Explore common investment terms and their descriptions below.


Angel investors: high net worth individual who make investments, typically in early-stage enterprises. See product types for more information. 

Asset: in relation to an organisation's accounts. a financial benefit recorded on a balance sheet. Assets include tangible property (i.e. a property with a physical form such as buildings, equipment and vehicles) and intangible property, and any claims for money owed by others. Assets can include cash, inventories, and property rights. 

Asset lock: is a general term used to cover all the provisions designed to ensure that the assets of an organisation, including profits or surpluses generated, are used for the benefit of its community or to further its activities and mission.

Asset transfer: where a charity or social enterprise takes ownership of a building previously owned by part of the public sector; the building is usually one that is particularly valued by the local community.


Balance sheet: a "snapshot" of the assets and liabilities of an organisation at a single point in time.

Blended capital: this is a mix of grant funding and investment (repayable finance). Not all investors can or will provide this.

Blended finance: a mix of investment, that needs to be repaid, and a grant that doesn't need to be repaid. Specialist social investors and grant makers may offer this. You can also make blended finance yourself by applying for grants alongside loans.

Bond: a promise by a borrower (the issuer) to repay money to an investor (the bondholder) usually with interest (the coupon). The issuer borrows money by selling bonds to bondholders; the issuer receives the money and the bondholder receives a promise from the issuer to repay the debt at a later date, with interest (usually through a written contract). 

Bounce back loan: is a new scheme introduced to help smaller businesses impacted by COVID-19 access repayable finance. Social enterprises and charities can apply online to borrow £2,000 - £50,000. Because of the government guarantee, the loan is interest free for the first 12 months and then subsequently carries a 2.5% interest rate.


Capital: capital usually refers to financial capital or money and in particular the amount of cash and other assets held by an organisation.

Capstone investor: the final investor in a fund or a project whose investment secures the other investments and enables the fund or project go ahead

Cash flow: the actual cash held by an organisation over a given period. A cash flow forecast shows the total expected outflows (payments) and inflows (receipts) over the year, usually on a monthly or quarterly basis. It is an essential tool for understanding where there will be shortages and surpluses of funds during the year and planning for ways to resolve these.

Co-investment: investment in a project or fund alongside and often on the same terms as other investors.

Community development finance institution (CDFI): a private financial institution that provides affordable loans and support to businesses, social enterprises and individuals who struggle to get finance from high street banks and loan companies.

Community shares: a form shares unique to co-operatives and community benefit societies. Investors can take their money out of the organisation if they choose to. A holder of community shares can not transfer them to another person.

Cornerstone investment: the principal investor in a fund or project whose commitment to invest may give confidence to others to invest.

Covenant: think of these like the terms of a grant that describe the circumstances in which you’d need to repay the money.

Crowdfunding: is a way of raising finance (donations/grant, equity or debt) from a 'crowd' of people - typically using an online platform. Equity or debt raised using crowdfunding is repayable on an agreed basis with the individual investors, usually with interest on top.


Debt finance: investment with the expectation of repayment (usually with interest). Debt finance usually takes the form of loans, both secured and unsecured, as well as overdrafts and standby facilities or standby facilities (e.g. bonds or loan notes). Generally, debt financing requires a borrower to repay the amount borrowed along with some form of interest, and sometimes an arrangement or other fee. See product types for more information. 

Development capital: money (typically invested as equity) to enable organisations to build capacity, for example by purchasing property or other assets, or developing new products and services.

Dividends: a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).


Equity investment: investment in exchange for a stake in an organisation, usually in the form of shares. Each share represents ownership of a proportion of the value of the company and typically provides the shareholder with voting and dividend rights. Equity finance is permanently invested in the organisation which has no legal obligation to repay the amount invested or to pay interest. Equity investors expect to receive dividends paid out of the organisation’s earnings available for distribution and/or capital gain on the sale of the organisation or on selling their shares to other investors. See product types for more information. 


