bfunded - Social Enterprise - Funding

Funds and funders

It is important to identify the most appropriate type of finance and funder for what you want to do. The following information provides a brief summary of the different types of funds available to a social enterprise and their pros and cons, along with details of where you may be able to access training or support.

Remember you can search for funding for FREE at www.bfunded.org.uk

GRANTS

A sum of money that is given to you or your business
The main aim is often to support economic development and regeneration
Grants are given by central and local government, the European Union, business support agencies such as Business Link, and a number of other bodies. Social enterprises can sometimes get grants from charitable trusts
Each fund will have its own criteria that you will have to meet to be eligible to apply
The funder generally will ask you to meet particular goals or targets
The funder will monitor and evaluate how you have used the grant
Funding will usually relate to a specific project or purpose, for example investigating a new market, developing a new product or service
Grants are often less than 100%, so it’s likely you’ll have to put in some of your own money
May be paid in arrears
Don’t usually have to be paid back.

AWARDS

Provide opportunities to promote and showcase your company and your work
Generally awards are one-off cash payments
Mainly to recognise achievements such as fastest growing start-up, or best use of information technology by a small business, or success in exporting overseas
Usually you need to enter a competition
Can be given by government Departments, government agencies, business support organisations, local authorities, private companies and not-for-profit organisations.

LOANS

Borrowing money from the bank is the most common form of financing available to businesses, either through a loan or an overdraft, or some combination of the both
Banks will demand that the business can demonstrate some form of security against defaulting on its loan payments
Interest will be payable on the loan or overdraft
Amount borrowed plus interest must be paid back.

SOFT LOANS

Soft loans are those that aim to help promising businesses who cannot provide the forms of security asked for by banks
They usually offer the borrower special terms on either security requirements, or on interest rates charged. Payment of little or no interest may be a condition of the loan, or in some cases borrowers can organise payment holidays
They are often available either directly from government Departments, or from local authorities and other bodies.
Examples include the Business Enterprise Fund in Bradford, which offers flexible loan options for small businesses, including a sharia type loan product that is non interest bearing, www.befund.org or Partnership Investment Finance, www.partnershipif.co.uk whose range extends from micro loans of up to £15,000 to equity funds reaching £1m.

VENTURE CAPITAL

A way of raising finance where shares in your company (equity) is exchanged for a sum of money.
Venture capital is a common source of funding for small or growing businesses that have little or no money of their own to risk. Venture capitalists invest in these businesses with the prospect of a large return if the company takes off
Investors will want to make sure they make a return on their investment so may specify, or be involved in, what the money is used for.
Investors can be private individuals or a partnership of businesses, or even the Regional Development Agency - the Yorkshire and the Humber Regional Venture Capital Fund was set up by Yorkshire Forward to assist small and medium sized businesses to grow and expand, www.yhef.co.uk/about_the_fund.htm
Some of the advantages are that venture capitalists may have the ability to invest large sums of money which can help your business to develop and achieve fast growth. Investors also have a wealth of experience to help you in achieving the most out of the investment
Some of the disadvantages are that venture capital may come with some conditions or involvement from the investors, for example venture capitalists will want to ensure they make money on their investment so may push for decisions that make quick returns.

Information compiled by J4B for bfunded 4 business, www.bfunded.org.uk

Other Help

Further help is available from local support organisations and agencies.