Show me the money: UK social enterprises seek working capital

UK social enterprises are increasingly in need of working capital to enable them to deliver contracts and finance their operations, concludes new research by Social Enterprise UK (SEUK) and the Access Foundation.

In 2011, 28% of social enterprises declared that they were seeking finance for working capital. This rose to 35% in 2013 and 43% in 2015. Working capital is the amount of a company’s assets minus the amount of its current liabilities – essentially it’s the cash available for day-to-day operations of an organisation.

The Prospecting the future: social enterprise and finance data from 2011-2015 report also found that the average median amount of finance raised by social enterprises remains consistent at around £60,000 over the four year period. Larger amounts of finance were more likely to be raised by enterprises located in the most deprived regions and a significant minority continue to apply for grants as part of their income mix. In 2015, 36% of social enterprises applied for some type of grant in comparison to 43% in 2013 and 28% in 2011.

Social enterprises need access to smaller loans and blends of loan and grant

Peter Holbrook, CEO of SEUK, said: “Research shows that access to finance has always been an important issue for social enterprises and is one of the key barriers for those both starting-up and seeking to grow.

“This report delves deeper into the finance data we have to identify trends over the last few years, and in different regions and sectors. This helps us not only understand the finance needs of social enterprises in more depth, but also to inform the design of social investment programmes and initiatives.”

Of all the different types of social enterprises seeking finance, leisure trusts and housing associations are the most successful. This is in part due to their large size and track record – and also because they commonly own assets and are able to seek secured lending. Community Interest Companies are more likely to seek smaller amounts of finance.

When it comes to geographies of the social enterprises seeking finance, between 2011 and 2015 enterprises in the north have applied for the most finance. On average they applied for £90,000 a year, in comparison to those located in the south that apply for an average of £78,000 a year and £50,000 a year in the Midlands.

Clear trends are also apparent when looking at rural and urban areas. Enterprises in urban areas, which tend to be larger, applied for an average of £73,000 and raised an average of £52,000. In comparison, enterprises in rural areas applied for an average of £37,000 and raised an average of £39,000.

Seb Elsworth, CEO of Access, said: “This report adds further weight to the case that social enterprises need access to smaller loans and blends of loan and grant which can help them to grow. The role of Access is to make sure that more of the right size and type of finance is available. We are open to expressions of interest from organisations who want to play a role in providing this sort of finance to social enterprises”.

The data analysed by SEUK and Access has been sourced from SEUK’s bi-annual State of the Sector Survey between 2011 and 2015. To read the report in full, please click here.


Photo credit: Austin Kirk