New research identifying the current and future demand for repayable finance in the arts and cultural sector, as well as attitudes to borrowing.
What appetite is there for taking on repayable finance in the UK’s arts and cultural sector? This is an important question for providers of capital – naturally, for social investors such as the Arts Impact Fund, but also for public funders, trusts and foundations. Whilst not a replacement for grant funding, repayable finance can make scarce, socially-minded funds go further since money that is repaid to investors can then be recycled back into other social enterprises.
With the £7m Arts Impact Fund – a loan fund for arts and cultural organisations in England backed by Arts Council England, Bank of America Merrill Lynch, Esmée Fairbairn Foundation and Nesta – we’ve been seeing first-hand the strength of demand for flexible and affordable risk finance in the sector. Since 2015, we’ve received over 200 enquiries and have approved 26 investment applications, with much interest being driven by word of mouth referrals to the fund.
Our hypothesis then, is that there is significant unfulfilled demand for repayable finance in arts, culture and heritage. However, in thinking about scaling up our lending offer, we needed some more rigorous data. That’s why last year we commissioned market research agency MTM London to undertake a comprehensive study of the sector, seeking to understand the existing and potential future demand for repayable finance as well as the issues surrounding access to finance, such as the perceived barriers. We wanted to explore the full range of financial products that arts and cultural organisations could be interested in, so we used the term ‘repayable finance’ throughout – encompassing secured and unsecured loans, overdrafts, blended grant-loan products, equity and other performance related debt.
Today, we’re pleased to launch the report of this study, which we believe is the first of its kind. Over 1,000 organisations from across the country took part, 70 per cent of which were asset-locked entities such as charities and community interest companies. Key findings include:
At Nesta, we believe that there is much to be gained from taking a sector-specific approach to social impact investment. It allows us to develop a more in-depth understanding of organisations’ needs and create bespoke, innovative solutions. We look forward to scaling up our work in the arts and cultural sector. In doing so, we hope to contribute to the development of a financially resilient and sustainable cultural ecosystem out of which great artistic work can emerge – transforming the lives of audiences, participants and their communities in the process.