Red Chair Highland

It supports many people across the Highlands, primarily the disadvantaged and the elderly who are being left behind in an increasingly digital world. Last year, their small team supported nearly 1500 people with devices, connectivity, or one-to-one digital support.

“As a micro social enterprise, we have some enterprise streams of revenue, but we also have a reliance on grant funding. As we grew, our board of management and organisational focus changed, and we lost some enterprise revenue streams. Over the past two years post-Covid we have successfully replaced these, with receipt of grant funding and tenders.

“In January 2024 we began to find it particularly challenging. Many third-sector organisations will recognise that funding and revenue streams have become difficult. We're all chasing ever-diminishing pots of money. As ongoing funding became a challenge, the Board recognised we may have issues in a few months. The problem was a lack of working capital, a safety net that we could use to purchase devices before grant funding became available enabling us to invest in services, ahead of enterprise revenue coming in.

“In April we recognised that we needed to act and approached Highlands and Islands Enterprise. They suggested contacting SIS. However, before getting in touch we discussed this as a Board considering the support we might be offered and how that would look for our organisation.

“We contacted SIS in mid-May. They quickly set up an initial meeting and after we explained our circumstances, who we are, what we do, our social impact and our investment needs, they explained the various options available.”

Senior management in the third sector often face challenges when considering investment as Boards may worry about personal liability.

Red Chair Highland's six-member Board includes Kirsty, who represents operations and brings financial insight from the third sector. Kirsty made the Board aware of the potential funding gap but ahead of their meeting spent time looking at different scenarios, forecasts and various options. She looked at social investment, the products available, and the typical terms across the market to determine what was on offer before presenting the findings, including any implications in terms of personal liability, responsibility and reporting requirements for members. This enabled discussion at the Board meeting.

It was important not to rush the decision therefore another meeting was convened a week later so the Board had time to consider the options, reflect, and do their own research.  The implications of any investment and mitigating risk is important not only for the organisation but for an investor as ultimately, they do not want to put organisations at risk either. Due diligence is often seen as something investors require, but it's also a valuable tool for organisations to assess their readiness. By May, they had the green light to explore the options.

At a second meeting, discussions focused on more comprehensive accounts and forecasting, which as a small team, Red Chair Highland lacked. SIS explained their needs clearly and was able to step in, providing a small grant to pay their accountant for the required forecasts. This unexpected support helped Red Chair Highland to prepare their application even before loan approval.

If the situation is critical SIS can offer elements of support to assist small organisations when, for example, it may be predominantly used to forecast grant income, and not enterprise income potential. Red Chair Highland learned a lot about forecasting revenue and organising budgets, making the experience useful even before loan approval and their accountant completed the necessary forecasts by mid-July.

This support was invaluable in simplifying the process. SIS handled most of the paperwork, easing the customer burden and mitigating the need to fill out onerous application forms making the experience supportive and educational for a small organisation.

The SIS investment pathway is applicant-led, unlike the usual grant regime with fixed deadlines and panel meetings. Understanding this difference is helpful.

Loan approvals are unique to each applicant. SIS investment managers appraise the information an organisation has and work with the customer to fill any gaps, minimising their burden. They understand that organisations, especially small ones, may lack the capacity to pull the required information together therefore previous grant applications provide valuable information.

Affordability is crucial; the organisation must demonstrate the loan is manageable and repayable and SIS can support with projections if needed.

SIS also evaluates governance. It's beneficial when the Board is involved from the start, as seen with Red Chair Highland. They assess the organisation's skillsets and experience, with loan size determining the level of detail required.

A final tip is to check your Memorandum and Articles of Association early. These documents can sometimes restrict borrowing, requiring updates which can delay any funding requirement. Regular reviews ensure they remain fit for purpose.

The key criterion for funding, whether £25,000 or £1 million, is impact.

The SIS Credit Committee sits regularly, and the SIS team evaluate customer appraisals, the impact on the communities they serve and provides feedback on those it reviews. Red Chair Highland didn’t have to wait too long for a decision and was successful in receiving finance from SIS.

Once a positive decision was made Red Chair Highland had documents to sign and complete, including agreements and reporting requirements for social impact and management accounts. They also received details on loan repayments and set up a direct debit. They planned and marked their calendars with the various reporting deadlines. As a small social enterprise, they decided to proactively manage repayments by setting up a savings account and allocating a percentage of monthly income to it, and they believe this approach has made them more financially aware. Despite the additional paperwork, they completed the activation process within seven to ten days.

Many organisations find the process a useful platform to move forward, helping them focus on using their money effectively.

Overall, Red Chair Highland found the SIS investment pathway supportive, and the positive partnership with SIS means they feel they can return if needed.