Nearly 90 per cent of social enterprises want grants, not loans

Nearly 90 per cent of social enterprises want grants, not loans
Civil Society, by Vibeka Mair

The overwhelming majority of social enterprises are looking for grants rather than loans, according to the State of Social Enterprise Survey 2013.

The survey, which analysed responses from 878 UK social enterprises, found 48 per cent had sought to raise external finance in the past 12 months.

The most common type of finance applied for – by a considerable margin – was grant funding, with 89 per cent of respondents applying. Of those, 70 per cent succeeded in their application.

Some 20 per cent applied for a loan with a 61 per cent success rate.

However, while grant funding was overwhelmingly popular with social enterprises, only 7 per cent cited it as their main source of income. And just more than a third (39 per cent) of respondents received grant funding as a source of income.

The main source of income for social enterprises is trade with the public (32 per cent), followed by the public sector (23 per cent). Just under three-quarters of social enterprises earn 76 to 100 per cent of their income through trade.

The proportion of social enterprises which cite trading with charities as their main source of income has doubled from 5 per cent in 2011, to 10 per cent this year. Social enterprises which trade with charities have increased from 39 per cent in 2011 to 48 per cent this year.
The median average turnover for social enterprises  this year dropped to £187,000 from £240,000 in 2011. The report says that 55 per cent of social enterprises have made a profit, 22 per cent a loss and 18 per cent have broken even.

Social enterprises lead on diversity and inclusion

The proportion of social enterprises led by an ethnic minority person is 15 per cent, while 38 per cent of social enterprise leaders are women – and only 9 per cent have male-only leadership teams. Just 3 per cent of FTSE100 companies and 19 per cent of SMEs are led by a woman.

Further, some 52 per cent of social enterprises actively employ people who are disadvantaged in the labour market, for example ex-offenders or disabled people.

Some 68 per cent of social enterprises measure their impact.

From concern to alarm on commissioning

Elsewhere, the State of Social Enterprise Survey 2013 said it was ‘alarming’ that there was a rise in social enterprises saying public sector procurement policy was affecting their sustainability. It was 25 per cent in 2011, rising to 34 per cent this year.

And while the survey showed that social enterprises which traded with the public sector were most likely to predict a profit (54 per cent), they were the most likely to have redundancies (27 per cent).

The survey also found that the median amount of finance sought by social enterprises was £58,000, “below the mimimun threshold of many social investors,” says the survey. “It can be argued that some have fallen out of step with the actual needs of the sector.”

Chi Onwurah, Labour MP and shadow social enterprise minister said: “It is fantastic news that social enterprises are thriving. That is a testament to the hard work and commitment of social entrepreneurs and those who work in social enterprises.

“Ministers across government must support this effort and not load policies against social enterprises. It is worrying that ministers have failed to take on board warnings around public procurement and access to finance. They should be helping social enterprises build jobs and value in local communities instead of giving super-contracts to big business and vested interests.

The sample of social enterprises analysed for the State of Social Enterprise Survey 2013 included companies limited by guarantee (51 per cent of the sample), industrial and provident societies and community interest companies.

It was compiled by Social Enterprise UK.