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Small social enterprises helped to grow with ‘permanent capital’

Resonance has responded to the funding gap for smaller charities and social enterprises with its first ‘permanent capital’ investment into Hollywell Housing Trust, a social landlord housing vulnerable people in the south west.

The social impact investor has invested £40,000 in the charity, which offers a housing and tenancy management service for people with learning disabilities and autism.

‘Permanent capital’ provides investment to social enterprises and charities wanting to scale up but locked out of mainstream investment due to their size or the risk of taking on debt.

It involves a loan for which there is no initial interest payable or fixed repayment date set, allowing the organisation to use the investment to develop their trading activity without the pressure of fixed interest and capital repayment obligations. Instead, a share of the enterprise’s revenue is paid once those revenues reach a pre-agreed level, at which point the enterprise should be in a position to refinance the loan, if it wishes, using alternative sources of finance.

The investment of £40,000 is from the Health & Wellbeing Challenge Fund, an impact investment fund managed since Resonance in 2016 to help charities and social enterprises in the health and wellbeing space to scale up their social impact.

The fund is seeking ways to make social impact investment more accessible and relevant to smaller social enterprises looking to expand their operations and impact.

Tom Crook, investment analyst at Resonance, said that the organisation has introduced permanent capital in direct response to the need in the social impact market for more flexible and patient investment capital.

‘From speaking with over 200 social enterprises across the south west, we often found many were new to social investment, and wanted to ensure that they would not be over-committing themselves to initial interest and capital repayments.

‘Our main aim for this product is to allow enterprises to make a step change in their social impact and to see this as a stepping stone on their journey to sustainability.”

Katie Sherjan, chief executive at Hollywell Housing Trust, said that the funds will allow the organisation to respond to growing demand for their service and grow quickly and sustainably.

‘The patient capital element of this investment means we can focus on growing the business without the worry of cashflow pinch points, allowing us to help as many vulnerable people as possible to find a safe home.’

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