Thinking about lending money to a charity - any advice?

Cavemanu

hi there, am a member of a very small gardening related charity who have been established some 20 years.

They are thinking about acquiring another adjacent privately owned allotment plot that is about to become available on the market (they've done this several times)

This plot will cost upwards of £10K. There is not enough in the reserves to finance this outright, there is probably around £3K available so as previously, they will be approaching the membership of the charity to see whether people would be prepared to donate towards the cost of buying the land to create additional gardening space for those on our waiting list and to preserve the site from being developed.

Previously, I understand that members were asked if they could donate £1K (or more). There are some people who can afford to do so, whereas others on fixed income/pension and those on lower incomes cannot, but would probably donate what they can, if they can. Also the people who funded before will probably be asked again (there isn't a very big membership) and given the recession some of these are not necessarily going to be able to donate £1K again.

I am currently not in a situation where I can afford to donate the £1K+. However I would be prepared potentially lend some money (interest free) if that helped facilitate the purchase as no doubt the purchase is likely to be time sensitive.

I would be happy to wait up to 3 years for the loan to be repaid. I've not yet made this offer to the charity board as I'd like to consider the issues/implications first. I don't believe anyone has been asked nor offered to lend money before so not sure how my offer to lend might be received!.

Over the past few years I have contributed to help raise several thousand pounds for the charity in various ways, such as grants, prizes, employer donations, open days etc to fund equipment and materials but never for the acquisition of land.

Any advice from anyone who has lent money to a charity or has been a charity who has received a similar loan or offer of one? Also any anecdotes of how money has been raised by charities in a similar position would be really helpful and might give us other funding angles to pursue.

paddyrg

Have you considered buying the land outright yourself, then letting the charity buy it back off you over the course of 3 years on some kind of rent to buy deal? That way you still have the asset to sell if push comes to shove and there is a problem?

Errata

The onus is on the charity to fully explain what repayment terms it's offering and how it will guarantee that the loan is repaid.

dandelionclock30

I cant believe they asked people to donate a grand!!.How scandleous!.If I were you I would'nt lend them anthing either, let them borrow from a bank or direct them towards grants and trusts in the area. You dont want to be ripped off and you would probably never see the money again.
You should just rent an allotment plot for a few quid a year then leave the rest to them.I've never heard anything so outragous in all my life.They are taking the P big style.

somethingcorporate

A charity asking for donations is taking the p? really?

I think it would be a lovely thing to do. Allotments are worth a lot more than the few quid a year it costs to have one. I really enjoyed mine and got a lot more pleasure than the tiny amount it cost me and was very grateful for the allotment committee to open some new area up for new plots to give us one.

Personally, I think Paddy's idea is great. Lower risk for yourself and the group doesn't lose out on the land.

Good luck.

Uncertain

paddyrg wrote: »

Have you considered buying the land outright yourself, then letting the charity buy it back off you over the course of 3 years on some kind of rent to buy deal? That way you still have the asset to sell if push comes to shove and there is a problem?

You could also have a charge on the land, like a mortgage, but this would involve some legal costs it getting it drawn up.

However there is only any real point in doing either if the piece of land would actually be saleable if you had to take possession. Otherwise the "security" is rather theoretical!

It is not uncommon for golf clubs and similar to have loans from members. Generally they pay more interest than you would get in a deposit account but less than the club would pay to borrow from a bank.

Ultimately it is a matter of weighing up the risk, how much you want to help and how comfortable you feel.

dandelionclock30

somethingcorporate wrote: »

A charity asking for donations is taking the p? really?

I think it would be a lovely thing to do. Allotments are worth a lot more than the few quid a year it costs to have one. I really enjoyed mine and got a lot more pleasure than the tiny amount it cost me and was very grateful for the allotment committee to open some new area up for new plots to give us one.

Personally, I think Paddy's idea is great. Lower risk for yourself and the group doesn't lose out on the land.

Good luck.

.

Yes I think asking for a grand is taking the P. Its not like asking for spare change is it?
The council usually provide allotments to local people and they are not asking the members to donate a Grand either.

Cavemanu

thanks for the responses so far, a very diverse range of observations and suggestions. Keep them ideas coming!

Just to clarify, the allotments we cultivate are in this case owned by the charity (not the council in this case), which is certainly not the norm.

We pay £26 a year for rent of our mini plot and water charges. The reason for the charity wanting to acquire more land so that more people in our local community (who have been waiting on a list for several years) can be accommodated through the provision of another plot that can provide gardening space for another 6 or 8 households off the waiting list. Yes, the cost of buying it will exceed the collective rents charged but it will then be owned by the charity in perpetuity and save the site to prevent it from development (it's not for profit it's more like an appeal to get some more funds to enable more people to participate).

Paddy, I like your 'third way' idea of buying the plot on their behalf using your method but sadly my finances cannot stretch that far! That might work if there were a few of us who wanted to do a loan rather than a donation using that approach, which would give us more time to raise the funds to purchase it outright through other ways.

Savvy_Sue

DH works for a charity which has had various loans from individuals: the key thing each time is to get the terms agreed up front, and in writing.

Some people are happy not to have any repayments for a fixed period and then installments, others want repayment to start quite quickly in installments.

We've also had an arrangement at work where a colleague took out a finance agreement on a van, and then we set up a DD to make the repayments direct to the finance co. Obviously a risk, because they would have been liable if we'd gone under, but they knew we were sound enough to stand it.

getmore4less

How many plots in total?

if these new 6-8 plots were offered on a 10 year payments up front that woud be £1500-£2000 if all the other plots were also offered a 10 year plan that might get closer to the total needed.

Mistral001

A charity asks for donations and the OP offers a loan instead? It is what it sounds like I am afraid, no way of dressing it up.