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Last updated: 09 September 2009
Introduction
Social enterprises have been hailed as one of the most exciting emerging sectors in the UK, contributing at least £8.4 billion to the economy every year. However social enterprises can find it difficult to access the finance needed to grow – particularly new sources of equity and equity-like finance.
Evidence suggests that this might be due to the fact that many SEs are not always investment ready and can have low levels of financial literacy. According to research undertaken, there is a lack of appropriate financial advice for SEs and existing advice is largely targeted at mainstream businesses.
At the Social Enterprise Summit (May 2009), OTS announced that it will work with the National Endowments for Science, Technology and the Arts (NESTA) to develop an Investment Readiness programme that will improve social enterprise access to support and finance.
Over the last few months, OTS has been working with NESTA's Public Services Innovation Lab to provide a year long Social Enterprise Access to Investment (SEATI) facility designed to give social enterprises the best advice to help them access risk capital. The facility will offer a success fee that will incentivise brokers of advice to help social enterprises access funds.
Angela Smith, Minister for the Third Sector
I am delighted that the Social Enterprise Access to Investment programme, announced in the Real Help for Communities action plan, is now open for applications. Now more than ever, it is important for social enterprises to have access to the finance they need to grow, thrive and become a real part of Britain’s future. Yet there can be a missing link between social enterprises and finance, this is often due to a lack of appropriate advice and the relevant support to access financial products.
By supporting and exploring ways for Investment Readiness Providers to provide advice and support to social enterprises in a financially sustainable way, the SEATI programme will contribute in the long-term to the appeal of social enterprises as attractive investment vehicles with sustainable and successful futures in a competitive market.
Jonathan Kestenbaum, CE NESTA
Social enterprise is the UK's most exciting up-and-coming business sector. But in the absence of tried and tested tools to guide social enterprises, there is a need to find new ways of bridging the gap between corporate and non-profit access to finance. This new resource will provide the evidence that social enterprises can achieve sustainable growth with the right kind of support.
About SEATI
NESTA and the OTS have developed the SEATI pilot to find and test new ways for social enterprises to gain the advice and support they need to access new forms of growth finance.
The programme compliments other initiatives to increase supply of risk capital for ambitious social enterprises such as NESTA’s cornerstone support for the Bridges Social Entrepreneurs Fund and the Big Issue Investment Social Enterprise Fund and OTS’s Risk Capital Fund (soon to be launched).
The pilot will develop and test a number of key principles and design approaches and the learning will be made available to the broader social investment community throughout the programme.
Eligibility
1. The SEATI programme will be success based, payable to any investment readiness provider on securing (on draws, even in stages) equity or equity-like investment deals for social enterprise.
2. Payable on receipt of investment from a finance provider and expected to be in the region of 3-5% of the value of the deal secured and in line with market rates for fees for investment readiness in this market.
3. Available for to any IRP that works with a social enterprise based in the UK.
4. Payable for quasi equity and equity investments (i.e. returnable capital that has equity like features). SEATI is not available for grants or venture philanthropy. An investment is defined as having equity-like characteristics if it has flexible repayment terms and higher risks but potentially higher returns and where returns are dependent on success, such as an agreed percentage of future income or surpluses. Risks and rewards are shared between investors and investee.
How to apply
To find out more about accessing the SEATI programme contact seati@nesta.org.uk with a short outline (no more than 100 words) of the services provided, details of the investment secured and a short description of your social enterprise client.