This week marks the second anniversary of the creation of Social Investment Tax Relief. Perhaps not an anniversary I ever saw myself marking in my diary. I have surprised myself at how captivating I have found this tax relief to be.
So a year on and what’s changed? Well over 26 more deals (compared to only 4 this time last year), 3 funds and a whole host of information that NPC has reflected upon in their State of SITR Report.
SITR really seems to be getting to the heart of the barriers that social enterprises and charities face in accessing investment. It is patient capital, unsecured lending, with interest rates depending on the appetite of investors (initial indicators are encouraging both around affordability and investors attitude to risk). It encourages new lenders and therefore new money, and many of the organisations that have used SITR are ones that previously didn’t scream investable proposition like a traditional boat festival and a gymnastics club.
Most excitingly, SITR really seems to offer a viable option for community facilities such as shops, sports centres, farms, piers or day nurseries and I am sure there will be many more case studies to come including community owned pubs (we know of at least two who are in the future pipeline).
There are always barriers and some less positive commentary to overcome but if we take a positive stance:
- Yes the deals are a drop in the ocean but compared to the traction of EIS (Enterprise Investment Scheme) in the first two years to the equivalent size of the market, we are doing well!
- Yes the numbers are still small (total lent to date around £3.4m) but it seems to be the right type of money and the right amount of money (many of the deals fall at the median need for capital of 60k)
New investors, whether they be through funds or a rising trend for DIY social investment, have all supported the uptake of SITR and most importantly this new tax relief is providing new options to raise investment to create impact. In my book, that can only be a good thing!
So let’s look forward to year 3 with hopefully a cap raise, social VCTs and a whole load more deals to talk about.
Happy anniversary SITR from all the Big Society Capital Team.