TSRC Working Paper 124

byFergus Lyon and Rob Baldock


There is a growing interest in social investment and the provision of loan finance to social enterprises. While there has been much discussion on the supply of finance, research on the demand has been lacking.

This paper shows that 15 percent of social enterprises are seeking loan finance, with most of these borrowing from high street banks. Only one in five borrowers or 3.6 percent of all social enterprises are approaching social investors (those lenders that have a social mission), Social enterprises without assets that they can use as collateral are shown to be able to seek finance.

Just under 60 percent of borrowers have unsecured finance with commercial banks providing unsecured lending to just under half of their customers. Social enterprises appear to be more successful than other types of small business in getting finance, and those more reliant on grants are more likely to succeed in getting finance, as are those with the public sector contracts as their main source of income.

This research allows a clear distinction to be made between social enterprises that are not interested in loan finance, those already receiving, and those that are interested but not able to source loans, or are discouraged. Conclusions are drawn for how best to support these gaps in provision without displacing existing finance.