Apart from fundraising, charities can raise money in a number of ways. This page provides helpful checklists if your charity is considering raising money by
Borrowing money
Charities are generally allowed to borrow money to help them do their work. But there are some things you should check first:
- Will the money you are borrowing help you carry out one of your charity’s purposes?
- Have the charity trustees considered other options for raising the money the charity needs?
- Have you looked at a range of loan deals to help you decide which is the best for your charity?
- Have you got a realistic budget that shows if the charity can afford the repayments on the loan?
- If you are borrowing from a person, rather from a bank, building society or similar commercial lender, will the terms of the loan be set out in writing?
- Are you getting professional help with checking the legal documents?
- Does the loan involve a mortgage? If ‘Yes’, there are special requirements, although it is not usually necessary to get our permission. More details
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Trading
Here are some issues to think about when considering trading.
- Does your governing document specifically say you can’t trade? (You can change this if your governing document has a power of amendment. If it doesn’t have this, you can ask us to help you make the change.)
- Do you understand what activities are considered to be trading? More details
- Will trading directly achieve your charity’s charitable purposes or simply provide money which can be used for those purposes? More details
- Will your charity need to set up a non-charitable trading subsidiary? More details
- Will your proposed trade involve the sale or hiring out of donated goods? More details
- Do you know what kind of trading your charity will have to pay tax on? More details
- Will your charity have to charge VAT on sales? More details
- Do you know that running a lottery is trading? More details
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Spending permanent endowment
Some charities have cash, investments, land or even items (for example, museum exhibits, artworks, antique or historic furniture) which were meant to be held permanently by the charity. This is called ‘permanent endowment’. There are two kinds:
- Functional permanent endowment. This is intended to be used to achieve the charity’s purposes. For example, land which was given to be used for almshouses.
- Investment permanent endowment. This provides income for the charity. For example, an investment portfolio or property which provides income.
There is a simplified way to spend permanent endowment – this only applies to investment permanent endowment. This simplified way is the ‘statutory power’.
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