Facility: an arrangement whereby a lender provides monies to a borrower. "Facility" is often used interchangeably with the term "loan". 

Financial returns: the monetary surplus generated by an organisation on an investment. It may be expressed as "not" (i.e. after deducting all expenses from the gross income generated by the investment) or "gross". 

First loss: it is possible to have different tiers of investors so that one set of investors accepts that, in the event that the investee suffers financial dificulties, it will lose the money it invested before any of the other investors lose any money. This investor will bear the ‘first loss’.

Fund: a collective investment scheme that provides a way of investing money alongside other investors with similar objectives on a pooled basis. This often provides individual investors with access to a wider range of investments than they would be able to access alone and may reduce the costs of investing due to economies of scale. Funds are managed by fund managers for a management fee on behalf of investors.


Grant: a conditional or unconditional gift of money with no expectation of repayment. See product types


High net worth individual: a person who a) has an annual income of £100,000 or more; b) net assets of £250,000 or more. 


Institutional investors: organisations making investments e.g. pension funds or insurance companies.

Interest: fee paid by a borrower to a lender to pay for the use of borrowed money. When money is borrowed, interest is typically paid to the lender as a percentage of the amount owed. Interest usually accrues on a daily basis but is charged less frequently, e.g. monthly, quarterly or annually.

Investment readiness: an organisation having the systems, processes and business model to be able to attract investment


Liability: in relation to an organisation's accounts, a financial obligation or debt to another party entered on a balance sheet.

Liquidity: refers to the availability of cash that an organisation has to meet short-term operating needs. It is the amount of liquid assets that are available to pay expenses and debts as they become due.

Loan: a sum of money which is borrowed and has to be paid back, usually with interest. See product types for more information. 

Loan capital: It is capital that is raised through borrowing on fixed terms to help organisations deliver and grow.


Market: public place where buyers and sellers make transactions, directly or via intermediaries. 

Merger: combining two companies to create one larger company that is expected to be more valuable than the individual companies on their own.


Net Present Value (NPV): present value of expected future cash in flows minus the present value of cash outflows e.g. the amount of investment and any initial and ongoing investment costs. Often used in capital budgeting to determine whether or not to make an investment (if negative, the investment should not be made).

Nominal rate of return: rate of return expressed only in monetary terms - so not adjusted for inflation.


Overdraft: an amount agreed between a borrower and a lender (typically the bank of the borrower) up to which an organisation can borrow when it needs funds rather than in one lump sum. Overdrafts are repayable on demand by the lender. Interest is usually paid on the amount of money that is borrowed until it is repaid and rates are usually higher than for standard loans. See product types for more information.

Operational risk: risk arising from failed processes in carrying out business functions.

Ordinary share: share in the ownership of a company that gives the holder the right to receive distributed profits and to vote at general meetings of the company. An ordinary shareholder ranks behind all other creditors/investors if the company is wound up.


Patient capital: loans or equity investments offered on a long-term basis (typically 5 years or longer). It is often used to describe long-term investment by investors looking for non-financial as well as financial gains and may be offered on soft terms (e.g. capital/interest repayment holidays and at zero or sub-market interest rates).

Peer-to-peer lenders: investors investing directly into borrowers (rather than in a financial institution) typically using online platforms that match (usually individual) lenders with borrowers to create crowdfunded loans for both business and individuals. See product types for more information. 

Principal: a sum of money lent or invested, on which interest is paid or earned (or the balance of a loan, net of interest and amounts repaid).

Profit and loss account: also known as an income and expenditure account, it shows income earned for the year and deducts from it all expenses incurred in earning that income. This will show a profit (surplus) or loss (deficit) for the year, depending on whether income is larger than expenses or expenses have exceeded income.


Quasi-equity investment: a hybrid of equity and debt investment. Equity investment may not be possible if an organisation is not structured to issue shares. A quasi-equity investment allows an investor to benefit from the future revenues of an organisation through a royalty payment which is a fixed percentage of revenue. This is similar to a conventional equity investment but does not require an organisation to issue shares. See product types for more information. 


