Finance and funding
Finance is the motor for all business development and the social enterprise sector is no different. A lack of access to appropriate finance can be a significant barrier to growth. SEEM has been working hard to level the playing field for social enterprises looking to access finance.
Earned Income
This should be the main source of finance for social enterprises to meet regular costs as well as to fund growth. Earned income comes with no strings attached – it is money you can use to achieve your mission without interference from outside organisations. Many social enterprises use mission-related strategies to earn income, for instance employing individuals from their intended beneficiary group.
Loan Finance
Loans are used by social enterprises for a variety of purposes. Perhaps the most common example is to buy or develop buildings, but they are also used to invest in equipment or staff, or to provide cash flow where funding or payments will be received in arrears.
New contract or trading activity is frequently funded through loan finance and in recent years the range of loans available to the sector has increased. Many high street banks now provide packages tailored to the sector, along with specialised finance packages from sector specialists, such as Charity Bank or FutureBuilders.
Loans are not suitable for all organisations or all types of activity. But where they are suitable, they can have advantages over other forms of finance, including higher levels of flexibility and less bureaucracy – as well as the obvious disadvantage that they have to be repaid with interest.
Grant Finance
Grants and donations are gifts of money and they form a major source of income for voluntary and community groups. They can also form part of the funding mix for social enterprises, especially for start-up costs and major developments.
Grants come from
- Charitable Trusts and Foundations
- Public Bodies
- Corporate Sector
Grants are generally tax exempt and do not have to be re-paid. But they may come with conditions; commonly these would include:
- to be spent on a particular activity
- to be spent within a particular timescale
- to achieve particular results or outcomes
- any under spend to be paid back to the funder
Failure to meet any specified conditions may lead to the funder asking for the money back. Grants from the public sector will almost always have conditions and sometimes these may be quite demanding. Grants from other sources will vary more widely.
Funding options are constantly changing in the current uncertain economic climate. We are currently updating our resources section, so please check this website regularly for funding news or call us on 0115 871 4760 for advice.