Social enterprise needs funding too

One aspect of social enterprise development, and almost certainly one of the most important, is achieving ‘the S word’ – sustainability.

The sector has for many years worked closely with funding providers as a means of supporting project development and liquidity. This has come at a cost in some cases, with the raison d’être of the organisation contorting to become what the funder needs it to be, generally for the purposes of getting the all important offer letter or service level agreement.

This in itself is a necessary evil for the third sector, and also a reflection of its greatest strengths: resilience, willingness and flexibility. After all, it’s the community that benefits ultimately.

In the delivery of the south east Wales community economic development programme (SEWCED), the understanding was that there would always be a need for funding. But through social enterprise development and an encouragement of trading income generation, this need can be lessened.

This is far from an all-or-nothing approach, and more of a recognition that the public sector landscape is shrinking, and this will directly impact on the funds available for the third sector.

EU funds have been a formative driver of the third sector, both through the European Regional Development Fund and European Social Fund. The Welsh government and Welsh European funding office are moving away from grants – or ‘non-repayable funding’ in new terminology – towards more of an investment (repayable) culture.

In fact, the word ‘grants’ is quickly becoming an old-fashioned term – certainly within a Welsh government economic development context – replaced with words such as ‘equity’ and ‘mezzanine finance’.

This brave new world of high-end investment will contextually mean much to finance providers; but it will mean less to the grassroots developing social enterprises, who this period of change will affect greatly.

As local authority budgets are squeezed across Wales on an unprecedented level, the very number of local authorities is being questioned through the Williams Report and funding methods are being ratified. The wheels of opportunity are turning quickly towards social enterprises across the country, which are best placed to deliver in areas of market failure.

Within this fluid landscape, it could be said that more money will be needed now than ever before to equip the social enterprise base to evolve into delivering a wider portfolio of services. This money has to come in the form of both grants and loans (to use common terminology), with the former eventually and gradually leading to the latter.

There needs to be a clear statement – and this is one we are keen to make from a local authority perspective – that further funding is needed to support Wales in developing an outstanding range of social enterprises delivering services by and for the community.

Service delivery can be far more flexible and fluid away from public sector protocol and procedures; services can evolve to meet the changing needs of service users and is a vehicle which must be embraced, encouraged and evolved.

With services threatening to disappear from communities, who better to take them on than the community itself: the users, beneficiaries and customers who could inherit the future of said service and shape its development?

As we plan the closure of the SEWCED project, we are working up proposals to continue supporting the growth and development of social enterprises. This will be achieved by working more closely with our partners and the varied and outstanding organisations operating in the third sector.

The efforts to date have focused on self-sufficiency and creating a sustainable income, thereby lessening the reliance on non-repayable funding. We will also seek to support the sector in becoming investment-ready and able to take on repayable (loan) finance. This will require the investment of time, skills and money into business development.

Such development will involve all manner of activity to create a stronger investment for potential lenders. In the absence of longer-term funding from existing sources, this presents a legacy for grants, in addition to an exit strategy.

Although it will take time and a little pain to get there, this will also present a massive development opportunity for the sector and one that must be taken.