If you’re a social business, chances are you need a wee bit of financial support to kickstart or grow your venture. But where to start? Below, we take you through the different kinds of funding available and offer a few tips to help you stand out from the ever-increasing competition.

Grant Funding

Grant funding is where you apply to a ‘trust’ set up by individuals, families, foundations or corporations. There’s a whole host of philanthropists (living or legacies) who wish to support causes that they feel / felt passionate about, or companies who wish to ‘give back’ as part of their corporate social responsibility. Most of the larger ones have their own websites, or you can search for opportunities on Funding Scotland. Helpfully, you can select ‘non-charity’ under ‘Organisation type’ to search for funders open to the wider category of ‘non-profits’ (as a lot of funders still require you to be a registered charity in order to apply).

There are various types of grant funding:

• Capital: for tangible things – buildings, equipment etc.
• Project: for specific events, projects or activities – i.e. ‘frontline’ work. Funders often favour new work or pilot projects.
• Core: for the general running of an organisation, including admin/management staff salaries and overheads.

In the application process or an offer letter, the funder will stipulate whether the funding is restricted or unrestricted. Restricted means that the money can only be used for the activities or capital expenditure outlined in your application. You may need to provide receipts, provide a budget report or other forms of proof, depending on how much funding you receive.

Unrestricted funding is a bit like gold dust. If you are successful in securing it, you can use it for whatever you need to achieve your social mission. Even if that’s ‘boring’ but essential stuff like renting office space, or paying the organisation’s energy bills.

To apply for a grant, a funder might have their own application form available for you to complete, or ask you to write a proposal. Always follow their instructions carefully and keep to any word count they stipulate. Many trusts are run by volunteers, so you want to make their task as easy as possible.

Application procedures, especially for more substantial requests, can take a lot of time and energy. Most funders usually ask who else you’ve applied to, or what other funding you have secured. Rarely do they fund 100% of the project costs, as they don’t see it as sustainable.

Funding is never retrospective, either. Foundation Trustees may only meet once or twice a year, and decision times can be up to 6 months (in the most extreme cases), so you need to plan your applications way in advance.

Grant funding is invaluable to the third sector. Thousands of charities couldn’t do what they do without it. But from a small social business perspective, you’ll be up against professional fundraisers (sometimes huge teams of them, if you think of the heavyweight charities like RSPCA or Cancer Research), who write reports and build relationships with funders year in, year out. It may be better for you to channel your efforts elsewhere…

Statutory Funding

Statutory funding is similar to grant funding; it’s just that the funder is local or national government. Applications often have strict open and deadline dates, but the decision might take a long time (as there is often a lot of competition for the same ‘pot’ of money), so just bear this in mind.

Statutory funding usually follows themes – e.g. mental health, food production, youth work, community support. Keep an eye on third sector news (e.g. TFN) to find out about these funding streams.

Social Investment

Social investment is becoming increasingly available to social businesses. It offers non-profit organisations the funds they need to start up or grow, but encourages them to build a sustainable business model, as most or all of the money is repayable.

Chris Holloway, Head of the Social Investment programme at Foundation Scotland explains:

“Social investment is a unique type of funding designed to support social enterprises, community organisations and charities, and enable them to grow and deliver positive social impact that addresses local issues and needs. Like many businesses, social enterprises often need investment to start up and grow or if they are already operating, to develop and expand.  There are lots of ways in which investment can help social enterprises, from buying equipment and purchasing premises to employing staff.

There are different models of social investment, usually as a repayable loan.  The advantage of this method is that investees don’t have to give away any profits or ownership, which they may have to do with other types of investment.

What makes Foundation Scotland’s programme different to other social investment offerings is our blend of grant and loan, meaning that only a portion of our investment is repayable.  Currently, we offer a 25% grant with a 75% loan.

Over the last 11 years, we have invested over £14.55 million in more than seventy organisations around Scotland, and we’ve built strong and supportive relationships and partnerships along the way. Our support creates unique value for social enterprises in Scotland by giving them the freedom to develop their businesses and be ambitious.”

Crowdfunding

Crowdfunding can be a great way to raise funds for a specific project, start up or build. The concept is to reach a funding target by gathering donations from a large group of individuals (a ‘crowd’, in fact). It’s only really worthwhile if you’ve already got an engaged supporter base, or an idea that will truly capture the hearts and minds of a lot of people. Community assets can be really successful, for instance.

Crowdfunding in its modern form is generally conducted online, via a special crowdfunding platform (which provides the software for a percentage fee from the amount raised). It is commonplace for the social business raising funds to offer various levels of gifts or incentives, to encourage and thank donors of all sizes. This may be as simple as a start-up café offering a free cup of coffee to anyone who donates £10, or a new distillery promising a limited edition bottle of whisky to anyone donating more than £100.

Self-Generating Income

Of course, the best way to fund a social business is to create a robust, ‘profit’-making business model in the first place. Profit shouldn’t be a dirty word. Yes, we talk about ‘not-for-profits’, but in the real world, a business has to generate a surplus to expenditure in order to grow, develop, maintain talent, and improve on its own terms. This can be easier said than done, especially in a consumer culture that values financial cost over environmental or social costs. But if a social business is truly to thrive, it needs to be working towards financial independence – thinking more like a business and less like a charity.

Further Support

There are lots of organisations in Scotland and across the UK who guide budding social entrepreneurs to set up and manage successful, sustainable enterprises – The Melting Pot included (see more about our Good Ideas programme here). We are also keen to bridge communities (be they regional, thematic or sector-specific), to offer a meaningful knowledge exchange and stimulate partnerships that might not evolve within our normal circles of influence. Keep an eye on our events page for upcoming opportunities.

We believe the future economy has to be more purpose-driven, for the survival of people and the planet. So, let’s do this together. Let’s make change happen.

Author bio

Lucinda Jeffery is a Marketing Consultant for charities, social businesses and SMEs. She has also worked in trust fundraising for charities like WorkingRite and the Royal Botanic Garden Edinburgh.

Find Lucinda on LinkedIn

www.roseberrymarketing.co.uk

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