Lending to Co-Operatives and Social Enterprises

8/7/2019 Lending to Co-Operatives and Social Enterprises

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LENDING TO CO-OPERATIVES

& SOCIAL ENTERPRISE

a view from Cambridge CDA: an

exclusive local lender

March 2004


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CONTENTS

Executive Summary 3

Introduction 4

History of CCDA loan fund 7

Research into finance issues for local CSEs 10(Co-operative and Social Enterprise)

Evaluation of CCDA loan fund 15

EEDA project support 18

Lessons for existing and emerging CDFIs to CSEs 19

Conclusions 20

Bibliography 21

Appendices 22i. Research questionnaire and full findings

ii. Publicity generated over 15 month period to encourage new loanapplications


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EXECUTIVE SUMMARY

In recent years, there has been a marked growth in the level of interest in social

enterprises1

by national Government. This has led to a greater awareness of the

specific needs of this sector across a wide range of issues including training,

employment, delivery of public sector services and finance by both mainstreamsupport agencies and private sector bodies including businesses and banks.

The purpose of this report is to profile the issues surrounding loan or debt finance for

social enterprise from the perspective of the Cambridge Co-operative Development

Agency (CCDA), which has been operating a small development loans fund

exclusively for co-operatives and other forms of social enterprise (CSEs) in the

Cambridgeshire area for over 20 years. Such loan funds have become to be recognised

as Community Development Finance Institutions (CDFIs) sustainable,

independent financial institutions that provide capital and support to enable

individuals or organisations to develop and create wealth in disadvantaged

communities or under-served markets2.

Through research conducted by CCDA in the summer of 2003 into local CSEs

experiences and attitudes towards finance, and coupled with an introspective

evaluation of the way in which it operates this fund, it is hoped that providers of

finance and other forms of support to social enterprise in a wider arena will benefit

from gaining a greater understanding of the needs and issues of this sector as well as

learning from the experience of CCDA about operating a CDFI exclusively for social

enterprise.

This research into local CSEs found that their attitudes and needs in accessing debtfinance differ very little from that of mainstream business. Further, that there is agrowing understanding amongst mainstream financial institutions about the natureand culture of CSEs, making them more open to considering applications fromthem for loans.

The evaluation of the CCDA loan fund itself also shows that the needs of CSEs inrespect of debt finance from a local CDFI have also changed significantly in recentyears; this, together with high transaction costs associated with operating the fundcall into question the economic viability of offering such support in isolation fromother support measures and programmes.

1A social enterprise is a business with primarily social objectives whose surpluses are principally

reinvested for that purpose in the business or in the community, rather than being driven by the need to

maximise profit for shareholders and owners, DTI SEnU Social Enterprise: A Strategy for Success,

20022

Community Development Finance Association website: www.cdfa.org.uk


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INTRODUCTION why dont CSEs use the existing routes tofinance like other businesses?

One of the key issues that social enterprises face is the lack of access toappropriate and affordable finance; this has been identified by the DTI's SocialEnterprise Unit (SEnU):

"...many social enterprises are undercapitalised and struggle to access externalfinance, particularly when starting up, growing or moving away from grant

dependancy. Ensuring appropriate finance...is available to social enterprise is keyto enabling the sector to develop and grow."

3

One of the key factors is that finance providers have been unsure of the risk andappropriateness of lending to the sector and this is largely based on a lack ofunderstanding of the sector itself and in there not being readily accessiblematerials profiling the experiences of lending to social enterprises

4

Another key reason identified in the SEnU strategy document is that:

"...at present, too many social enterprises appear to have underdevelopedfinancial management and business planning skills. This means that they presentthemselves poorly to potential lenders and investors, who see them as a high-risk

business."5

Further, many CSEs are located in areas that are seen to be 'high-risk' owing tostatistics on unemployment figures, household income, skills shortages, etc. Thismeans that not only will these enterprises struggle to access finance frommainstream institutions

6; but also that should they be successful in their

application, it will inevitably be more expensive than it would be for an enterprise

based in a more 'prosperous' area - the Bank of England in 2000 found that lendingto high-risk enterprises in deprived areas had an average interest rate of 4.12%above base rate compared with 2.72% for the UK as a whole

7. This is of particular

concern, as owing to their very nature, CSEs will usually gravitate to areas ofdeprevation owing to their explicit social aims and objectives.

