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Opinion: Hot Issue - Are projects compromised by accepting loans asfunding?

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Futurebuilders has just handed out the first round of its Home Office-backed 125m investment fund. This includes a 1.3m loan, grant and overdraft package to The Who Cares? Trust.

NO - Susanne Rauprich, chief executive, National Council for Voluntary Youth Services

This is something of a non-issue. Loans are the way of the future and the voluntary sector needs to wake up to the fact that funding methods are going to change.

In the past, charities had two choices: either accept grants and donations in advance of need or enter into contractual agreements with local authorities. If an organisation doesn't already have the money in the bank, they can find it difficult to run big contracts.

If the voluntary sector wants to deliver services and take advantage of contracts, they should be allowed to operate on an equal footing with other commercial providers. There is an element where you pay the loan back but it is an opportunity, not a threat, to the voluntary sector.

Unlike grants, loan conditions are stringent in a different way and are far more like a business transaction. The provider is not as interested in the values of the organisation or the way the service is delivered.

Loans might not be right for every organisation, but the voluntary sector is so diverse that it is good to have them available.

YES - Imran Saithna, project manager, Muslim Youth Helpline

Accepting loans could potentially compromise the voluntary sector's work, but it would depend on the individual case.

Taking a loan can be a gamble and is not a route I would be tempted to go down myself. I can see why some organisations would accept a loan if they needed to secure a cash injection for a project straight away. But they are by no means a replacement for grants.

Loans will also take away the ethos of being a not-for-profit organisation, which would be a big turning point for many of them and might even compromise their not-for-profit status. As a Muslim, the aspect of paying interest would also potentially put me off.

I don't see the benefit of it myself, as I can't see what the loan would add. It seems to be aimed at such a small market that it doesn't seem justifiable.

NO - Susanna Cheal, chief executive, The Who Cares? Trust

A loan will not compromise a project as long as the loan is the right "fit". For many projects, a loan will not be appropriate. But for those that can generate an income, it could help organisations assist people more effectively and faster.

Projects need a strong case that can withstand rigorous quizzing from potential investors before taking out a loan. If the proposals prove their value, why should investments not be made in the voluntary sector on a level playing field with other sectors? The voluntary sector can and does deliver quality services and should increasingly be seen as a "safe" bet for investors.

At The Who Cares? Trust, we relied on traditional funding means, including central government, trusts and foundations, to complete the development stage of our online service CareZone. The Futurebuilders investment will help us move beyond our present sales base and expand our reach to young people (YPN, 23 February-1 March, p5). We have appreciated Futurebuilders' support in helping us develop services.

NO - Ann Blackmore, head of policy, National Council for Voluntary Organisations

There is no reason to believe that Futurebuilders' new way of financing the voluntary sector will compromise those it funds.

Indeed, it should support better public services as it removes some of the uncertainty relating to future financing that can engulf voluntary organisations. The Futurebuilders initiative seeks to move voluntary and community organisations away from a reliance on short-term grants to earned income. The fund is for a very specific purpose: to provide investments to voluntary and community organisations in England that deliver public services in five key areas.

We welcome the first set of investments made by the fund, and are pleased to see that they cover a range of different organisations. Indeed, a third of these initial investments have been made to organisations that work with children and young people.


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