As part of the ?funding cocktail? social enterprise should consider loan finance or non-grant finance to enable them to meet their needs. Non-grant finance includes a range of options; some of these are listed below:
- Mainstream banks ? such as Lloyds TSB, NatWest Royal bank of Scotland (RBS), Barclays, HSBC
- Social banks ? banks that have a strong social mission, like Charity Bank, Triodos, Unity Trust Bank or the Co-operative Bank
- Community development finance institutions (CDFIs) ? CDFIs are independent organisations that provide access to financial services for people and enterprises. They have social as well as financial objectives.
- Charitable trusts and foundations ? that make social investments other than through grants
- Enterprises ? that have a strategic interest in forming a partnership or financial arrangement with a social enterprise or larger social enterprises that support smaller ones
- Funds ? that are set up to provide debt, equity or grants, with the funds supplied by institutional or individual investors. Some of these funds have dual commercial and social purposes
- Individuals ? that buy shares or bonds issued by social enterprises. Wealthy individuals can also play the role of angel investors and provide loans and equity finance to social enterprises.
(Developed from Social Enterprise Coalition, 2004)
In terms of loan finance, there are broadly two variations: Commercial Loans (through mainstream banks or other institutions) and Community Loans. The latter is available to community groups and organisations including social enterprises that traditionally may not be able to access loan finance from a mainstream source.
The East Midlands Community Loan Foundation (EMCLF) is a partnership organisation providing loan finance to ?not-for-private-profit? community groups and organisations, as well as those wishing to take over an existing business as an employee or community buy-out.
They provide loans of between £5,000 and £100,000 to social and community enterprises for the following types of activity:
- Business loans with terms up to 10 years
- Bridging loans to ease cashflow
- Loans on property or business purchase
- Loans for Capital equipment and working capital
The interest charged is dependent upon the cost of making the loan and the element of risk involved.
You can find more information on the SEEM website here