FAQ (Frequently Asked Questions)

• Enterprise Orientation - they are directly involved in producing goods or providing services to a market.
• Social Aims - they have explicit social aims such as job creation, training or the provision of local services. They have ethical values including a commitment to local capacity building. They are accountable to their members/stakeholders and the wider community for their social, environmental and economic impact.
• Many social enterprises are also characterised by their social ownership. They are autonomous organisations whose governance and ownership structures are normally based on participation by stakeholder groups (e.g. employees, users, clients, local community groups and social investors) or by trustees or directors who control the enterprise on behalf of a wider group of stakeholders. They are accountable to their stakeholders and the wider community for their social, environmental and economic impact. Profits can be distributed as profit sharing to stakeholders or used for the benefit of the community.

Yes, they are enterprises directly involved in the production of goods and the provisions of services to a market.

They seek to be viable trading concerns, making a surplus from trading. While they have explicit social aims such as job creation, training and provision of local services, they aim to be self-sufficient and not to depend on grant funding.

Some, particularly those addressing social exclusion, receive start-up and capital grants. In disadvantaged communities these substitute for equity investment by financing capital purchases and start-up costs. Revenue grants are usually linked to training programmes or the delivery of other social benefits

In addition to equity contributed by the community, Social Enterprises raise their capital from a mixture of sources.

Banks will provide loan funds to Social Enterprises on the same basis as they lend to the private sector. Some banks also have special programmes and products to support Social Enterprise. Several banks provide special packages to Credit Unions, while others offer special products for employee-owned businesses, particularly ESOPs. Some banks also have staff that specialise in supporting community enterprises and/or co-operatives.

A number of specialist social investment funds also target Social Enterprises. Community Development Finance Initiatives, such as Triodos Bank and the make loans to developing social enterprises to aid start-ups or to bridge gaps in grant funding.

To find out more about CDFIs you can contact the Community Development Finance Association on 020 7430 0222 or email

Within Social Enterprises, leaders at both board and management levels manage decision-making.

Their role is to make things work and work well. They ensure that proper and effective decision-making processes are designed, understood and followed. They keep the organisation focused on its common purpose. Leadership in Social Enterprises requires both good political managers, providing community leadership, and good task leadership focused on implementation and execution.

Social Enterprises operate within a variety of legal and organisational structures.

In establishing new Social Enterprises, the principal of 'structure follows strategy' is important. These enterprises bring together communities around a common purpose, often in demanding circumstances. Successful Social Enterprises tend to have a strong underlying sense of common purpose, and are mission driven, often in reaction to social and economic problems. These could be the closure of a factory, social exclusion, the decline or absence of an important service or a lack of employment opportunities

Social Enterprises tend to be found in clusters, where a local support infrastructure and network exists.

Success is often underpinned by being able to learn from each other and to access specialist expertise and support in their locality. Business networks and clusters are the focus of much economic development thinking. The success of mainstream clusters is explained by the informal forms of co-operation found at the heart of such networks. Due to their nature as social organisations, there is a natural fit between Social Enterprise and the approach to business clusters more generally.

In the 1980s, some community businesses were closely linked to local government initiatives and training programmes. They required ongoing subsidies to operate.

Now communities recognise the need to build sustainable businesses that outlive the Single Regeneration Budget or other grant programmes that financed their start-up. While some successful community businesses deliver local services, (community-owned retailing or Credit Unions for example) most now seek wider market opportunities. As with other businesses, finding a viable market is the key to sustainable community businesses.

The strongest Social Enterprises have:

• A strong internal understanding and consensus about the business's mission and strategy - thus keeping the business externally focused.
• Robust staff development and training programmes.
• Continuous improvement in the quality of community participation.
• A strong enterprise orientation involving good marketing and business skills.

Source: Social Enterprise London 2003