Find frequently asked questions and their answers about loans and overdrafts below.
A Loan is when you receive money and need to pay it back at some point in the future. You need to have a document that operates as a loan agreement.
Credit facility is the ability to borrow money later even if you haven’t received a penny yet. Overdrafts and credit cards are the most common items in this category.
Only the Local Party can enter into a loan agreement. Branches of the Local Party must never enter into a loan agreement as outlined in the Party constitution. [8.3 of model local party constitution]. Whilst your branch’s constitution might not specifically prevent you from borrowing it doesn’t mean you should.
Legal considerations - as an unincorporated association your organisation does not have a separate legal identity from the members, so banks (etc.) normally won’t lend to you. Only borrow money from a member or a supporter and only borrow if it can be repaid from future income.
Permissible Lender laws are the same as for who is a permissible donor. In simple terms, if it is an individual they need to be on the electoral roll, if it is a company they need to be registered and actively trading in the UK.
We strongly advise against borrowing from anyone other than members and supporters, and only borrow if you can’t get a donation instead.
All new loans and new credit facilities with a value of £500 or more need to be added to Lighthouse in the Loans section. Amongst other things you will need the electoral roll number of the lender if it is an individual or the companies house registration number if it is a company.
Please write if the loan agreement has a repayment plan or not and any other useful information in the ‘reason’ field. You must report any repayments. These can be reported on lighthouse via the add repayment button within a loan. As the way this works is still being tested please also email the compliance team your repayments.
For overdrafts and credit facilities you report the maximum amount you can borrow in the future and the date you entered into the agreement as the ‘borrowed’ date even if you haven’t received any money yet.
If the amount you borrow changes, don’t change the record on Lighthouse, email any changes to the compliance team. A change could be an increase in an overdraft limit or the removal of the ability to borrow
These need to be reported as both a donation and a loan repayment. As the way this works on lighthouse is still in the testing phase please email compliance so they can make the entries for you.