Is loan finance right for you?
Before applying for a loan, voluntary and community organisations should be at a stage where sound business and financial planning has demonstrated its ability to generate enough income to repay the loan. The following discussion points can be used to find out if loan finance is right for you.
What will you use the money for?
An organisation should be clear from the start what will be the purpose of the loan. Loan finance can be used for a variety of purposes, including:
- Purchasing property, land, machinery or equipment
- Renovating existing property
- Managing cash flow problems and grant income cycles
- Establishing new projects or ventures
- Investing in organisational growth
What are the benefits to your organisation?
Before applying for a loan, an organisation should carefully consider the following and possibly prepare a business plan to support its application.
- Will the loan allow you to achieve your mission, aims and objectives?
- Will the loan assist in helping to improve service provision or reaching more beneficiaries?
- Will the loan contribute to the future sustainability of the organisation by providing opportunities for further income generation?
Is your organisation fit for purpose?
An organisation should demonstrate its ability to apply for loan finance and manage the repayments.
- Does the organisation’s governing document allow for borrowing money and potentially allowing assets to be pledged as security?
- Does the organisation have robust financial systems in place to manage such an investment?
