No Debra!

Loans are an important new tool in supporting and expanding our sector's work. And needed more.

You are wrong to assert in your recent Third Sector article that we must avoid debt as a sector . ( Article, this weeks' Third Sector by Debra Allcock Tyler).

You are right however to urge caution.

A loan will not fit or suit many third sector organisations. It won't help campaigning charities. A loan must be repaid and so no organisation should go into a loan unless they are absolutely clear on the obligations and responsibilities that a loan brings. You should have weighed up the different options. But in some cases a loan makes financial sense and is a good option.

It is also the job of social lenders like the Social Investment Business ( who now have 7 years experience of loans to over 300 organisations) venturesome or Charity Bank. In fact they are very careful to only lend to charities or social enterprises that have a clear business plan that means they can pay back.

I really enjoy Debra's company and enjoy the lively discussions we have, so it won't be a surprise to her that I believe she has been peddling this unhelpful line for some time. She needs to speak to organisations that have had loans or read the 2 independent research reports that have been produced by Sheffield Hallam and London Metropolitan on social finance.

http://www.adventurecapitalfund.org.uk/images/stories/files/reports/acf_finalreport_july%202009.pdf

http://www.thesocialinvestmentbusiness.org/fileadmin/futurebuilders_evaluation_summary.pdf


And let me pose this question: What would you have said to the group of parents of kids with autism who had the vision of taking their kids out of crap state provision and building their own school that could cater to the special needs of their children. A school they would run and guide.

We supported their vision with a £5m loan, which they used as leverage. They have built the school: the Treehouse in North London. It's superb. It has developed as a centre of excellence for the teaching of kids with autism across the UK and internationally. They could not have done this without a loan. I challenge Debra to go and tell them to their faces that they have made a mistake and shouldn't have taken the loan.

Should they have taken Debra's advice and refused to take a loan and spent years trying to get the money through raffles and grants, Perhaps never making it? Their experience was exactly that- which is why the loan was such a deliverance.

In fact they had the guts and determination to get it going through a loan and a superb professional plan to pay that back.

So I'm with Treehouse on this. And the other bodies that have gone for loans to support their work with beneficiaries. At a time when our sector faces ever more challenges we need more diverse income streams. Of course we must be careful about funding - whether that is a grant that makes you overly dependent on the funder - or a loan.

And finally I say to my friend Debra, you like me may have a mortgage? Or have had one. That's a loan you took to buy a home because that suited your circumstances. So why do you want to deny that opportunity to third sector bodies who may decide they want a loan to buy a property to turn into a youth centre, for example, because that makes more sense than renting? Why not take a loan for expansion because you know you can make a payments by results contract work and that is the only way you can take part in a contract you know you are the best to deliver for your beneficiaries ?

The only reason the sector is relatively debt free is because for ages we have simply been denied access to capital. We can't actually get loans even when there is a superb business case for them. The point of social finance is to correct that injustice. To get us access to capital to grow. Of course it is not for everyone. But to suggest it should not be available for anyone in our sector is the height of presumption.