february 2014 social enterprise northwest social finance fair
TRANSCRIPT
February 2014
Social Enterprise Northwest Social Finance Fair
Big Issue Invest was founded in 2005 as the social investment arm of The Big Issue
It provides a range of investment options, from debt to equity and quasi-equity
finance to social enterprises from £50,000 to £1 million
Lending business:
Loans from £50,000 to £250,000
Typically up to ten years
Over £20 million lent to 180 social enterprises with c. 3% loss rate
June 2010 launched the BII Social Enterprise Investment Fund limited partnership
investment vehicle for ‘equity like’ risk capital finance
£9.2 million raised from a diverse range of social impact investors
Can invest from £100,000 to £1,000,000
Big Issue InvestFor social entrepreneurs – by social entrepreneurs
BII – Approaches to investing
‘Conventional’ lending
Convince me that you can pay me back
Security – secondary source of repayment
‘Risk capital’ investing
Convincing case for growth
More intensive due diligence
More active involvement post-investment
Higher potential loss, higher potential return
BII SEIF - Investment Targets
Social Impact Clearly identifiable, high social or environmental value creation
Growth Potential and Ambition Viable business model which is either scalable or replicable
People, Products and Projections Strong management team with proven capability to deliver
High value-for-money product or service
History of positive cash generation or a clear near term path to cash and surplus generation
Investment Targets
Sandwell Community Caring Trust
Total financing requirement: £4.25 million to acquire a newly built residential care facility
Source of funds:
Senior secured debt (first mortgage, 75% LTV) Unity Bank£3,250,00(83%)
Subordinated term loans (secondary security) Big Issue Invest £725,000 (17%)Consisting of:
- Fixed rate term loan £362,500- Term: 7 yrs, 4 yrs interest only- Rate: 7.5% fixed
- Revenue participation loan £362,500- Term: 7 yrs, bullet repayment- Rate: 1.8% of the uplift in “Trading Income” from the base year, with
annual cap
Example ‘patient capital’ investment
BII’s Impact Assessment Scorecard
1. Mission & Vision
2. Scale of impact
3. Transparency
4. Market transformation
Dimensions Weight
35%
40%
10%
15%
Grade ranges
91-100 Excellent Performance
81-90 Very Good Performance
71-80 Good Performance
55- 70 Low Performance
0-54 Inadequate Performance
Investee Performance Metrics
Agreed, not imposed (but required)Simple, verifiable
Usually, 4-8 quantitative output measures Relevant to the business SROI if relevant and desirable
Metrics + targetsTargets reported quarterly, reviewed and reset annually
(concurrent with financial budgeting process) Discuss progress with Boards and work to drive improvement
Annual social impact report
Investee Performance Metrics (example)
Investee is on target, within a negative variance of 25%, to meet the following social performance targets for the 12 month accounting period to 31 March 2012:
3.1.1 Health600 service users with mental health problems demonstrate improved well-
being and have reduced dependency on state services; 3.1.2 Safety 150 service users with long-term mental health issues live independent of
acute care; 60 service users who are homeless or have inadequate housing needs are re-
housed; 45 families with children in care or at risk of going into care receive support; 50 victims of domestic violence receive support; 30 perpetrators of domestic violence are no longer considered a threat to their
families; 30 children gain safe access to a non-resident parent; and 20 services users that have been offenders within the criminal justice system
do not reoffend. 3.1.3 Inclusion:
300 service users for whom English is not their first language use Investee’s services.
3.1.4 Economic well-being: 100 service users become more economically independent or useful either through employment or a return to work after sick leave.
