Financing community food: Securing money to help community food enterprises to grow

This report examines the funding needs of community food enterprises and how they can continue to use food to achieve a wide variety of important social and environmental benefits.

The report was written following a series of community food finance meetings, bringing together organisations that assist community food enterprises, with progressive funders. This process was undertaken as part of the five-year Big Lottery funded Making Local Food Work programme that has – since 2007 – supported a wide range of community-run food enterprises to help communities take control of their food and where it comes from. The community food finance meetings discussed how best to secure funds for community food enterprises in the future, to help them through the all-important start-up phase, and to obtain funds to grow and, thereby, continue work that has more charitable than commercial aims.

We hope to see the community food movement grow and thrive, hence the enterprises need improved prospects for securing the finance they need to succeed. With this report, and work evolving from it, we wish to encourage conversations between enterprises and their communities, the sector organisations that support them, the individuals and organisations that provide funds, and with government, whose policies provides the framework in which we operate.

As with all enterprises and organisations, the need for external funding is ever-present. This might be for start-up finance for a trading enterprise, an investment in equipment, vehicles or enterprise development, or to subsidise the more socially or environmentally focused work that may never be fully financially viable. Most of the community food enterprises we have worked with are structured as co-operatives or community interest companies, or charities structured as companies limited by guarantee. None pay dividends to shareholders, although some may issue shares or loan stock. Very few own assets such as land or buildings against which loans can be secured. Even where income-generating potential is good, income can fluctuate – varying due to, for example, the school calendar and variable local food availability through the seasons.

We therefore set out to ask questions such as where should community food enterprises now go to get the sympathetic and socially-motivated investment they need and deserve? What types of funding are most suited to community food enterprise, such as grants, loans and community finance, and what are the strengths and drawbacks of each? What would it take for sympathetic funds to be made readily available? How much is needed? How should funders present those opportunities? And how should the community food enterprises, in turn, develop and present themselves to make a convincing case for that investment?

A sister report, entitled "Food & Finance: How small-scale food enterprises raise the money to grow" presents research into how small-scale food businesses and community food enterprises have secured funding to support their work. It also contains a summary of interviews with representatives from a range of lenders and funding organisations, and their views on challenges particular to the small-scale food sector.

Contents

Summary

1. Introduction

2. The enterprise funding landscape

• How much money is needed by the community food sector?
• Limited options, little innovation
• Recognising diversity: different needs and funding solutions
• Risk aversion dominates funding decisions
• People, people, people!

3. Opportunities for change

a) Helping enterprises become “investment ready”

• What do we mean by ‘investment ready’?
• Making the right choice

b) Increasing the availability of finance

• Raising the profile of the community food sector
• Gaining community investment
• Expanding share equity
• Tax incentives
• Building links with the ‘Slow Money’ movement

c) Improving connections between enterprises and funders

• Plain English, please!
• Better understanding of funders’ needs
• Bringing enterprises and funders together
• Promoting finance partnerships
• Sharing risks and loans
• Loan guarantees

4. Making change happen: what next?

5. Sources of useful information

Appendix 1: The Breedon Report

Appendix 2: The Village Core programme