Better to borrow?

£5.00 inc p&p (free to DTA members) In 2004 we asked development trusts about their attitude towards loan finance. We discovered that borrowing was at a relatively low level: 79% of development trusts had not used any form of loan finance in the previous year. However, in 2005 the figure was 73%, and in 2006 it was 71%. This suggests a gradual increase in the number of development trusts prepared to use loans. Download a copy

Borrowing sometimes takes the form of an overdraft facility. Sometimes a bridging loan will meet a short term need. Most significantly we are seeing development trusts taking on a mortgage for capital purchase or refurbishment – in other words to develop community owned assets which can deliver community benefits and at the same time provide the basis for independent income. Our members now have over £340m of assets in community ownership – financed by a potent mix of grants and loans.

In this booklet we have selected examples where finance has been provided by NatWest/RBS or by Unity Trust Bank. This is because these banks have been pioneers of community enterprise investment – ever since the formation of the DTA in 1992 they have supported our movement and built relationships with our members. They helped to grow a market and so it is perhaps not surprising that they are now the market leaders.

In 2006 over a third of our members said that they were “comfortable” or “very comfortable” about using loan finance. We hope this booklet will encourage more to consider this route. We believe that loan finance, when used correctly, is one way to help development trusts grow their business, and therefore increase their community impacts.