Charity Donations Are Disappearing

In recent years, charitable organizations have been seeking traditional forms of funding to stay afloat in the absence of traditional funds raised from donors.

The current debt figure is about £500m and is expected to double in the next three years. According to Young Foundation (a think tank), fundraisers are seeking bank financing at rates of 10% interest or higher to keep operations going.

This is simply because less donations are being made to these firms. Interestingly, the government is starting to back these loans by infusing a total of £600m. The fund is known as Big Society Capital.

The founders of this new fund have stated that this infusion of cash will spur new social entrepreneurship ventures just as venture capital did for private industry 30 years ago.

If managed properly, the loans could be beneficial to charities, helping them launch new fundraising programs, however some have warned of the risks associated with such loans.

If charities cannot pay back these high interest loans on time, it could cause them to close down. The danger here is that charities are used to dealing with grants and fundraising dollars which do not need to be paid back whereas loans have to not only be paid back, but with interest and on time.

On the bright side, charities might be able to innovate and use this financing to create new streams of much needed revenue. Leaders of these loan accepting charities have assured that they have the skills to effectively manage and process these investments. The founders of charitable organizations see this form of financing as a new opportunity to tap into diverse sources of support and leverage new networks that will further promote the missions of the organizations.

Loans are not going to be the new way of fundraising for charities, they will simply complement the already existing donation based and government grant money that is traditionally pursued.

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