The launch of the new Big Lottery Fund, the Big Potential, will help voluntary, community and social enterprise organisations (VCSEs) diversify their income streams, says Dan Hird, head of Triodos Bank corporate finance.
On July 1, the Big Lottery Fund launched the Big Potential, a £10m fund designed to help charities and social enterprises access finance. This should help them improve their scale, capacity and sustainability. It is designed for organisations “at the beginning of their social investment journey”.
Charities continue to be under threat of losing essential income from voluntary donations, legacies and government grants. Since the economic downturn in 2008, government and consumer spending has continued to decrease.
To alleviate financial insecurity, a growing number of charities are now looking to steer towards more diversified sources of income. Trading income from charity shops, e-commerce, cafes and government contracts for instance is one way to diversify income streams. Another way of growing capital is raising money through share and bond issues.
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Historically, charities and social enterprises have had limited access to commercial capital raised through bond or share issues. Many charities simply don’t have the resources to pay for the upfront fees that come with this type of capital raise.
Another hurdle for charities and social enterprises trying to raise capital is their investment readiness. In the past 12 months, Triodos corporate finance has spoken to several charities and social enterprises who would like to raise capital but found that some of them do not have a working investment readiness strategy in place.
The social investment market has been getting a great deal of attention in the last six months, mainly thanks to the significant funds now available to invest into social enterprises. As a result, many discussions have taken place and recommendations made as to the best ways of unlocking these funds for qualifying enterprises.
Understandably, most lending institutions have appeared to be risk averse when assessing opportunities for investment, but momentum may now be starting to change. Not only specialist social venture funders, but mainstream banks are actively looking for new ways of managing risk and making new investments.
Big Lottery Fund’s new £10m fund will help pave the way to allow voluntary, community and social enterprise organisations to improve their investment readiness and the preliminary costs that come with raising capital.
The Triodos corporate finance team is excited to see the social investment market maturing. With the launch of the Big Potential, Triodos Bank corporate finance will be able to advise more charities and social enterprises on raising finance and structuring social impact bonds. Helping these social enterprises to improve their sustainability, capacity and scale and ultimately help them deliver greater social impact for communities across England.
Dan Hird is head of corporate finance at Triodos Bank.
Photo: Garry Knight via Flickr