New report shines light on “significant potential” of enterprise grant-making

In a new report published today by Social Spider CIC, enterprise grants are identified as critical to actively supporting enterprising behaviour for charities and social enterprises, especially those working in challenging areas of market failure. With increasingly limited resources to create positive social impact, this new movement of grant-making intentionally fills a gap in the funding market that complements unrestricted funding, project-based grant funding and repayable social investment. 

As a new approach, enterprise grant-making can enable social organisations to find new and different ways to generate sustainable levels of traded income. In-depth interviews with funders, social enterprise support bodies and charity infrastructure organisations have supported the definition of enterprise grants and helped scope and size the field to-date. 

Anna De Pulford, Chair of the Enterprise Grants Taskforce and Director of Dulverton Trust, said:

“Voluntary sector organisations are increasingly having to compete for donations. In this environment, enterprise can play an even more important role. Funders are rightly being called to provide flexible, unrestricted funding - but we also need to recognise that developing enterprise requires specific skills and resources. This report is a timely reminder that we funders could be doing much more to support the development of charities’ enterprise and I hope to see other funders joining this necessary and growing movement.”

Defining enterprise grant-making 

After consultation with funders, social enterprise support bodies and charity infrastructure organisations, authors of the report Social Spider CIC settled on the following definition for enterprise grant-making:

"An approach which encourages and supports charities and social enterprises to increase or maintain their income from enterprise activities, including selling services or goods. This is largely through using funding conditions and/or incentives to encourage enterprise behaviour, often accompanied by capacity building."

Scoping and sizing the market 

Whilst the report shows only £2.6m of grants per annum are clearly identified as meeting the definition of enterprise grants, it highlights there is a much greater amount of funding, between £22m and £115m per annum, supporting enterprising activity in a wider sense.

Currently, the number of enterprise grants available do not meet demand. In response, an increasing number of funders are looking to move towards enterprise grant-making as part of their offering. 

The Enterprise Grants Taskforce sees this shift moving at pace in the coming months and believes now is the time for more funders to consider adapting their practises to become more enterprise-centric to support the long-term sustainability and impact of the sector.

Alastair Wilson, CEO of School for Social Entrepreneurs, said:

“One thing’s for sure, the current sources of funding were not designed by practitioners on the ground. In 2023, is it not time we radically overhauled how grants are administered to reach broken markets whilst embracing the creative, entrepreneurial energy of local communities to create change? 

Social Spider’s report shows early signs a new wave of grant-making that enables social organisations to become more sustainable and generate local impact. Funders interested in sustainability may wish to consider how they can incorporate enterprise grant-making into their funding mix.”

Filling a gap in the wider finance market for social enterprises and charities 

As an approach, enterprise grant-making recognises that most social impact organisations will be sustainable somewhere between 100% grant dependency and full commercial viability. Where on that spectrum each business operates depends on their size, location and the impact they are intending to create in their community. 

This report highlights potential demand for enterprise grants from over 25,000 social enterprises, as they identify obtaining access to grant funding as one of their main barriers to sustainability and growth. It also acknowledges that for many social enterprises operating in underserved communities and carrying out activities rendered unprofitable due to their social components, repayable social investment has not been applicable.  Enterprise grants are designed specifically to fill this gap, enabling organisations to build up trading activities to a point where grant is less or no longer needed, and also act as a potential on-ramp to blended social investment. 

Seb Elsworth, CEO of Access - The Foundation for Social Investment, said:

"With a squeeze on household income and the public sector under stress for the foreseeable future, we need to think strategically and carefully about where an increase in the sector’s income can be found, so we can meet the many challenges facing our communities.

Charities and social enterprises have a long tradition of generating their own income through trading and this report shows the huge potential for enterprise grant-making to catalyse this further - increasing the impact of philanthropic funds, regardless of their particular focus, and driving sustainability across the sector.”

Read the report in full here.