ‘cost of capital’ that is, how much social investment will cost, is also influenced by where the investor’s money comes from. Some can take more risks if their funds are philanthropic at source. Others need to cover their own costs so they can reinvest again.
Curious about what social investment might cost your organisation? Try the Cost of Capital Calculator.
6 Due Diligence isn’t fun, but it does make your business better
Due diligence might feel like a financial root canal; digging through paperwork, projections, and impact data. I’ve only met 1 person who actually enjoyed it!
It’s the process by which you and your social investor really get into the details of your organisation to understand where the risks lie and ultimately determine if social investment is the right option.
It may not be fun, but here’s the silver lining: the process usually leaves organisations stronger, clearer, and more investment-ready.
Tip: Good Finance offers a free, bitesize e-learning programme to help you prepare.
7 It takes longer than you think
Social investment takes time. From first conversation to funds in the bank, the process can take a few months, or even upwards of a year.
It’s best viewed as a financial tool to help your organisation become more sustainable and resilient in the longer term, not a last-minute lifeline. It’s worth reaching out to social investors and having conversations early on, especially if you think you might need social investment further down the line.
If you’re wondering if social investment could be the right option for your organisation, try Good Finance’s handy tool: Is It Right For Us?
Social investment isn’t for everyone and really it is just one tool to help organisations deliver impact. In the right circumstances it can be a game-changer to unlocking growth, resilience, and a means to scale your impact in a sustainable way.
Olivia McLoughlin is Senior Programmes & Projects Manager at Good Finance.
Good Finance exists to be a trusted source of information for charities and social enterprises navigating social investment. If you’re curious and want to access free, easily digestible and jargon-free tools and resources to support you in making an informed decision, visit our website.
