In the four years since we began offering dedicated social finance for the arts and cultural sector, we’ve received 333 enquiries about our offer, taken forward 46 applications to an investment committee, and had 36 investments approved. All of this experience has given us a good insight into what makes for a successful social investment application.
While every application is unique and our approved investments represent a real diversity of organisations and business proposals, we’ve noticed that there are a few key ingredients that all successful applications have in common.
Whether you’re just starting to think about social investment or you’re already knees-deep in the due diligence process, here are our five top tips for giving your application the best chances of success.
Our funds consist of funding from different investors, each of whom have their own requirements and priorities for how they want their money to be invested. Both our current open funds require that your organisation’s primary activity is in arts, culture, and heritage; and that it has a clear social mission, reflected in its structure and governance. The Arts & Culture Impact Fund is interested in all types of positive social impact for people and communities across the UK, whereas the Cultural Impact Development Fund looks for organisations that work with underserved groups in England, such as people living in poverty or financial exclusion, people with physical disabilities or sensory impairments, and vulnerable children and young people. Meanwhile, the Arts Impact Fund (now closed for new investments) was interested in organisations that were able to demonstrate social impact in one of its three outcomes areas: young people and educational attainment, citizenship and community, and health and well-being. Check what the eligibility criteria are for the fund that you’re interested in, and make sure you can clearly demonstrate how your organisation meets each of those criteria.
Unlike traditional grant-making for on-going service delivery, social investment typically provides a one-time infusion of cash that will make a critical difference to the organisation, improving its future resilience and enhancing its ability to achieve social impact. Do you want to acquire a building to provide a more stable base for your organisation? Do you need working capital to help launch a new product or service that will generate income for the organisation? Do you want to invest in marketing to scale up your activities or help them reach new audiences? Or perhaps you just need a temporary infusion of cash as a bridge loan to confirmed funding or to help cover seasonal fluctuations in cash flow? Whatever the reason for needing investment, we want to know that you have a clear plan of action for the loan and that it is going to something that will support the organisation’s business and financial goals.
Our investments typically take the form of unsecured debt, and we want to know that your organisation has the capacity to manage this debt and pay it back responsibly. What sources of income will you rely on to pay back your investment? These might be existing sources of income or new ones that you will develop through the investment. How reliable are these sources? Do you have the necessary controls to help understand and predict your finances, such as management accounts and cash flow forecasts? As social investors, we’re committed to investing responsibly, and we’re keen to see that the investment will help your organisation build its financial resilience rather than place an undue burden or put your social impact at risk.
The key thing differentiating social investors from mainstream investors is that we’re interested in both financial and social returns. That is, we want to know how our investment is going to increase your organisation’s social impact. Increased social impact might look different in different organisations. For example, it might mean reaching more service users, working with new user groups, expanding your geographic remit, strengthening your delivery approach, or offering greater breadth or depth of services. Whatever this looks like for your organisation, you should be able to explain clearly how the investment will help deliver increased social impact.
Besides just having a clear vision of what you want your organisation to achieve financially and socially, we want to know that you have the knowledge, skills, experience, systems, and relationships to make this happen. If your organisation already has a track record in its field, tell us about your management and delivery team, what frameworks you will use to structure and manage your work, and any kitemarks or awards that demonstrate the quality of your approach. If you are starting up a new organisation or initiative, show us how you have assembled the right team to deliver on your vision for the organisation, and how their previous experiences will ensure that your new venture is a success.
This blog post was updated 10 December 2020 to reflect the eligibility criteria for Arts & Culture Finance's current open funds.