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How to secure finance which expects no financial return - a type of social investment

What does it mean?

A grant is a conditional or unconditional gift of money with no expectation of a financial return (i.e. an expected financial return of “– 100 %”). It is also known as a “donation” or “gift capital”.

Who might use it?

Grant-making trusts, individual philanthropists, companies or the government may make a grant to an organisation with a charitable purpose for “restricted” or “unrestricted” use. If the funds are for a specific project or narrower purpose than the organisation’s objectives, they are “restricted”. As this restriction is an obligation under trust law, the funds cannot be used for any other purpose (even if the project increases expenses in other areas such as HR and IT). With these conditions in place, the organisation operates a ‘cash-in, cash-out’ model for those specific projects. If the funds are not used for the specific project or group of beneficiaries, it should be returned to the donor as it was given for a specific purpose.

Funds can also be “unrestricted” and therefore used exactly where the organisation needs the money to further its objectives. The management team and trustees can decide where this money should be spent, e.g. for a specific project, working capital, growth or to build reserves for long term plans.

Who provides it?

  • The National Lottery Community Fund gives grants from £300 to over £500,000 to organisations ranging from small local groups to major national charities.
  • Esmée Fairbairn Foundation provides grants to organisations who work within the Foundation’s four areas of interest:  arts, education and learning, environment and enabling disadvantaged people.
  • Heritage Lottery Fund gives grants to projects that sustain and transform a wide range of heritage for present and future generations. The grants awarded are upwards of £3,000.
    Impetus Trust provides unrestricted funding between £200,000 and £500,000 over a longer term (4-6 years on average), combined with hands-on management support and specialised expertise.
  • The Tudor Trust makes grants, and provides other types of support, to voluntary and community groups working in any part of the UK.
  • UnLtd provides practical and financial support to social entrepreneurs in the UK with Awards between £500 and £15,000.

NB - This is only a sample  –  there are hundreds of grant makers that a civil society organisation can choose from. See NCVO's Funding Central website for regularly updated lists of grants.

Case study - Brightkidz

Brightkidz is a workers’ cooperative that promotes walk to school schemes to keep children safe near roads. It was started in 2004 after Brightkidz Managing Director Alison Holland organised her local school’s first walking bus scheme. Core activities include providing free information about walk to school schemes, and selling high visibility products for children.

Key to Brightkidz’s early development was a large start up grant of £31,500 from Social Enterprise East Midlands, which helped to establish the organisation before it was able to turn enough profit to be completely self-funded through trading activity. The grant from Social Enterprise East Midlands paid for IT equipment, salary costs, materials for product development and formal office space.

To win this grant, Brightkidz put together a strong business plan to demonstrate that after this initial ‘pump priming’ investment the organisation would be able to sustain itself financially.

Seven years on, Brightkidz is going strong, with several part-time staff and a brand new social enterprise arm. It is now fully self-funding through bright clothing sales, and beginning to concentrate on monitoring its impact so that it can apply for further grant funding in future if it needed it.

Page last edited Sep 10, 2020

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