Part of the funding is in the form of a ‘social loan’, described as ‘an innovative financing structure’ under which returns to investors will increase or decrease in line with the organisation’s turnover.

Dai Powell, chief executive of HCT Group, which competes with organisations such as Stagecoach and First Group, says the structure means social enterprises ‘can now compete on a more level playing field in the capital markets’ because they can now share an element of risk with investors with the prospect for greater returns.

Social investor Bridges Ventures led the funding round for HCT, investing £1 million in the social loan with commitments for a further £500,000. The Futurebuilders Fund, which is backed by the government’s Office of the Third Sector, invested £1 million in a fixed-rate loan for HCT and £500,000 in the social loan.

Rodney Schwartz, founding partner at Catalyst Fund Management which advised on the deal, says, ‘This is a benchmark transaction. Social minded investors have proved keen to offer their support to a company of HCT’s quality and track record.’

HCT has a turnover of £20 million and runs community transport initiatives, such as home-to-school transport programmes and a London bus service for those with mobility problems.