SOURCES OF FINANCE

There are three sources of capital finance for social enterprises (including co-operatives). All have their advantages and disadvantages and are more or less appropriate according to the stage of development of your co-operative, its profitability and the scope for involving your community as owners as well as service users.

1. GRANTS, GIFTS & DONATIONS

Grants may be essential at start-up, and can help cover costs until income is generated from trading . They can be used to purchase assets to help generate income and they can fund important but less viable activities. However grant funding is only a short term solution, it is often restricted to project costs and will not cover core costs, and making applications for grant funding can be time consuming. Finally there is a danger that your enterprise will become grant reliant and vulnerable when funding dries up.

2. LOANS

Debt is a liability, and must be repaid at some point in the future. The cost of debt finance will vary according to the lender's interest rates and the length of the loan. Some lenders will ask for personal guarantees, not a good idea in a social enterprise.

3. EQUITY or INVESTMENT

Equity is an asset, it is the property of the enterprise and does not have to be repaid. Equity finance in social enterprise differs from ordinary share capital. There will be limited returns available to investors; there may be an asset lock; investors may have only limited voting rights - in a co-operative one person one vote rather than one share one vote) and there may be a limit on the size of shareholding (upper limit of £20,000 in an I&PS, no limit in CICs). There is currently a great deal of interest in Community Shares, further information below as well as a link to the Community Shares website: www.communityshares.org.uk/

SOURCES OF FINANCE

Below is a list of sources of different kinds of finance, updated in February 2010.

GRANTS

The Co-operative Enterprise Hub helps to support and develop new and existing co-operative enterprises. Our aim is to grow the co-operative economy, creating strong ethically-led businesses with a deep sense of social responsibility. The Co-operative Enterprise Hub is now seeking applications from organisations that have identified a co-operative solution to tackle climate change. We are particularly looking for practical applications in the areas of renewable energy and energy efficiency technologies. The Co-operative Enterprise Hub is unlikely to fund feasibility studies or research projects. http://www.co-operative.coop/ethicsinaction/community-investment/fundsan...

Awards for All is a Lottery grants scheme - between £300 and £10,000 - funding small, local community-based projects in the UK www.awardsforall.org.uk/

Esmée Fairbairn Foundation is one of the largest independent grant making foundations in the UK. The Main Fund is responsive to requests for support across the broad range of our interests, which are: the cultural life of the UK, education and learning, the natural environment and enabling disadvantaged people to participate more fully in society. www.esmeefairbairn.org.uk/

Tudor Trust is an independent grant-making trust which supports organisations working across the UK. We aim to support work which addresses the social, emotional and financial needs of people at the margins of our society, and are particularly interested in helping smaller, under-resourced organisations which offer direct services and which involve the people they work with in their planning. www.tudortrust.org.uk/

The Community Land Trust Fund: The Tudor Trust and The Esmee Fairbairn Foundation are the first contributors to the Community Land Trust Fund, launched in 2008. The Fund stands £2 million, which is intended to support the development of around 30 operational Community Land Trusts, and the construction of around 150 affordable homes, over the next four years. http://www.tudortrust.org.uk/TheCLTFund/tabid/82/Default.aspx

The Adventure Capital Fund Business Development Grant

The Business Development Fund is for community enterprises in the early stages of development. A grant of up to £15,000 comes with up to five days’ support and can be used to make an organisation ready to run its own enterprise and trading activities. www.adventurecapitalfund.org.uk/content/view/36/50/

The Princes Trust Business Programme is for people aged 18-30, who are unemployed or working less than 16 hours a week, and have a business idea they want to explore. Help available includes business skills training, business planning support, start up funding, ongoing support from a mentor and access to a wide range of free and discounted products and services. www.princes-trust.org.uk

Unltd provides grants of between £500 and £15,000 to social entrepreneurs. Will support groups of social entrepreneurs under special circumstances www.unltd.org.uk

New improved version of BIG Lottery Reaching Communities programme offers £100m funding per year 2010 - 2015

Reaching Communities is open to any social enterprise in England with an idea about how to improve their community, and funding of as much as £500,000 for up to five years is available. Social enterprises looking for smaller sums up to £40,000, will find the application process less time-consuming and will get a decision more swiftly.

For more details check the BIG lottery website:

http://www.biglotteryfund.org.uk/

Somerset County Council's Rural Services Fund

Somerset County Council’s Rural Services Fund is a capital investment fund to sustain and develop rural retail services (e.g. shops, post offices) and social enterprise services during the economic downturn. It is designed to help Villages improve the economic vitality of their community. It has been developed as part of a strategic approach to the County Councils relationship with rural communities across Somerset. Somerset County Council has made available an allocation of £75,000 for the financial year 2009/10.

