Whether you have an established social enterprise or are just starting out, securing funding is an essential part of business. Social enterprises are unusual in that they qualify for many of the same funds as charities while operating for profit. But what types of funding are available for social enterprises?
Grants for social enterprises
Grants are sums of money that do not need to be paid back. Grant funding is typically offered by charitable, philanthropic and government bodies. Rather than investing for a financial return, these bodies are investing in the social outcome that your enterprise offers. For example, the Global Innovation Fund invests in projects that improve the lives of the poorest people in the developing world.
Some key grant-awarding bodies include:
Funded by the National Lottery, the Arts Council has championed, developed and invested in British art and culture since the 1940s. Today, it operates as Arts Council England, Creative Scotland and the Arts Council of Wales. If your enterprise uses art to support local communities, you may be able to apply for a grant.
UnLtd is dedicated to helping social entrepreneurs to build sustainable social ventures. Since 2002, the organisation has supported over 16,500 social entrepreneurs, in turn helping to change the lives of hundreds of thousands of people. UnLtd offers mentorship and small grants to organisations that are starting or scaling up.
Social Investment Business
Social Investment Business offers several funds for charities and social enterprises in England, including a Northern Cultural Regeneration Fund for creative and culture businesses in Northern England. Some funding comes as grants, while other programmes offer blended loan and grant finance or simple loans.
Social Impact Bonds
If your social enterprise meets one of the government’s key areas for improvement, such as homelessness, youth unemployment or long-term health issues, you could look into developing a social impact bond (SIB).
The way SIBs work is that investors fund a project at the start and then receive payments based on its results. This means that despite the name, SIBs are not actually bonds because there is no guarantee that the investor will be renumerated or receive any return on investment. They will only receive a return if the project achieves its goals.
The first social impact bond was introduced in 2010 by Labour’s then Justice Secretary Jack Straw in order to finance a prison rehabilitation programme. According to Social Spider CIC, 32 SIBs are currently active in the UK and they hold an estimated combined value of £153 million.
It’s worth noting that smaller charities and enterprises are so far underrepresented. In theory, SIBs are a good way for smaller groups to develop new solutions with less financial risk, but the majority of contracts so far have gone to more established initiatives.
Investment funding for social enterprises
Investment funding is almost synonymous with startups, and easily the most valuable form of funding. Typically, investors offer finance in exchange for shares or as a loan.
Impact investing, or investment into socially and environmentally beneficial ventures has become increasingly popular in the last few years. Last year, the Global Impact Investing Network estimated the value of impact investments at $502 billion—that’s up from $228 billion in 2018, and $114 billion in 2017.
Sources of investment funding include angel investors, seed funding firms and venture capital funds.
In the UK, your enterprise may be eligible for the government’s Social Investment Tax Relief (SITR) scheme. SITR is a state aid that entices investors by offering them tax breaks on income tax and capital gains when they buy shares and hold them for at least three years. Alternatively, investors can lend your business money, but it must not be repayable for at least three years. Read more about SITR and its criteria on GOV.UK.
Some examples of investors in social enterprises are:
The Big Issue Social Enterprise Investment Fund
Big Issue Invest offers finance to social enterprises, community organisations, charities and businesses that are socially-driven. Loans start from £20,000 and cap off at £3 million; since 2005, the charity has made more than 330 investments worth £250 million.
Toniic is a leader in impact investing. Its global community includes over 400 high net worth individuals, family office, and foundation asset owners across 25+ countries. Toniic members invested $2.8 billion into positive impact projects in 2019 alone.
Investing for Good
Investing for Good works to match charities, social enterprises and NGOs with socially motivated investors. The community interest company also offers advice and guidance throughout the fundraising process.
For a more comprehensive list of social investors in the UK, check out Good Finance.
Social enterprise incubators and accelerators
Social enterprise incubators are designed to support innovation, while accelerators help existing social enterprises to scale-up operations. Typically, both types of schemes offer mentorship, resources and networking opportunities as well as funding.
Examples of incubators and accelerators for social enterprises include:
Hatch runs a variety of programmes for startups, including one specifically for social enterprises—Impact. Impact offers a peer-learning environment co-designed with social entrepreneurs and access to £5 million in blended finance opportunities as well as pro bono legal advice and financial coaching.
Bethnal Green Ventures Tech For Good Programme
Run by the founders of Social Innovation Camp, the Tech for Good accelerator programme supports founders using technology to improve lives and protect the planet. Applications open twice a year and winners get a tailored three-month programme, lifelong support and £30,000 in funding in exchange for 7% equity.
Echoing Green Fellowship
The Echoing Green Fellowship provides seed funding and support for entrepreneurs with bold ideas for social change. The two-year full-time programme is specifically for organisations in the startup phase and includes leadership development, a personalised plan and targeted networking opportunities.
Awards for social enterprises
Awards are a great way to raise awareness of your social enterprise while competing for funding. Often, winners and runners-up are offered mentorship, expert help and collaborative opportunities.
UK Social Enterprise Awards
Hosted by Social Enterprise UK, these annual awards celebrate entrepreneurs making an impact in Britain and abroad. The 14 categories include Social Enterprise of the Year, Women’s Champion, ‘Buy Social’ Market Builder and One to Watch.
Commonwealth Secretary-General’s Innovation for Sustainable Development Awards
The annual Innovation for Sustainable Development Awards celebrate innovators who are helping Commonwealth countries to achieve sustainable development goals. Entrepreneurs must be from one of the 53 member countries of the Commonwealth and able to demonstrate how their innovation helps to meet one of the UN’s 17 sustainable development goals, which include gender equality and eradicating hunger. Winners go home with £2,000 in prize money.
NatWest SE100 Social Business Awards
The NatWest SE100 Index celebrates the growth, impact and resilience of social enterprises by recognising the 100 most impressive social businesses of the year. Finalists from eight categories will also win a trophy, a slice of funding and the opportunity to present their work to 300+ attendees from across social enterprise and social investment.
Crowdfunding social enterprises
If you have a smaller amount of funding to raise, why not consider crowdfunding? Crowdfunding works best for specific projects where the scope is clear and you can explain exactly how funding will be allocated. Learn more with TechRound’s helpful guide to the different forms of crowdfunding.