Funding is key to any charity meeting its charitable objects. As part of raising funds, borrowing will inevitably be one of the options for a charity to consider where other funding options are unavailable or a charity does not wish to, or cannot, spend its reserves for whatever reason. Borrowing from a bank will of course be the more traditional option but what if the terms of the bank’s offering are unattractive or the time it takes to obtain the loan is too lengthy when the charity might need funds urgently?
Could the charity look closer to home for funding, such as from one of its trustees? If so, what is the status of such a loan and what must a charity consider when entering into a transaction with a trustee? A summary of the key considerations for charities which are considering borrowing from a trustee is set out below.