Guidance Notes see attached. For an application form:

Contact

Paul Chadwick, Rural Delivery Team Manager,

Economy and Europe, Somerset County Council

County Hall A2, Taunton,TA1 4DY

Tel: 01823 358060 & 01749 814996 (Wed-Fri when not in County Hall)

pchadwick@somerset.gov.uk

LOANS

The Co-operative Loan Fund supports co-operatives throughout the UK through the provision of accessible, ethical loan finance. The Co-operative Loan Fund offers loans between £5,000 and £75,000. In addition the fund is able to make loans with initially low repayments of capital and interest. www.co-operativeloanfund.co.uk

Co-operative and Community Finance has been providing of loan finance for co-operatives, employee owned businesses and social enterprises for 30 years. Loans for co-operatives, employee owned businesses and social enterprises. www.co-opandcommunityfinance.coop

Wessex Reinvestment Trust Loan Type - Business loans to start or develop small businesses.Home improvement loans. www.wessexrt.co.uk

Charity Bank provides affordable loans to the charitable sector – for those who might otherwise find it difficult to access finance on terms they can meet. Loans to registered charities and charitable projects, from £3,000 to £350,000. www.charitybank.org

Triodos Bank is a different kind of bank, lending exclusively to businesses and charities bringing real and lasting social and environmental benefits to the wider community. From social enterprises to homelessness charities Triodos has over twenty years experience working in the sector. Loans from £10,000 - £250,000 under the CITR scheme, more with other funds www.triodos.co.uk

South West Investment Group (SWIG) new £10m South West Loans Fund - to help growth-oriented business with viable business plans. £5m Cornwall and Scilly Isles, £5m for rest of SW region. Contact Business Link 0845 600 9966 or www.businesslink.gov.uk/southwest www.southwestinvestmentgroup.co.uk

Plymouth Small Business Fund - Loans for new and existing businesses in the Plymouth travel to work area. Loans can be provided to help applicants who have a viable business proposition but are unable to raise the required funding from traditional sources. Loans up to £5,000 repayable over term of up to 3 years. Loans up to £600 interest free repayable over a maximum period of 12 months. www.epl.org.uk

Prime Initiative is the only national organisation promoting 50+ self-employment and enterprise. Loans of £1,000 - £5,000 www.primeinitiative.org.uk

Gloucestershire Development Loan Fund is a 'not for profit' Community Fund based in Gloucester. Support funding can be accommodated under Sharia Law. Clients need a plan and forecasts with advice available on how to prepare them and develop their ideas. Loans from £500- £9,500 www.gdlf.co.uk

Bristol Enterprise Development Fund (BEDF) is a potential source of loan finance for new and existing businesses that are based and trade in Bristol, South Gloucestershire, North Somerset, Bath and North East Somerset. All applications must include a current business plan and be made via one of the enterprise agencies or business advice and training organisations in the BEDF area. Loans for sole traders, partnerships or limited companies, up to: £7,500 for start-ups, £15,000 for business developments and expansion. Fast Track loans: up to £1,500. www.bedf.co.uk

Big Issue Invest is a specialist finance provider for social enterprises and CDFIs seeking to scale-up. Loans from £50,000 to £500,000 and contract financing from £500,000 to £5,000,000. http://www.bigissueinvest.co.uk/

INVESTMENT

The Local Investment Fund. LIF is a national organization that makes loans of between £25,000 and £250,000 to economically viable, not-for-profit organization across England, that cannot access sufficient funding from conventional sources

Bridges Ventures is currently managing two community development venture funds, Bridges CDV Fund I and Bridges CDV Fund II. Their primary focus is investment in ambitious businesses located in under-invested, mainly inner city areas of the UK. (Bristol and North Cornwall in the SW) http://www.bridgesventures.com/investment_strategy.php

Futurebuilders England is a government-backed fund offering investment and support to third sector organisations to develop their capacity for delivering public services http://www.futurebuilders-england.org.uk/

COMMUNITY INVESTMENT

Community investment is different. Instead of turning to the private sector and wealthy individuals for support, community investment is about engaging communities to invest in themselves.

By harnessing the collective investment powers of whole communities, large amounts of capital can be raised in small sums from members of the community.

Be it a small village shop or large scale housing development, a community recycling project or major renewable energy scheme, they all have one thing in common – actively committed and motivated members who recognise the wider benefits of communities investing and engaging in their own solutions. www.communityshares.org.uk/