Restricted funds: funds (often grants) that can only be used for a specific purpose or project and cannot be used for other purposes. These can also be referred to as ring-fenced or earmarked funds.

Repayable finance: money that has been provided to you to use which you’ll need to return on certain terms at some time in the future.


Secured debt/loan: a loan that is backed by property (in the case of a mortgage) or assets belonging to the borrower. This may be the property or asset that is being bought with the loan itself or other assets held by the organisation. If an organisation defaults on its debt, the lender can sell the asset to recoup, in full or in part, its loan. See product types for more information. 

Senior debt/loan: debt that takes priority over other unsecured or otherwise more junior (or subordinated) debt. In the event that the borrower organisation is wound up, senior debt theoretically must be repaid before other creditors receive any payment.

Social enterprise: a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.

Social impact: There is no one definition of the term or concept, but the social impact can be defined as the effect on people that happens as a result of an action or inaction, activity, project, programme or policy. The 'impact' can be positive or negative and can be intended or unintended, or a combination of all of these.

Social Impact Bond: a payment-by-results contract where social investors pay for an organisation to deliver a service - for example, helping homeless people to find a home - and the commissioner (typically government or local authority) repays the investors with interest if the service is successful unlike a conventional bond, they do not offer a fixed rate of return. See product types for more information. 

Social investment finance intermediary (SIFI): an organisation that provides, facilitates or structures financial investments for social sector organisations and/or provides investment-focussed business support to social sector organisations.

Social Investment Tax Relief (SITR): offsets the risk to investors by offering a 30% tax relief on qualifying investments. It can be used by eligible social enterprises, charities and community businesses to raise patient, flexible and more affordable capital to support their trading activities.

Social investment wholesaler: an investor which makes larger investments in funds or financial organisations (social investment finance intermediaries) that will themselves invest smaller amounts in a number of charities and social enterprises. Big Society Capital is the UK social investment wholesaler. 

Social sector organisations: charities and social enterprises that exist primarily to deliver social impact; that reinvests the majority of surpluses to further their social mission; and that are independent of government. The social sector includes, but is not limited to voluntary and community organisations, charities, social enterprises, community interest companies and community benefit societies. The social sector is also referred to as the "Third Sector".

Standby or revolving credit facility: usually provided in the form of a loan where money can be drawn down over a certain period of time when an organisation needs it (if budgeted income does not materialise), rather than as one lump sum. Interest is charged only on the funds drawn down. This is similar to an overdraft but is typically repayable on a fixed date (rather than on-demand). 

Subordinated or junior debt/loan: debt which is ranked after other more senior debt. In the event that the borrower organisation is wound up, subordinated debt will be paid only after other senior creditors have received payment. This is a riskier investment for a lender and is therefore typically lent at a higher interest rate than senior debt.


Term loan: a loan drawn as a lump sum or in several portions, for a set period of time with an agreed schedule of repayment. Once any part of the loan is repaid, it cannot be re-borrowed. 

Third Sector: see social sector organisations

Triple bottom line: approach to measuring a company’s performance on environmental, social and economic issues. The triple bottom line focuses companies not just on the economic value they add but also on the environmental and social value they add or destroy.


Underwriting: a commitment, for a fee, by a lender or investor to provide financing if other sources fail.

Unrestricted funds: funds that can be used however and wherever an organisation needs to further its objectives.

Unsecured loan: a loan that does not take security over an organisation’s assets. Because the risk for the lender is greater, interest rates are usually higher than for secured loans.


Valuation: process of determining the value of an asset or a portfolio of assets, including any accrued income.

Venture capitalists: A Professional Investor who provides capital to early stage businesses.


Working capital: finance used to manage the timing differences between spending money and receiving it (income and expenditure).

Write-off: when all or part of the value of an asset (e.g. an investment) as shown in an organisation's accounts is reduced. In respect of an investment, this may occur when the investor considers there is no likelihood of any recovery of the amount invested.