Securing funding from trusts and foundations as a CIC or trading organisation - what are our chances?

Mike Zywina, Director at Lime Green, explores what the current funding landscape looks like for different types of organisation, and what you need to know if you're planning to focus more on trusts fundraising.

​Trusts and foundations fundraising is really difficult right now.

We’ve said it, Alex Evans has said it, people like Jo Jeffery and Caroline Danks have done incredible work to track it.
 
While it's hard to secure funding as a registered charity, it's even harder as a community interest company (CIC). And generally more difficult still if you’re neither of these things.
 
Yet more and more non-charities are looking for a slice of that tasty but oh-so-elusive funding pie. In my experience, there are a couple of common reasons why.
 
Firstly, lots of people have set up CICs in recent years in search of a lighter governance burden, a quicker and easier registration process, and more freedom to do activities such as campaigning. In different circumstances, they’d probably like to be a charity – but this feels daunting and restrictive, especially at a time when the Charity Commission is increasingly suffocating the sector in red tape.
 
Secondly, there are lots of organisations that have traditionally been sustained by trading, and probably hoped to never need grant funding. However, their trading income is shrinking in the current economic landscape – so, perfectly understandably, they cast their eyes towards trusts and foundations instead, hoping that grants will enable them to subsidise the cost of what they charge people for activities or services.
 
All sounds great in principle – but there are a few problems.
 
This blog explores the funding challenges for different types of organisation that aren't registered charities. It's informed by the funder prospect research we've previously done for a range of CICs and other non-charities, to support their decision-making about long-term legal structure. However, I want to emphasise that this explores things purely from a grant funding perspective – I know there are myriad other factors that affect this decision, and I’d never advocate for picking your legal structure purely based on funding availability.

More and more organisations are searching for a slice of the funding pie - but getting it isn't easy

"We're a CIC - generally speaking, how willing are trusts and foundations to fund us?"

(TL;DR: somewhat, but not hugely)
 
Over the years, more funders have gradually opened up their eligibility criteria. A decent number funders – particularly larger, more strategic and more relational ones – will fund CICs. Others that traditionally haven’t funded CICs, like Lloyds Bank Foundation, have recently started including CICs for specific funding programmes. More progressive funders often recognise that, for organisations focused on long-term systems change and campaigning, being a registered charity can be too restrictive.
 
But this shift has always been very slow. As a whole, the funding world moves at a glacial pace. A significant proportion of funders, particularly the shy types that don’t have grantgiving staff and shelter behind a law firm or solicitor – including many sizeable family foundations – still have a blanket "charities only" policy. Jem Stein’s excellent LinkedIn post – and the discussion it prompted – covers some of the funding challenges for CICs.

My gut feeling is that many funders simply haven’t got their head around what a CIC is – to them, “charity” is shorthand for “vaguely trustworthy” and anything else simply isn’t. And in the current climate, with funders overstretched by huge demand, there's not much incentive to open up eligibility. Restricting applications to charities is one quick way to reduce the number they receive. I worry that even funders that officially fund CICs will be thinking along these lines too.
 
Just to complicate things further, there are funders in the opposite camp – they don't openly say they fund CICs, but will consider it if they know and like your work. This is where a relationship-driven approach or initial phone call can really help.
 
In my experience, you’re more likely to persuade a funder to fund your CIC if you can give a good strategic reason for your choice. For example, if you have a clear, credible vision (even if long-term) to generate a significant portion of your income from trading, or you want to undertake activities that are problematic for a charity. If you’re a CIC simply because it enabled you to register more quickly and keep your governance simpler, then – rightly or wrongly – that’s less likely to wash with funders.

When applying to trusts and foundations as a CIC, you'll encounter a lot of locked doors

"We've historically been sustained through trading income, but want to pivot to grants - how will we get on?"

​Regardless of legal structure, this can be problematic.
 
Firstly, seeking grants primarily to subsidise the cost of your activities is rarely a compelling proposition for funders. I’ve seen organisations outline this very literally in applications, for example: “A grant of £10,000 will pay for X students to enrol in our course at half the personal cost.”
 
I understand why organisations start off thinking along these lines, but funders want to enable social impact, not subsidise the cost of activities. They care about the Why, not the What. To get their attention, you’ll need to completely reframe your proposition.
 
Secondly, if you’ve historically focused on trading, you may not be set up to measure and demonstrate your impact – because you haven't needed to. Even if you create a robust way of doing this from now, you may not have an existing track record of impact data, and you'll be competing against others that do.
 
Finally, you’ll need to consider your wider communications materials beyond your application. Funders will search for these, whether you provide them or not. Even if you write a brilliant funding application outlining your future plans, if your website is geared around selling things to customers, and you don’t have things like an impact report, this might put off funders in an ultra-competitive landscape.

Organisations that have historically generated most of their income from trading face challenges when pivoting to trusts and foundations funding

"What does this mean for us? Will Lime Green work with us if we’re not a registered charity?"

​I really don't want to discourage and demotivate people – it’s hard enough right now as it is. But, even more so, I don’t want to encourage organisations to spend time and money on things that are unlikely to yield a return.
 
You might think that the hardest part of being a fundraising consultancy right now is securing funding, or finding clients. But it’s actually having difficult conversations with people who need funding and want our help, but where we feel we're unlikely to achieve success together.
 
If you’re a CIC, or organisation pivoting away from trading income, it’s worth thinking about the challenges above and how well-equipped you are to work through them. Putting in place the foundations for trusts fundraising takes time, and funders currently have little appetite for taking risks on unproven grantees. Now is a tough time to start securing grants. Don't get me wrong, some will succeed. But plenty more will not.
 
We’re absolutely open to working with CICs and other forms of not-for-profit via our strategic support and training.
 
And we’ll still explore providing trusts fundraising support too – but we’ll need to ask you plenty of questions.

Because, when deciding whether we can help you, we'll always focus less on “How much do you need funding?”, and more on “Do we think you can achieve a positive return on investing in our support?”