How The Cost of Capital Calculator Works
This cost of capital calculator provides an estimate of how much social investment could cost for your organisation, and what the monthly repayments might be.
The purpose of this page is to provide an example of how the cost of capital in social investment may work. Various additional factors, such as the providers of the capital, specific details, rates and fees will affect monthly repayment rates.
You will also need to consider:
- What type of social investment you are considering e.g. a secured loan, revenue participation loan or charity bond ‘the product’ (find out more about the different types and which ones might be right for you here)
- How long they are going to lend their money for ‘the term’.
- How likely they are to get their money back ‘the risk’
- How much does it cost them to make the deal happen ‘the fees’
Example 1
A charity borrows £100,000 in the form of a secured loan from a social bank to buy new premises from which to operate.
This is a secured loan meaning that a charge against the asset (in this case property) is made. In the event that the loan is not repaid the asset could be used to repay the loan.
Capital amount: £100,000
Term: 10 years
Interest: 3%
Fees: Payable in one lump sum upfront so does not contribute to the cost of capital
Monthly repayment: £965.61
Example 2
A social enterprise borrows £45,000 as working capital to help cashflow a new contract they are delivering for their local authority.
This is an unsecured loan and they will only receive payment from the local authority if they deliver the outcomes agreed in the contract. They will use the money from the investment to recruit additional staff to deliver the contract and to cover the cost of their wages.
Capital amount: £45,000
Term: 3 years
Interest: 7%
Fees: £675 (1.5%)
Monthly repayment: £1389.47