Finally, 1 in 5 of all business in the East of England currently have concerns aboutbeing able to raise development finance

8. If this is true of the mainstream business

sectors whom the banks can relate to and understand, the ratio of enterprisestrading within the social economy where banks have less understanding andsympathy must suerly be much higher.

In all, this makes for a bleak picture for CSEs being able to attract and securefunding for start-up or development costs - yet this is a key strategy in not only the

3 Social Enterprise a strategy for success, DTI SEnU 2002, p8&94 Ibid, p27&285 Ibid, p686 economic prosperity & social inclusion, EEDA, 2001 p.1407 Finance for Small Business in Deprived Communities, Bank of England, 20008

competitive business, EEDA, 2001 p.69


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Governemnts agenda, but also those of the Regional Development Agencies andother development bodies.

Underlying this issue of the difficulties that CSEs face in securing debt finance is a

drive to encourage them to seek finance beyond their traditional sources of grants

and donations. This impetus is based on both internal and external forces: localauthorities and trusts are being seen to have increasingly less amounts of money to

distribute to local groups and enterprises which operate for social benefit, and many

enterprises are restricted in their activities by constraints placed upon them by terms

and conditions of grants they receive.

Developing trading activity is therefore a way of both sustaining the social benefits

being delivered by groups in the community while lifting restrictions placed upon

them by grants. However, one such restriction, as evidenced by the European Social

Fund, is that activity funded cannot generate revenue for the applicant organisation

this makes it very difficult to therefore begin to trade; the most common solution to

this problem is for groups to take on loan finance. And the benefits of doing so can beidentified as9:

Topping-up other revenue

Create a capital investment to generate future income

Address short-term cash flow problems

Allow a change in the direction or scale of an enterprise

Attract more resources

Generate a greater investment in the community, thus giving that community

greater control

Offering a greater independence than is available through grant finance

There also exists a strong aversion from CSEs to certain types of other investment that

are used and favoured by mainstream business:

equity investment, venture capital, etc

This form of investment can often lead to a loss of control over the enterprise

by its founding group which they will seek to avoid; further, many CSEs do

not actively seek to generate large surpluses on investment or trading activities

to return as private profit for a select group of private individuals this can act

to deter venture capitalists from pursuing such organisations

to lease or sell property which the enterprise may ownAnecdotally, there is very little experience and skill within the CSE sector for

organisations to pursue this option. This is evidenced by the fact that very few

such enterprises are generating an income in this manner

factoring

9a guide to loans for social enterprise, Bristol Area Community Enterprise network, 2001


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This relies very much on the enterprise being willing to lose some of the

value of its sales in order to strengthen its cash flow. It also relies on

enterprises being happy to accept a distancing from themselves to their

customers; as a key cultural value of CSEs is the importance of relationships,

it is hard to see how they would be willing to use factoring at such a cost to

their identity

overdrafts

Many CSEs are often dissuaded from using overdrafts owing to high interest

rates levied on them

share issue

Many CSEs are increasingly structured as guarantee companies and so this

prohibits them from raising funds through a share issue; further, for local

enterprises, their attractiveness as an investment opportunity is often minimal

as they are not seeking to maximise the financial return to shareholders. This

raises the issue of the role of shareholders in an organisation if they are not

investing to ultimately benefit from a personal financial gain, especially with

larger CDFIs using this route to increase their total fund, but is one that is too

broad to be explored within the confines of this report.

going public (becoming a plc)

As with venture capital, this option begins to create a loss of self-governance

for the enterprise and further, relies on a scale of operations and profitability

of enterprise with few CSEs can currently claim to attain.


