Social Enterprises - Dissertation Example

Social enterprises are different from other enterprises mainly in their goals and the type of finances they use for meeting their objectives (Bank of England, 2003a). As far as the financing of social enterprises is concerned, they are two sources of finances- grants and non-grants. It is, however, interesting to note that majority of social enterprises do finance their social activities through grants provided by various government or non-government institutions. The share of the grants provided by public agencies is much higher. In other words, social enterprises do mainly resort to government grant funding for fulfilling their social objectivities. (Anderson, Dees and Emerson, 2002; Guclu, Dees, and Anderson, 2002.

Social enterprises have to depend on external sources of finance for fulfilling their social objectives as most of the time they are incapable of generating enough revenues from their business activities to finance their social activities (Dees, 1994). The more interesting thing to note that is they do not rely much on non-grant finance as an external source of their finance. Grant-dependency among social enterprises is quite prevalent even if grants impose certain kinds of restrictions on their activities (Anderson, Dees, and Emerson, 2002; Alter, 2006). The grant providers may impose some conditions at the time extending funds to social enterprises (Blau, 2005). In these cases, social enterprises have to use those grants in such a way that these conditions are met even if these conditions do not match adequately to their social objective. Despite this, the majority of social enterprises use grants at the time of their initiations as well as at the time of expanding their trading activities. (Dees, 1994; Blau, 2005).

• Problem statement

Of course, se, the popularity of non-grant finances like debt finance, equity finance, etc. have increased over time among social enterprises. Many experienced social enterprises are now using a mixed approach of financing whether their combining grant and non-grant finances to finance their social activities. However, on average, non-grant finances are still less popular in comparison with grant finances and hence, the problems that social enterprise face while using grants persists and work as obstacles in the path of realization of their goals. (Wei-Skillern, Leonard, and Stevenson, 2007; Dees, 1994)

There are certain reasons behind less dependency on non-grant finance, particularly lending which is considered to be one of the most common sources of finance for any business enterprise. The managers and founders of social enterprises generally claim that traditional lenders like banks do not aware of their special needs and have a negative attitude relating to the issue of extending loans to them.