A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
7.2 Growth: finance for development
Many people claim without thinking and without evidence that the problem for financing social enterprise is that the
right sort of funds are not available. The real problem, though, is that many enterprises either don’t know what sort of
funding they want, and when they choose they are prone to make mistakes. The contribution which is most needed to
meet the challenge of financing social enterprise growth is help for isolated practitioners everywhere to understand the
options and learn how to recognise what they need as their activities evolve.
The challenge for financing growth
Myth and reality: It is often said that third sector trading is held
back by difficulties with finance. This was probably true in the
past, and some large and highly complex projects involving
partnerships between community and private sector organisations
(eg for expensive renewable energy projects) may always struggle
to attract backers. But there are many other factors closer to home
and rather more controversial which are limiting the growth of
businesses. If you don’t face up to them frankly they will continue to
stop enterprises from achieving their potential.
Why is growth so difficult for social enterprise? Here are some
of the often closely related factors which are restricting the natural
business growth of third sector businesses. Some ideas may be
considered heretical. But even if there is no immediate agreement
on the source of problems, it is healthy to have the debate.
• the massive grant dependency of the third sector, caused
among other things by
− the long history of grant funding
− weak funding policies by some grant making bodies which
unnecessarily limit risk, flexibility, innovation, and ambition
• lack of confidence among charities and community
organisations (often cultivated by the permanent insecurity of
funding regimes) – caused by
− the unattractiveness of loans compared with the comfort zone
of grant funding
− unfamiliarity of business investment models and terminology
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