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History of CCDA loan fund

Cambridge Co-operative Development Agency (CCDA) was established in 1982 in

order to meet a need to deliver support to democratically owned, and what are now

classified as other forms of social enterprise, in Cambridge at that time. At the time,CCDA was the only specialist business start-up support agency and as such, it

received much support from the local City Council in both receipt of revenue funding

to deliver its services, but also in investment to a loans fund that it administered in-

line with meeting its own objectives and those of its principle supporter, the City

Council.

This loans fund was set up at same time as CCDA as there was recognition of the

need for such a resource from mainstream financial providers not showing any real

understanding of the different nature or culture presented to them by CSEs, when they

were approached by them for loans or overdrafts. These enterprises were therefore

often refused finance despite having a viable business plan or proposition.

As well as attracting support from local authorities, the loan fund was also developed

through donations from co-operatives it has delivered support to: Delta-T Devices was

one such group who gave a one-off sum to further build the fund as part of their

commitment to supporting the wider co-operative sector.

The success of the loan fund can be seen by its having lent out nearly 80,000 over

the last 20 years from a starting capital investment of 5,000 without any planned

formal publicity programmes. Current figures show that the total capital invested inthis fund since its formation has now been lent out more than 4 times, demonstrating

not only a need from within this sector for such a fund, but also evidence of high

demand for it.

The appraisal process for approving loan applications was developed on a peer-to-

peer model. This is delivered through a panel made up of CCDA board members,

(who are drawn from local CSEs and who voluntarily give their time), structured as a

working group. The key reasons behind choosing this structure were two-fold: firstly,

it was felt that any loans were more likely to be repaid if the recipient perceived it to

have been made to them by their peers rather than a faceless bank; and secondly, to

overcome the barriers which they were experiencing with mainstream financialproviders at that time.

A maximum amount on a loan to any CSE was set at 4,000. This was done so as to

complement existing CDFI provision available in the area from ICOF (a national


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CDFI); further, it has since been recognised that often, only small amounts of cash are

needed by enterprises in various stages of development10

.

When applying for a CCDA loan, CSEs are not asked to provide any personal

security: instead, a debenture against the assets of the business is issued and the

decision to lend is based solely on the strength of the business plan. This furtherremoves some of the barriers to accessing finance, as many founders of CSEs are

either unwilling or unable to offer personal guarantees.

As has often been acknowledged, the administration and transaction costs of any

CDFI or micro-credit scheme are usually much higher than for more traditional

finance providers11

. For CCDA, these costs are subsumed into its overall operating

costs incurred through the delivery of its range of core services of support (access to

finance being one such core service, hence the funding of its administration), as it

does not seek to use this resource to generate large returns, rather to provide a means

of support for CSEs who may need to call upon it.

The actual fund is held within CCDAs main deposit accounts and is annually audited

as part of the Agencys overall activities. The reason to do this, rather than create a

separate legal entity to own and manage the fund was taken owing to its relatively

small size. Further, through not seeking private subscriptions or deposits to it and so

not requiring it to be regulated by the FSA, it is easier to manage and is much easier

for the running costs to be built into CCDAs main activities.

The most common reason for applications to be made to the loan fund, and

increasingly so in recent years, is in respect of incorporation fees. This may be for

several reasons CCDA always recommends that any group wishing to incorporate

with a co-operative governance structure do so using the legal services of Co-

operativesUK, the national federal body for the co-operative movement. This is due to

the support and specialist advice that can be accessed through it as well as other

benefits such as access to ongoing legal support, for a relatively small fee. However,

this fee is still higher than might otherwise be incurred if a group were to incorporate

using another route. Therefore, CCDA offers interest-free loans to groups in respect

of their incorporation fees and require that the sum be repaid as soon as the newly

formed enterprises is able to (usually within the first year of generating a financial

surplus).

Historically, many loans have made to provide working capital to strengthen the

cash flows during re-furbishments or initial investments in new machinery and

equipment which was yet to generate the anticipated increased revenues for CSEs.

