Debt hardly sounds like better financial sustainability. Indeed, the very word debt usually puts a shiver down the spine of most creatives. Often without the surety of stable income, be it multi-year funding for an organisation or simple guaranteed cash flow for a creative studio, for creatives debt feels dangerous.
But there is a newish trend in the funding and philanthropy sector that may just shift those attitudes.
Last week, Creative Australia – in partnership with Figurative, the UK-based not-for-profit expert on impact investment for the creative and culture sector – launched the resource Creative Returns: Getting started with impact debt finance. It is essentially an easy step-through guide to help creatives get their head around this new thinking, and walk them through how to become ‘investment ready’.
It was a topic that received strong interest at last week’s Culture Business conference, where Creative Australia’s Director Private Partnerships and Impact, Jayne Lovelock, and Executive Director of Development and Partnerships, Dr Georgie McClean, introduced their new program. Lovelock said, “The new funding model can work in tandem with our grant programs – not to overtake them, but to amplify the current investments we have through government grants and philanthropy – and do really special and new things with them.”
She continued, “We have been thinking about impact investing for a while at Creative Australia, but this guide is really a 101, and an opportunity to understand what it is, how it will work for the sector and how it may work for your organisation. It will not be for everyone, and that’s OK.”
What is impact finance debt?
The guide explains: “The terms ‘impact investment’, ‘social investment’ and ‘social impact investing’ are often used interchangeably… We define it as finance provided with the aim of achieving positive social or environmental impact alongside a financial return.”
This is not a grant scheme. It is more like a loan, not dissimilar to that you would get for a car or a house, where you are contracted to deliver repayments.
The difference, however, is that rather than floating your coffers with money from a bank, this kind of loan is usually furnished by investors or philanthropists who want to see their money going towards scaling social or environmental good, and – in this case – culture and creativity.
Lovelock and McClean encourage us to think of it not as another grant opportunity, but rather another tool in the funding mix. “Obviously, it is a response to the financing challenges that we are all facing, where, while government funds in some ways are increasing, it’s finite. Philanthropic funds is an area of growth for us, but elements are also finite or still in development. So this is about growing that pie and thinking about how we can use funds in more innovative ways,” explained Lovelock.
A friendlier bank
Being creatives, it is often difficult to tick the box of a bank manager’s requirements due to the very flexible and unpredictable nature of our business, and yet the gains to community and cultural merit are extremely high.
Impact investing attempts to fill the gap. The guide steps through the various types of impact investing – from types of loans to blended investments – and also offers some case studies of suitable examples suited towards impact investing, such as scaling up and funding infrastructure, IT or dedicated staff roles. Another great example is to invest in energy resilience, which is increasingly becoming a central issue. An example may be for a gallery to purchase new energy efficient lighting systems or solar, or retrofit storage areas with new technologies for climate control. This investment will lead to a reduction in operating costs, while making a social/environmental impact.
Why this presents an opportunity for the creative industries
Since 2015, the team at Figurative has managed over £30 million (AU$58 million) of capital across three impact investment funds in the UK, after launching the Arts Impact Fund – the first ever dedicated impact investment fund for the arts.
Creative Australia has used this as a benchmark to prepare the Australian sector.
One of the great opportunities with impact investing is that is does not come with the same restrictions as grants, and terms can be more flexible as negotiated with the funder.
They are generally funding a creative or social enterprise to help it become more resilient, while also delivering an outcome for social good. It is generally a one-time investment of capital to make a critical difference to an organisation or business.
Hence, timing is a big factor. You need to ascertain: is now the right time for this kind of investment?
Downside to debt
Like any loan, if you don’t make your repayments, the consequences are serious. And if you are delayed in your pick-up of the loan, some investors will charge you for holding the loan until you are ready to start.
For some organisations, generating a profit is often not then possible.
How to get investment ready
The guide comes with a warning that getting ready takes a lot of work, and that impact investing is not necessarily for everyone.
It says the key question to consider to ask is: will the investment help the organisation to build financial resilience and lead to increased impact? It’s vital to be clear on what positive change you are trying to effect.
Next, the obvious one, is working out how you are going to repay this loan. Will it come from operating profits, is it a gap fill to be repaid by fundraising or other income? Unless you can demonstrate a clear pathway to repayment, then this is probably not an option for you.
You then need to work out a repayment structure – regular instalments, a lump sum, a sliding timeline –and how these fit in with your expenditure and income. “Considering these options in advance may help focus your discussions with an impact investor,” says the guide.
In tandem with these is demonstrating a track record of managing your finances and repayments. “Think about the end-to-end financial process in your company, from bookkeeping to producing management accounts to board reporting,” suggests the guide.
On top of your regular ins and outs, which we all know can be a delicate balance, to become investment ready also requires detailed cashflow forecasting – up to two-year projections.
Create a Theory of Change is next on the list. So what’s that?
Data sets equal opportunities
A Theory of Change is that area of data collection that is less about dollars and cents, but more about how you record impact.
Whether you intend to try the impact debt finance space or not, it is probably a good idea to start creating impact reports. If you start now, you will not limit your future. These are also easily transferable to regular grants, to government and board reporting, as well as useful in the sponsorship space.
Coming away from this panel, and after spending some time with this new guide, this would have to be the biggest takeaway.
It starts to get you into standard measures of evaluation. “Impact investors will be keen to understand how serious and committed you are to tracking impact,” says the guide. “Is there enough evidence or research behind your assumptions on how impact will be achieved?”
Wrapping up the guide is a list of resources to learn more. Like any new idea, it can feel a bit daunting. Creative Returns keeps that first step enquiry simple, and encourages the sector that this indeed may be a fit and an opportunity for many.
To download the Creative Returns guide.
Creative Australia is presenting a webinar on Impacting Investing, Wednesday 27 November 2024, 4pm – 5.30pm AEDT. To register.
ArtsHub attended Culture Business as a media partner. The panel was presented at Luna Park, Sydney on Tuesday 19 November 2025.
