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How can charities bridge the funding gap during coronavirus?

12/06/2020

With shops closed and fundraising events cancelled, coronavirus has hit charity funding hard.

Small charities are facing a double whammy during these troubled times of the coronavirus pandemic. Not only are their services required more than ever, with domestic abuse, mental health, food charities and many others in ever increasing demand. But funding has fallen off a cliff.

With shops only now set to open again, albeit with restrictions, and fundraising events cancelled the length and breadth of the country, income has been hit hard. That, combined with the negative impact economic uncertainty is having on donations, means charities are having a rough ride.

So immediate has been the effect of the pandemic that figures make for grim reading. Based on initial surveys combined with data from the NCVO (National Council for Voluntary Organisations), the sector’s income was predicted to drop by over £4 billion in the first 12 weeks after lockdown.

Worse still, a survey by Pro Bono Economics found one-in-ten charities thought it likely they would fold within the next six months under the strain.

And it’s not even as if the sector’s finances were in such a great place before the pandemic hit. New Philanthropy Capital’s (NPD) January 2020 survey of 300 charities showed that overall funding for the sector had remained static. Funding growth was put at just 2% higher than 2018 levels.

So, with such a potentially rocky road ahead, what can small charities do to give themselves the best chance of survival? Here are some suggestions for weathering the storm.

Make a plan

It’s important to have a plan under any circumstances. But the current challenging climate makes it even more vital to take stock and to plot a path through to better times ahead. You need to survive the crisis in the short-term so your charity can go on being a force for good in the long-term.

The first thing to do is to put your organisation’s finances under the microscope. Look at what your fixed costs are, including delivery of services, and then compare them against your projected income. If you have any reserves, you can factor them into the equation too.

If there’s a discrepancy, which there may well be for the coming months, then you need to act. Make sure you call in any income due and chase unpaid invoices. If things are tight, put a halt on any new expenditure and trim costs where you can. Negotiate overdraft facilities and a holiday from any loan repayments, as necessary.

As ever, cashflow is king, and you’ll need a detailed schedule of what’s going out and what’s coming in when, so you can plan accordingly. If you’re a trustee, don’t forget that you’re responsible for making decisions in your charity’s best interests, and that if things go horribly wrong, you can be held personally accountable.

But all this is top-level stuff. It’s also worth taking a look at the more detailed financial advice for charities that the government has put together: Manage financial difficulties in your charity caused by coronavirus. It’s pretty self-explanatory, really.

Furlough your staff

You may already have staff furloughed through the government’s Coronavirus Job Retention Scheme. It’s an obvious way for charities to cut overheads if they’re unable to operate as they normally would. If you haven’t furloughed staff already, the deadline is 30 June.

The scheme runs until the end of October, although it begins tapering down from August, with employers having to contribute more to costs as time moves forward. However, a big positive is that as of 1 July, staff who were furloughed before 10 June have the chance to come back on a part-time basis.

One bugbear for the charity sector has been that staff who’ve been furloughed can’t then come back to their employing charity on a volunteer basis. They can, however, volunteer for another organisation, making a swap scheme between charities a possibility.

Apply for emergency funding

The government is making £750 million available as emergency relief funding for charities badly affected by lockdown. It’s split into various pots defined by the sector you work in, and each has a separate application process. All of them can be accessed from the gov.co.uk website.

£370 million of the total is reserved for smaller, local voluntary, community, and social enterprise organisations (VCSEs) working with vulnerable people throughout the UK during the COVID-19 crisis. This includes the England-only £200 million Coronavirus Community Support Fund, distributed by the National Lottery Community Fund.

Get a loan

There’s other government money available too. Although this particular financial shot in the arm comes in the form of a loan, so will need to be paid back. Charities are exempt from the general requirement that 50% of income should come from trading.

The Bounce Back scheme is aimed at organisations at the smaller end of the scale and allows them to borrow between £2,000 and £50,000 depending on turnover. The good news is that the government acts as the loan’s guarantor, and there are no repayments, fees, or interest charged during the first year.

After that, the interest rate is fixed at a flat 2.5%, and loan terms can be for up to six years. They can also be paid back early with no penalty. So, it’s a pretty good deal all round.

Larger loans of up to £5 million are also available through the Coronavirus Business Interruption Loan Scheme.

Seek out grants

There’s a lot of money out there available as grants for charities, and there’s additional money floating around as a response to the current crisis. It’s just a matter of knowing where to apply. And how.

First stop should be your local community foundation. They’re regional champions and every year give away £millions in grants to charities doing good work in the community. If you don’t know where your nearest community foundation is based, you can find out here on the UK Community Foundations’ page.

There are many other grants available via trusts and businesses, and the best way to hunt them down is by searching online. Grants Online has a searchable database, including COVID-19 funding, and a section for latest funding news. So does new entrant Brevio.

Grant trackers for each of the devolved nations are also available via their relevant voluntary action organisations: NCVO (England); SCVO (Scotland); WCVA (Wales); and NICVA (Northern Ireland).

The grants application process can seem a bit daunting to the uninitiated, but don’t be put off. If you think you don’t know where to start, it’s a good idea to seek out advice. Other charity sector contacts who’ve already run the gauntlet of the grants process are a good bet. Otherwise, organisations like the FSI provide specific advice and training.

Take advice

These are difficult times, there’s no two ways about it. Also unprecedented times, as we’re often told. And where there’s no precedent, it’s sometimes difficult to know the best way forward.

That’s why it’s important we keep talking to each other as we adapt to the various challenges of coronavirus. It’s why taking advice and knowing where to go for help and support is crucial. Because it can be the difference between survival or not.

Where your insurance is concerned, brokers ace it on the advice front. That’s because we’re specialists at what we do, so we can help you get exactly what you need. And nothing that you don’t. With cover that’s tailored to your exact needs, we can help your charity reduce its risks and preserve precious funds.

If you’d like to talk about any aspect of charity insurance, call the team on 0345 222 5391. Or click here.

Image used under license from Shutterstock.

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