However, as has already been noted, in recent years loans are being increasingly made

against incorporation costs. This is perhaps due to increased understanding on the part

10 Finance for Small Business in Deprived Communities, Bank of England, 2000 p711

Ibid p.25&29


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of mainstream banks when CSEs approach them seeking relatively small amounts of

capital12

; an increased willingness for individuals to put their own money in to a

new venture; a need for a quick decision which CCDA cannot always provide (as

loan applications can take up to 8-10 weeks to be appraised using the current peer

model); and finally, an increased awareness about the importance of legal structures

and the need to ensure that an enterprise is properly constituted from the outset and

so an increased need for specialist legal support which is often more costly than moretraditional methods of incorporating an enterprise.

12 this is based on anecdotal evidence gathered from social enterprises for whom a majority of their

income is derived from trading activities, during research conducted in 2003


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Research conducted in summer 2003 into local CSEs finance issues

In summer of 2003, and as part of project funding being received by EEDA at thattime (see later section), CCDA undertook to research financial issues affecting

CSEs in Cambridgeshire. As the Bank of England had recently published its paperand research on this issue from a national perspective, it was felt appropriate to usethe same framework and questions locally in order to provide a meaningful andcompartative benchmark for the findings.

This research found that were significant similarities between CSEs nationally andlocally around the issues of not seeking external finance (no identified need, riskaverse); the types of finance sought (bank overdraft and CDFI loans); the types offinance currently being used (bank overdraft and Hire Purchase - HP); the needsfor external finance; and the planned financing of future growth.

But perhaps more importantly, this research also shows some marked differences

between CSEs nationally and locally. These differences are concerend with theways in which they are seeking to develop their future trading activities and thebarriers they identify to realising that growth. Locally, CSEs are only consideringa narrow range of future financing options, whereas nationally, CSEs are open to amuch wider range of financing routes. Also, at a national level, CSEs see access tofinance in the broadest sense as the main barrier to their future growth, whereaslocally, CSEs see access to grants as the biggest problem.

Reasons given for not seeking external finance

0

10

20

30

4050

60

70

80

90

noneed

riskaverse

prefer

grants

legal

restrictions

other

All SME

National SE

Local SE

13

13SME = Small and Medium sized Enterprises; SE = Social Enterprises


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All types of finance sought

0

5

10

15

20

25

30

35

40

45

ove

rdraft

bank

loan

CDFIloan

share

issue

venturecapital

assetfin

ance

g

rants

mem

bers

mortgage

other

All SME

National SE

Local SE

Current external finance being used

0

5

10

1520

25

30

35

40

overdraft

HP

loan

credit

cards

mortgage

factoring

other

All SME

National SELocal SE


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Reasons given for current use of external finance

0

5

10

1520

25

30

35

building

costs

equipment

cash-flow

develop

trading

working

capital

refurbishment

other

All SME

National SE

Local SE

Level of change in use of external finance over

last 3 years

0

10

20

30

40

50

60

70

All SME National SE Local SE

increase

no change

decrease

Applications for finance rejected

0

10

20

30

4050

60

70

80

90

100

All SME National SE Local SE

yes

no


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Financing of future growth

0

10

20

30

40

50

60

grants

surplus

bank

loan

members

leasing

equity

other

All SME

National SE

Local SE

Barriers to developing trading

05

101520253035404550

accesstofinance

accesstogrants

lackofstaff

lackofpremises

lackofcash-flow

lackofdemand

themarket-place

All SME

National SE

Local SE

These findings raise some key issues about the CSE sector locally namely thatlike its counterpart nationally, it is more risk-averse than maintream business (but

beyond that, is broadly in-line in respect of most other financing issues); itidentifies similar needs against which to seek external finance; but crucially it stillsees that grants are the key to its continued growth whereas nationally there wouldseem to be an acceptance that CSEs must seek more maintream sources of financeto develop themselves.

This issue over access to grants is one that raises several key questions in light ofkey funding streams, including ESF, coming to an end within the next few yearsand at the same time, an increasing number of groups from the wider voluntary


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and community sectors making increasingly large demands on increasingly smallerfunds from other grant-making bodies. It also calls into question the long-termviability of local CSEs, perhaps signaling a need for a programme to both developtheir financial skills in order to begin to access non-grant sources of finance, andalso to develop their confidence to actively seek them and oversome their aversionto the risks associated with finance.


