Making an impact

What role can loans play in stimulating great art? Not a question you overhear in every gallery or theatre foyer. Loans, finance and investment may seem a world far removed from culture and creativity but the space between contains more potential than you might think.

In times of public sector austerity, with low yields driving reductions in philanthropic grant-making and greater diversity in cultural output, borrowing money can give organisations the opportunity to invest in their own assets and future.

Common to all our investments is a culture of entrepreneurship among leadership teams and a desire to become more self-sustaining

The aim of the emerging social investment market is to match investors who want to use their money to generate value in more than one dimension – creating positive value for society alongside a financial return – with non-profit organisations or social businesses seeking investment, for whom commercial finance might be too expensive or constraining.

Social investment fund

The Arts Impact Fund is a pilot social investment fund specifically for arts and cultural organisations that provides unsecured loans of between £150,000 and £600,000 repayable over three to five years at affordable interest rates.
Crucially, it is the first fund of its kind anywhere in the world to take into account the artistic as well as social impact of its applicants when making investment decisions.

The fund combines public, private and philanthropic money from Bank of America Merrill Lynch, Esmee Fairbairn, Nesta, Arts Council England and Calouste Gulbenkian Foundation.

Having opened to applications last summer, it has already received 70 expressions of interest and offered loans to theatres, galleries and dance spaces for a variety of purposes: from setting up commercial trading subsidiaries, such as restaurants, cinemas and digital content licensing agencies, to funding new product development, refurbishments and property acquisitions. Common to all our investments is a culture of entrepreneurship among leadership teams and a desire to become more self-sustaining.

Impact evidence

Social investment is not a magic bullet for the sector. Not all organisations have business models capable of generating sufficient cash to repay a loan. and is not intended as a replacement for grant funding or other loans, but a clear advantage of social investment is that it can make money work harder for the arts. Repaid money can be ‘recycled’ or lent again to other organisations.

Titchfield Festival Theatre, an amateur dramatics theatre company in Hampshire, will use a loan from the fund to install energy-efficient heating systems, solar panels and a new roof on its 1960s warehouse venue. It will repay the loan out of fees earned from hosting weddings at another of its sites, as well as income earned from selling surplus energy back to the National Grid from its main venue.

In terms of its social impact, the theatre has a strong focus on artist development as well as outreach to schools in the area, using drama as a medium to engage young people with local history.

There is a long history of arts organisations taking commercial loans for the refurbishment of venues, but supporting them to provide evidence of their social impact opens the door to new funds. As with all of our investees, we’ll be closely following Titchfield Festival Theatre’s progress and evidencing what we believe is a strong appetite for an expanded range of financial instruments and methods.

Flexible money

Social investment is likely to become an increasingly important tool for the arts sector, helping organisations do more and perhaps do it better with existing and new audiences. Social lenders don’t provide free money, but they can provide flexible money, enabling enterprising arts organisations with clear social and artistic goals to pursue them. And what is great art if not the courage to experiment for the sake of a bold vision?

Seva Phillips is Fund Manager of the Arts Impact Fund at Nesta.
artsimpactfund.org