Fund a start-up social enterprise

Have you got a great idea for a social enterprise but you’re being held back due to lack of finance, or maybe you’ve begun your venture and you want to take things further? 

Serves – a start-up or young social enterprise
Preparation – time taken to prepare your social enterprise vision
Time taken – from two weeks upwards

Ingredients

• Social Investment
• Other forms of investment
• Business Plan
• Business grant
• Project grant
• Individual donations

Method

If your own financial resources are limited, there are four main sources of funding your early start up days – investment and loan finance, donations and grants

To find out about investmentin social enterprise, note it is usually termed social investment. There are various specialist lenders to be found through an internet search. Social Investment Business have various programmes available at different times, Charity Bank is a specialist lender in the field, Social Investment UK is a good source of  knowledge  including Good Finance, a collaborative project to help improve access to information on social investment. It provides a list of potential investors and advisors. Also, a diagnostic tool has been created to help you decide whether social investment is right for your organisation. Further information can be found at https://www.goodfinance.org.uk/   There are also specialist investment banks such as Clearly So  www.clearlyso.com. 

Other forms of investment amount to borrowing in different guises.  Whether you can obtain debt finance (i.e. a commercial loan) will depend on the merits of your business and your organisation’s creditworthiness.  Shop around for the best deals; note the lender may want security or a personal guarantee. 

Equity finance involves the exchange of finance or capital for part ownership of the business; quasi-equity is a form of debt that has some traits of equity, such as having flexible or performance-related repayment options. You would only be eligible to apply if your social enterprise is registered as a legal form that allows you to raise equity through issuing shares, i.e. a Community Interest Company limited by Guarantee (CIC). If yours is a community enterprise your group may be able to sell community shares to local people to become part owners of the enterprise, see http://communityshares.org.uk/.

If you find people who would consider investing in your enterprise who are not professional  investors, it will be worth referencing Social Investment Tax Relief (SITR) as some may be eligible to claim, as the scheme offers a range of tax reliefs to individual investors.

Note in all the above cases you’ll need a Business Plan (if you haven’t got one, see our Recipe; preparing a Business Plan, or get in touch as we can help).  Your Plan should set out how your priorities over the next 1-3 years. This should contain evidence of the need, and the gap in the market you are addressing, and how your particular approach will fill this gap, together with your projected income and expenditure. As your venture develops, the Plan may need to be reviewed, but having all this written down helps to convince funders that you are not working on blind faith.  

To find grants you could consider a business grant for your business as a whole, or a grant for a specific project. The former is usually one-off, and sometimes come with extra input and expertise to support your venture. Sources have various programmes at different times , for example UnLtd, the Foundation for Social Entrepreneurs www.unltd.org , Power to Change https://www.powertochange.org.uk/ – for community businesses,  the Lloyds Bank and Bank of Scotland Social Entrepreneurs Programme. Your local council or Local Enterprise Partnership for your area may also have grants available

Also consider venture philanthropy  grants; these are usually given in a form resembling investment, and the venture philanthropist may provide long term tailored pro bono support to facilitate growth, for example try the  Venture Partnership Foundation http://www.vpf.org.uk/  

Project grants support many different kinds of projects usually for social or community benefit, the arts, environment and heritage issues.  Apply to sources such as grant making trusts and foundations, or the National Lottery Community Fund or the Arts Council which run various programmes.   There are usually application forms where you have to convince the funder of the value of your proposition. Get in touch if you need help with this.   Usually, but not always, a project grant will only be considered if your organisation has a track record in delivering the service you are asking funding for. See our Recipe Securing grants from the trusts and foundations.

To seek individual donations, the best option is to run a fundraising campaign, see our Recipe Running a Fundraising Campaign