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Evaluation of CCDA loan fund against other CDFIs

CCDA is not exclusive in being recognised as a CDFI for social enterprise, although

it is unusual in that it operates in such a narrowly defined geographical area and is

exclusive to CSEs within that locality. Further, the total size of the fund (never more

than 20,000 in its life), also makes it unusual as one of the smallest CDFIs in the

country.

The history of the management of the fund has shown that there is always a great

reluctance to write off any bad debts; ways are always sought in which a struggling

enterprise can be better supported to avoid closure, either through direct intervention

by CCDA or by other means. This had led to a number of CSEs continuing to trade

beyond a stage where most mainstream financial institutions would have accepted

their closure and written off the debt this way, jobs have been better safeguarded

and enterprise activity sustained.It has also meant that CCDA has been much more supportive of the CSEs it has lent

money to than perhaps other mainstream providers would have been, thus increasing

the cost to itself in making and securing the repayment of the loan.

The appraisal process for a loan is relatively informal: application is made through the

submission of a business plan that is developed with support from CCDA workers,

and a subsequent meeting is held with a review panel. This meeting is largely

unstructured, beyond the need to make a decision as to whether to approve the loan or

not, and so allows opportunity for CSEs to share their experiences and skills with each

other currently, no formal consistent structure in terms of using standardised

questions, scoring, etc exists.This process means that each application is judged on own merits, this creates a

benefit in that it allows for the wide variety of diversity in CSEs to be recognised and

encouraged.

However, it also makes the process more time-consuming and less clear to applicants

about how to best present their application. This time factor can also act as a deterrent

to applications being made as it can take up to 8-10 weeks from an initial application

being formally submitted to a decision being taken and the funds being transferred

this is an extreme scenario, but highlights that owing to the diverse background of any

appraisal panel, it can often be difficult for it to agree a mutually convenient date to

meet.

In charging relatively low interest rates (5% per annum on the balance), CCDA is not

seeking to generate financial surplus on the loans it offers, rather to safeguard the total

fund for the benefit of future CSEs. This reluctance to charge a commercial or higher

than commercial rate owing to the relatively high administration and transaction costs

is determined by a number of factors:

The length of time it can take for an appraisal already acting as a deterrent,

and so CCDA seeking to actively remove other barriers


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CCDA not having a need to recoup administrative costs incurred in making

and reclaiming loan repayments as these are subsumed into the ongoing

operating costs of the Agency

Seeking to encourage CSEs to become more commercially viable and

business-orientated through supporting them to develop financial skills, by

CCDA workers supporting them to develop their application, which will

enable them to better present an application to mainstream providers in thefuture

Introducing the concept of loan finance at a relatively low cost to encourage

CSEs to begin to accept the benefits and costs of loan finance

Finally, successful applicants receive a higher level of ongoing support from CCDA

than CSEs who are not debtors to it in the same way. This is not a deliberate policy,

but an effect of the Agency wishing to safeguard its investment and protect the loans

it makes as best it can in order to support other CSEs in the future.

Interestingly, in recent research conducted amongst CSEs in the East of England14, the

positive and negative attitudes found towards mainstream banks can be seen to be

counterbalanced by CCDAs loan fund, although it also compares unfavourably

against some of the more positive features CSEs perceive of the banks:

14Lend me your fears: Lending, borrowing, saving and earning - Social Enterprise finance in the East

of England, The Guild, 2004; also note that the research used from this relates to perceptions of the

mainstream banks only


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Positive attitudes to banks CCDA Negative attitudes to banks

Brand strength. Seen as

financially stronger, more robust

and trustworthy

Not seen to have great financial

security

Requirement for matched funding

Complex transactions managed

with ease

Can be lengthy process to secure

loan

High deposits sought. N

Local presence No physical presence like the

banks

Not designed for needs of

charities

D

o

a

se

Confidence of local authorities,

trustees

Low awareness of loan service

amongst local authorities

Fair weather friends O

International/export experience Local experience only Profit making motive

incompatible with socialeconomy.

