Making sense of Futurebuilders terminology

Sometimes we come across words that may not be in most people’s daily usage. Many of them are specialist financial terms and others may refer to a specific section of the third sector. To combat this information gap we are starting a series of articles aimed at making sense of many of the terms used in the sector.

Bankable – organisation or project that is able to secure investment from another social or commercial bank. Futurebuilders only invests in unbankable organisations.

Capital costs – expenditure on capital assets such as land, buildings, equipment or vehicles. These also include ‘intangible fixed assets’ such as expenditure on copyright or intellectual property rights.

Cashflow – the pattern of income and expenditure and its impact on the amount of money directly available to an organisation at a given time. Cashflow is key because even the most profitable organisation cannot continue to operate if it runs out of cash.

Community Interest Company (CIC) - a social enterprise which is registered under the Community Interest Act 2004. A CIC is a registered company, with special features that ensure that it is working for the benefit of the community.

CICs are more lightly regulated than charities, but do not have the benefit of charitable status, even if their objectives are entirely charitable in nature.

Full cost recovery – Historically, third sector organisations have struggled to secure funding for their overhead costs. Full cost recovery recognises that overheads are a legitimate cost of running an organisation and provides a framework to ensure all costs are taken into account when pricing contracts or submitting grant applications.

Investing - the act of laying out money or capital in an organisation with the expectation of a return.

Futurebuilders is a mission investor which means that in addition to expecting a financial return on our investment, we also want a social return. Futurebuilders mission is to invest in third sector organisations, strengthening them to win public sector contracts. This mission drives all our investments and sets us apart from other investors.

Loan – an amount of money given to somebody on the condition that it will be paid back later, usually with interest.

Match funding - the requirement that a proportion of funding of the total costs of a project comes from another source. Futurebuilders has no formal requirement for an organisation to have match funding.

Professional support – capacity building provided to an organisation by a professional. Futurebuilders Full Investments may include some aspect of professional support and will often include advice or training about contracting with public bodies, organisational review, governance, financial planning etc.

Quasi-equity –an investment tool that has features of both a traditional loan and equity. Quasi-equity products typically function like performance-based loans with higher rates of return and longer repayment schedules that come due only after the project has reached a certain level of profitability.

Revenue - the total income of an organisation.

Revenue costs - non-capital costs. These are generally the recurrent running costs of the organisation.

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

The profits of social enterprises are ploughed back into the business or distributed to the community it serves. They also have a clear social purpose such as job creation or the provision of local facilities.

Turnover – income from sales over a given period of time.

Working capital - the amount of money readily available for use by an organisation. It’s often expressed as a formula: the amount of current assets that remains after current liabilities are deducted.

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