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At their core, social enterprises are ventures that are formed with the aim of providing solutions to social issues. These ventures can be either profit-making or non-profit, and their results have both a financial and social benefit element. They come in many forms, but they all have a fundamental concern: can they generate enough returns to attract investment that can keep them going?

For social entrepreneurs the world over, getting adequate funding is one of the biggest challenges. It’s not enough to be a creative genius with an innovative idea – getting the job done and providing solutions to a complex issue – and that the social enterprise brings enough returns to show that it’s sustainable. As Fiyaz Mughal, founder of social enterprises Tell MAMA and Faith Matters knows, in many cases entrepreneurs still need to find additional sources of funding to cover their costs and enable them to deliver on their promises.

The responsibility of raising finance lies with the owners of the social enterprise. Their focus lies on finding investors who believe in the social venture’s vision and the entrepreneur’s ability to deliver. While a traditional business can use its balance sheet to show a track record, the social enterprise has to get creative and find a way to access good funding options.

Fiyaz Mugha

So where does the funding come from?

Friends and Family

Entrepreneurs often turn to their close circles to find support for their ventures. While they have the knowledge and belief of their ideas, the task is to convince those around them to part with their money. It’s a tricky balance sometimes, navigating through close ties and friendships for the sake of the enterprise, and often has to be done with careful thought and consideration.

Getting the backing of friends and family can be crucial in attracting another category of investors known as angel investors. These are people who are not part of the entrepreneur’s close circle of family and friends but believe in the business enough to want to see it grow. It’s the work of the owner to convince angel investors on the high-level objectives and strategy for the firm, and also their personal ability to see the project through.

Formal Lending Institutions

While traditional businesses and social enterprises have been thought to work differently when it comes to balance sheets, there’s no reason a social enterprise can’t approach a lending institution for financing. One of the key things for the business is to have a well-crafted business plan that demonstrates an ability to sustain revenues, enough to service its debts and keep operations going.

Thought should be given to finding lenders with an affinity for social causes, as they are more likely to work with the enterprise should there be any repayment issues. In many cases, such lenders may not require personal guarantees to facilitate financing, as they are more open to managing the lending risks.


Unlike formal loans, grants do not have to be repaid. However, they are offered under strict terms, necessitating proper research by the social enterprise making the request. From legal structure to the company’s constitution, a host of aspects are assessed by the grant-making institution before releasing any funds. Grant funders tend to be more demanding about measuring the social benefits, the involvement of the wider community and the project’s governance structure. They also focus on social projects that support areas such as education, health, energy, and the environment. A good example is the Big Lottery Fund, which donates 40 percent of money raised through the National Lottery to charities, voluntary organisations, social enterprises and community projects.  Take a look at the embedded infographic and video for more information.

In the next article, we’ll focus on some of the key aspects that enable social enterprises to thrive.