Pig Out For The Cure

Financial Measures To Secure A Housing Property

Charity and Mortgage

Help for charities looking to borrow money

Are you running a charity organisation and running out of money? Looking for ways to source money? Well, we will help you analyse the situation better and find ways to get the money without many hassles.

We believe that it isn’t easy for a charity to get the money when funds don’t suffice. They have many rules to be followed, to get the extra required money, in a legal way. Trustees and persons in authority must give a nod; it isn’t a one man job, but a collective work. So with a little help, we think you might be right there, getting the right help from the sources/lenders.

First and foremost factor to be analysed is Why Charities need to Borrow money?

There are times when the funds don’t meet the requirements and there is a necessity for more of funds. Or even to invest in properties or IT sectors to save money for those rainy days. Most of the Charity Borrow Money organisation don’t do such activities using the reserves money and hence borrow and settle at the end.

The next question, Is Borrowing allowed for a charity?

Yes, but involves them to have ‘express power’ to do so. Most of the banks require the charity to have this document handy when applying for a loan or any other way of borrowing money, like pledging any property of the charity or selling them.

The basic factor is to analyse if the borrowing will solve the arisen problems or will fulfil its purpose. If it’s yes, then the next step is to look if the charity has express power. If it’s a yes, then you must provide the supporting documents and you are done.

In case there is no express power, then the ‘Companies Act 2006’ allow charitable companies to amend the laws to confer the express power to them.

The final word is, when you have so many things to consider and work out before you even think of the process, it’s better to analyse deeply about the necessity of borrowing money and then going forward.

So, what are the types of borrowing allowed?

Definitely, there are many ways of borrowing allowed for a charity, but yes with some restrictions. Well, let’s see the various kinds of borrowing available:

  • Overdraft facilities
  • Term loans
  • Revolving credit facility
  • Social finance and investment

Well, the first 3 are traditional known types of loan methods. The last one, ‘Social finance and investment’ is something new and trending these days, which involves a promised social return from the charity’s end to the lender.

So, the type of loan needed depends upon the purpose it is raised for.

Did we miss out something very important? Yes, Security!! Security for the money taken by you is surely an important part needed by banks. They need to be assured that you are not going to cheat them in any way; your bankruptcy isn’t their problem. So, to ensure a smooth process, security for loans is mandatory.

In such cases, the property is the most preferred one, and the legal advisors are at your rescue. Charities have specialised advisors to offer insights about mortgages using the property and you may then come to a conclusion if you really need the loan or can try with any other option.

Thinking if there are any ways to get money without dealing with banks and a whole lot of process? Well, yes there are few other ways.

Other ways to source money, without borrowing: Sell or lease property

It’s always pretty easy on the charity part to sell or lease a land that’s under them. But there are few organisations which need the charity commission’s approval and you must follow the rules to get there. Well, before you start the process, including yourself and other trustees, consider the below factors.

  • The organisation or you have the permission to sell or lease the property. It should be present in a document or the governing law.
  • The property should actually be owned by the charity.
  • There isn’t any clause that stops the charity or you from selling or leasing the property.
  • The action was taken, selling or leasing must be in the best interests of the charity and not any others personal interests.
  • The purpose of the property must be followed. Example, if it’s meant for an educational purpose, it must be sold or leased on the same grounds. If it’s for entertainment then it has to meet the requirements and not go against it.

For the above actions, there are certain legal requirements. They are listed below:

One must get:

  • The best deal for the charity’s property
  • Hold advertisements for the sale or lease of property
  • Written valuation of the property from a qualified surveyor before the agreement is made. An advice is needed from them.

Along with the above details, you must furnish few documents and certificates to the purchaser for their safety and security.

  • Certificate or document to show that the land is disposed legally
  • Document to show what sort of charity is yours and how you possess the land

Well, if you are into this industry, then all these might not be new to you and can be done in a quick jiffy without many hassles as everything needed is internal approval, that too not always. So, when is the approval mandatory for you to sell a property of charity possession, definitely for the charity purposes!

Commission approval for lease or sale is required when:

  • The property is specifically designated for a purpose.
  • It's sold for lesser than the market value
  • The surveyor’s advice isn’t taken like for the prices quotations and method of sale
  • Being prevented by the governing law of the charity, for sale or lease of charity’s property
  • Property being sold to any relative of trustee family, or directly to a trustee or any family connected directly to the trustee or the charity itself.

So, these are the factors to be looked into before you think about getting some money either by borrowing or leasing.

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