There is a mismatch between the supply and demand for finance to support social entrepreneurs in the UK
According to a report from Big Venture Challenge (BVC) – a lottery-funded programme to support social entrepreneurs by helping them to attract investment – in 2011/12, 765 social investment deals were made in the UK, contributing to a 21% growth in the market from the previous year.
Despite this increased flow of capital, its research suggests the sector is still struggling to find entrepreneurs ready to take on the social investment available.
This mismatch, says the report, is due to the financial products on offer being unsuitable for early stage, community-based social ventures. Of the 765 deals made in 2011/12, the vast majority of this lending 90% was in the form of secured loans.
“This presents a challenge for the sector: without assets to rely on, how can start up organisations raise the finance they need to grow?” said the study.
This year saw better quality applications and fewer that were ineligible or unsuitable, but fewer applications overall, with just 143 applications for 30 awards.
The report also highlights a sharp downward trend in women applicants – 42% in 2011, down to 25% in 2013. The report said that women were both less likely to apply for and to receive investment, partly because women are more likely to start businesses out of necessity, to use smaller amounts of start-up capital and to be more risk averse than their male counterparts.
As such, according to BVC, they remain “less likely than male-led ventures to reach their full potential.”
In addition, the report finds a growing regional bias. In 2011 and 2013 BVC received more applications from London than any other region, but the proportion grew in 2013 (46%, up from 34% in 2011).
“This highlights the London-centric composition of the social enterprise population, and goes some way to explaining the disproportionately high number of BVC applicants from London. However, 47% of all applications came from London – a percentage so high it cannot be explained by distribution alone,” it added.