Funding and financing
The most obvious source of finance is an organisation generating its own surpluses to reinvest. But there are a range of further sources of finance available to charities, co-operatives and social enterprises. Although some types of funding can be obtained by any legal form, other types are only available to certain legal forms.
Charities, social enterprises and co-operatives often receive part of their funding through grants from charitable foundations, government or European funds. Any legal form is able to accept a grant although charities tend to find funders more receptive.
Debt finance, usually in the form of loans, may be obtained from banks, specialist social finance providers (such as community development finance institutions, or co-operative lenders) or from supporters. Again, this source of finance is available to any legal form although an incorporated form is preferable as the obligation to repay the loan may be a substantial liability.
Equity finance means a company ceding part-ownership and selling shares in it to a third party in exchange for funding. Not all legal forms will allow a company to receive equity investment.
The Financial Services and Markets Act 2000 (FSMA 2000) regulates the activities of businesses seeking to attract investors, in order to protect individuals without expert financial knowledge. Registered societies benefit from a number of exemptions in terms of prospects and financial promotions rules which can be useful if you wish to raise funds from community share offers. It is always worth seeking expert legal advice before you think about undertaking any activity of this kind.