Arts, cultural and creative organisations will receive lower interest rates if they can demonstrate positive social impact.
Nesta has launched a new £3.7m fund that will make small repayable loans to English arts, cultural and creative organisations to support increased social impact and resilience.
The Cultural Impact Development Fund will offer unsecured loans of between £25,000 and £150,000 to help organisations “articulate, monitor and evaluate their social impact”.
Recipients of longer term loans that can demonstrate they are achieving their goals will be rewarded with lower interest rates.
The fund, which will offer interest rates of between 5.5% and 8.5% over periods of up to five years, will run until 2026. It is managed by Nesta and funded by Access – the Foundation for Social Investment, using money from the Big Lottery Fund and Big Society Capital.
It comes in the wake of Nesta’s £7m Arts Impact Fund, which made 22 loans of between £150,000 and £600,000 over the past three years. Beneficiaries included The Old Courts Arts Centre in Wigan, which created a new arts hub with working space for artists and digital entrepreneurs, and Project INC, which is creating learning centres in North West England for young people struggling to engage with education.
The fund has a dedicated Impact Manager who will help organisations find ways to define and evaluate their social impact. Nesta says it has learned from managing the Arts Impact Fund that “arts and cultural organisations often lack the capacity to carve out time to refine this increasingly crucial aspect of their work”.
The organisation will also “collaboratively set goals around outputs, outcomes and monitoring and evaluation improvements that will support organisations in achieving over the lifetime of their investment – thereby fostering a more specific and long-term approach to impact”.
Nesta is equivocal about plans to offer lower interest rates to strong performers – which will apply to loans with terms of between two and five years. The organisation says: “We’re well aware of the challenges around this - not least in terms of picking suitable, measurable goals and the ethical questions some may have around financially incentivising social impact - so we’re keen to learn about how this will work in practice.”
Gap in the market
Nesta research earlier this year predicted that arts and cultural organisations would be seeking £309m in repayable finance over the next five years, and found that 41% of organisations considering taking out a loan in the next five years would take out less than £150,000.
Fran Sanderson, Director of Arts and Culture Investments and Programmes at Nesta, said: “We are really excited to have this opportunity to partner with Access to address the gap in the market for smaller loans that we could clearly see whilst managing the Arts Impact Fund. We hope we’ll be able to help smaller organisations all over the country use this patient capital to drive revenue generation and compound their impact.”
More information about the fund can be found on Nesta’s new Arts and Culture Finance portal.