Social enterprises 'need external finance'

The UK's many social enterprises have endured a fairly difficult time lately, with government-led funding cuts and uncertainty over their position making it difficult for them to carry out their work effectively.

According to the State of Social Enterprise Survey 2013, which was launched earlier in the week by secretary of state for business, innovation and skills Vince Cable, a lack of access to finance is the biggest barrier these organisations are facing.

Some could be looking to finance professionals to improve their funding processes as traditional routes of income generation begin to fail.

Twice as many social enterprises as small to medium-sized enterprises sought capital in the past 12 months, with the average sum applied for around £58,000 - indicating that smaller-scale, boutique lending is needed as well as the major funding involved in social investment sources.

The biggest marker of the problems facing social enterprise is that 32 per cent cited the economic climate as the biggest factor in preventing their growth and expansion, up from just eight per cent in 2011.

Peter Holbrook, chief executive of Social Enterprise UK, said: "There's growing interest in social enterprise - it's the sector where entrepreneurs are choosing to set up businesses. This fact speaks volumes about people's motivations and a desire for change in the way that businesses behave and their contribution to society."

As more start-ups move into this area, filling the gap left by the closure of charities and a lack of council funding for local initiatives, it is clear the funding environment will need to change to allow firms of this kind to thrive.

Mr Holbrook stressed that investing in social enterprise is one way to drive economic recovery in the UK and generate "lasting social change" across the country by allowing people to access the services they need.

On the bright side, business optimism has improved, with 38 per cent of social enterprises seeing an increase in turnover in the last 12 months and 63 per cent expecting a further jump in the coming two years.