N

rafu

Seen as cheaper than social

economy specialists

Seen as more expensive owing to

relatively small size of loans

available and time needed to

arrange them

Not geared up to deal with

alternative legal structures i.e. co-

operatives

S

a

Good personal relationships Good relationships with CSEs

taking on loans

Out of touch with sector needs S

se

Preferential rates/low charges Low charges on loan, no charges

for appraisal or set-up

High charges L

fo

SE attitudes to mainstream banks, as shown in Lend me your fears, The Guild, 2004


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EEDA support/recent project activity

During 2003-4, CCDA successfully applied to EEDA to secure funds to further

strengthen its loan fund, to undertake a planned publicity campaign for it and to

formally evaluate it.

The success of this application was based largely the fund being clearly seen to be

contributing significantly to EEDAs strategy for the region which seeks to:

"find new sources of finance for business growth15

"invest in success"

16

"deal with financial exclusion"17

Further, EEDA's corporate plan, activity 5 (section 4), further states that support is to

be given to SME businesses in accessing finance and recognises that currently one

group of SMEs that struggle to gain access to finance are social enterprises.

Despite a significant level of acivity to attract loan applications that was able to be

undertaken with this support; including press releases for coverage in local media,

presentations to start-up groups and referall partners, specific publicity materials

being generated and widely distributed over a 15 month period; CCDA has noted a

marked reduction in the number of applications it received in this period against those

in preceeding years.

This reduction in applications to the loan fund may be for one, or more, of severalreasons:

CSEs are now becoming better understood by mainstream financial providers

and so are transacting all their financial business with them

CSEs require much quicker decisions to be made against a submitted loan

appraisal than CCDA is currently able to offer them

CSEs are starting to be able to finance growth through trading surpluses and

becoming more aware and better able to apply for grants

CSEs may be seeking to maintain all their financial products with one

provider in order to secure improved terms

15 EEDA Corporate Plan 2002-4, p.416 Ibid, p617

Ibid p14


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LESSONS FOR OTHER CDFIs

It is always important for any agency seeking to support CSEs that they learn from the

practice and example of others in the field this can reduce the time needed todevelop new support systems, and identify and avoid common mistakes which

minimise wasted efforts and loss of value.

From the perspective and experience of CCDA, in its capacity as a local exclusive

CDFI, there are therefore a number of issues that have been identified that should be

noted by other Agencies seeking to develop similar exclusive CDFIs for CSEs

BENEFITS OF CCDA LOAN FUND:

Low interest rate

Peer appraisal

Ongoing support to applicant

Part of a wider integrated package of specialist support

Enables incorporation using specialist agents

BARRIERS FACING CCDA LOAN FUND:

Time needed and taken for appraisal

Administrative and transaction costs subsumed into operating costs so a needto ensure sufficient surplus/income being generated by CCDA to recover them

Loan could be perceived as another financial arrangement for applicants who

may prefer to keep all costs and liabilities with single finance provider for ease

A 15-month campaign of targeted mailings, profiling in local media and

promotion through networking meetings and referral groups and partners was

seen to be ineffective in encouraging an increased level of applications.

Therefore a more widespread awareness-raising campaign is needed such a

campaign would be costly without dedicated resources which CCDA cannot

easily secure


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Bibliography

Setting up a local social investment fund, icof, 1999

No Limits conference report exploring barriers and solutions to financial and

social exclusion in the east of England, ERCC/EEDA, 2001

Finance for small business in deprived communities, Bank of England, 2000

A guide to loans for social enterprise, Bristol Area Community enterprise

Network, 2001

Financial engineering, Gabrielczyk, 1986

Lend me your fears: Lending, borrowing, saving and earning - Social

Enterprise finance in the East of England, The Guild, 2004


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APPENDIX research into SE financial issues

QUESTIONNIARE:

FINANCING CO-OPERATIVE AND SOCIAL ENTERPRISES

QUESTIONNAIRE

Name of Business

Size (no of employees)

