Thinking about lending money to a charity - any advice?

oldtoolie

I am participating in a scheme like this. The charity raised £70,000 to fund a new building on property it owns which is rented to generate income for the charity. The loan arrangement was drawn up by the charity's lawyer and we are being paid back over a ten year period. Interest was set at BOE rates so that part is in effect a donation. The charity is long established, well run and has assets. It has many loyal supporters and could have raised twice as much.

Since your charity is also seeking to acquire an asset, it should be able to draw up a business plan and proposal which would be attractive to supporters. Presumably, the land will generate income through rents so it would be clear how the loan would be paid.

heretolearn_2

It also makes a difference whether it is a charitable trust or a charitable company. Thinking about having any difficulties getting repayments made, for example.
charitable trust - the trustees personally are liable for the loan. This means that if the charity closes down/defaults/whatever, you'll have to chase all the trustees individually for the money. What if the charity trustees have changed by then? What if one has died? What if they simply can't afford to pay you back? What if one does a runner? It's a pain in the bum, frankly, and is the reason most commercial lenders prefer not to deal with trusts.
Charitable company - the charity itself is liable for the loan, (it's irrelevant who the directors are) a much safer and simpler situation for lenders. Although in this case, if the charity is unable/unwilling to pay, then the directors do become liable, but limited to only a few pounds.

Savvy_Sue

Worth saying that it would be worth the trustees getting in touch with the local voluntary services council (google volunteer plus town / city / local authority) to see if they can offer advice, AND to see if there is a local 'pro bono' legal advice service.