Annual turnover

Date established/number of years trading

If you have never sought external finance (loans, overdrafts, etc), is it because: No need

Prefer grants

Dont like the risk

Not enough income

Not enough assets to secure the loans against

Banks dont understand your organisation

Legal restrictions to prevent borrowing

Other:

If you have applied for external finance applied for in the past, what types were

they?: Overdraft

Bank loan

Loan from CDFI (i.e. ICOF, CCDA development loan)

Share issue

Venture capital

Asset finance

Grants

Mortgage

Other

Types of external finance currently being used: Overdraft

Leasing or Hire Purchase

Secured Loan

Credit cards

Unsecured loan

Commercial mortgage

Factoring

Other loan

Other:


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Why do you/would you seek external finance?: Buy a building

Buy equipment

Cover cash-flow difficulties

Develop trading activity

Working capital Refurbishment

Other:

Over the last 3 years, would you say that your use of external finance has:

Increased/decreased/remained the same/dont know

Have you ever been rejected in an application for external finance?

If so, why?: No collateral

Bank too cautious

Bank wouldnt lend to social enterprise/non-profit making enterprise

No track record

Problems with business plan

How much does your current external finance cost?

i.e. what % charge do you pay on your loan/overdraft

How do you plan to finance future expansion in your trading activity?: Grants

Profits/surplus

Bank loan

Cash from members Leasing

Other:

Do you currently have any problems in expanding your trading activity?:

If so, is it because: Cant obtain external finance

Problems in accessing grants

Lack of qualified staff

Lack of appropriate premises

Lack of cash

Lack of demand No demand from local market for goods/services

Would you be happy for us to contact you to discuss this

research in greater depth at a future date?

Please return this completed form in the pre-paid envelope to Cambridge CDA by July 7th


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QUESTIONNIARE RESULTS

NB all figures given as percentages (response rate was 36% of 25 targetted CSEs inCambridgeshire)

Reasons for not seeking external finance

All SMENationalSE

regionalSE Local SE

no need 82 26 60

risk averse 7 21 20

prefer grants 0 16 0

legal restrictions 0 4 20

other 11 33 0

All type of finance sought over life of enterprise (if any)

All SMENationalSE

regionalSE Local SE

overdraft 39 29 25

bank loan 32 29 0

CDFI loan 5 17 25

share issue 2 2 0

venture capital 3 2 8

asset finance 11 13 8

grants 1 2 17

members 0 3 0

mortgage 2 0 17

other 4 3 0

Current external finance used

All SMENationalSE

regionalSE Local SE

overdraft 34 26 33HP 15 21 25

loan 26 27 8

credit cards 16 15 18

mortgage 7 8 8

factoring 2 1 0

other 0 1 8

Reasons given for need for finance (if any)All SME National SE Local SE

building costs 7 32 21

equipment 27 15 21

cash-flow 15 23 11

develop trading 17 9 21working capital 15 4 0

refurbishment 5 6 21

other 14 12 5

Level of change in use of external finance over last 5 yearsAll SME National SE Local SE

increase 20 52 13

no change 46 29 62


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25

decrease 34 18 25

Have an enterprises application for finance ever been rejected?

All SMENationalSE

regionalSE Local SE

yes 10 28 2 20

no 90 72 98 80

Planned financing of future growthAll SME National SE Local SE

grants 16 39 38

surplus 49 29 31

bank loan 24 17 13

members 0 6 6

leasing 5 5 0

equity 7 4 0

other 0 0 12

Barriers to developing trading

All SME National SE Local SEaccess to finance 14 30 0

access to grants 2 25 44

lack of staff 20 13 14

lack of premises 4 15 14

lack of cash-flow 16 9 14

lack of demand 32 4 14

the market-place 12 4 0


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27


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28


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29


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30

Publicity generated in social enterprise-specialist press


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Cambridge CDA LtdAlex Wood Hall, Norfolk Street, Cambridge CB1 2LD

T: 01223 360977 F: 01223 509040

E: [email protected] W: www.colc.co.uk/cambridge/ccda

Documents

Lending to Co-Operatives and Social Enterprises