non-profit making business?

[emonkey]

We are about to try to obtain a significant grant for devolopent of our business and to pay wages associated with it. However the grant only applies to non-profit making organisations and charities.

We are a partnership (LLP) and so far (18 months) we have not made a profit, instead we have put all earnings back into the running and devolopment of the company. Does this make us officially non-profit making and elibible for this grant or does 'non-profit making' mean something else in terms of registered as such?

Initially we believed we would make a small profit and intended to do so but the type of company we are (running a community subscription based website) really we are probably better off becoming a non profit making company if our wages are covered through grants/external funding. Is there a way to declare this or would we be better off running as an official charity?

 

[profitxchange]

No it does not classify you as a non-profit making organisation. You seem to be a business that has every intention of making a profit at some time. The not profit grants are for community support type organisations.

Why not call them and double check?

 

[Faith28]

Non-profit making businesses are social enterprises that help communities and have social objectives.

You are not that.

 

[jennyjenny]

You would need to set up as a charity, voluntary organisation or Community Interest Company. See the Charitiy Commission's website for details.
Jenny

 

[KidsBeeHappy]

Generally grants are not available for working capital.

 

[emonkey]

Generally grants are not available for working capital.

These are for wages and running costs only, not asset purchases.

The thing is we have never taken a wage from our company nor have we made profit and if we could get a grant to pay our wages for three years in this way then we would declare the business a voluntary organisation.

 

[KidsBeeHappy]

These are for wages and running costs only, not asset purchases.

The thing is we have never taken a wage from our company nor have we made profit and if we could get a grant to pay our wages for three years in this way then we would declare the business a voluntary organisation.

I understand where you are coming from, but a grant to non-profit making organisation is about aiding society, not about paying your wages and running costs for three years when you may make the business a voluntary organisation.

How many businesses here do you think would like a grant for three years to pay their wages & running costs - don't think many would turn it down :|

 

[emonkey]

I understand where you are coming from, but a grant to non-profit making organisation is about aiding society, not about paying your wages and running costs for three years when you may make the business a voluntary organisation.

How many businesses here do you think would like a grant for three years to pay their wages & running costs - don't think many would turn it down :|

Yes, obviously I see you point!
But we are a community website offering support and resources (unique content, forums, databases, advice etc) for schools, the idea is to make the site free for all schools as part of the funding. We could well have started up as a non-profit making charitable organisation initially (which with hindsight may have been a good idea) rather than going down the partnership route.

 

[KidsBeeHappy]

I think you would need to sort the structure before the grant application. At the moment there is the possibility of everything being misinterpreted. The organisations making these types of grants have very strict guidelines, and must conform to them. The Highland & Island enterprise agency is being asked to pay back grants to the EC because it's failed to follow procedure 100% Some of the grants are for less than £300 (an you know that its costing the EC more to enforce this)

You need to sort these before making your applicaiton otherwise you run the risk that the very very probable rejection will just prevent you from reapplying after you've sorted it out.

 

[Esk247]

your profit making...they won't pay your wages anyway! grants are for development of social enterprises in the community e.g. they will pay for materials and possible computers but they will never ever ever pay wages! if they are offering you this then they must be taking the wee surely...because then you can say I demand £50,000 a year to make cups of tea.

the grants i've been involved with require you to go through the proper routes, you have already set the business up yes? so therefore you've missed out on start-up grants as you are already trading....get on to Business Link or one of your local Agencies and get some advice on converting your company to a non profit making social enterprise..this MUST have lots of community aims and goals and it is not a blank cheque from the grants people..they'll want pages and pages of cashflow forecasts, detailed information on why they should give you this money..and they won't give you anything at all either, you have to invoice them usually e.g. YOU buy the computer on day one and on day two YOU send off an invoice to the people supplying the grant with a copy of the receipt to prove you're not taking more money than you should.

 

[emonkey]

I think you would need to sort the structure before the grant application. At the moment there is the possibility of everything being misinterpreted. The organisations making these types of grants have very strict guidelines, and must conform to them. The Highland & Island enterprise agency is being asked to pay back grants to the EC because it's failed to follow procedure 100% Some of the grants are for less than £300 (an you know that its costing the EC more to enforce this)

You need to sort these before making your applicaiton otherwise you run the risk that the very very probable rejection will just prevent you from reapplying after you've sorted it out.

I know we could be misinterpreted and I may contact them before we do anything else just to see what they advise. I wouldn't want to change the structure of the business and still get rejected but I agree we would probably be rejected if we remain as we are.

 

[emonkey]

your profit making...they won't pay your wages anyway! grants are for development of social enterprises in the community e.g. they will pay for materials and possible computers but they will never ever ever pay wages! if they are offering you this then they must be taking the wee surely...because then you can say I demand £50,000 a year to make cups of tea.

the grants i've been involved with require you to go through the proper routes, you have already set the business up yes? so therefore you've missed out on start-up grants as you are already trading....get on to Business Link or one of your local Agencies and get some advice on converting your company to a non profit making social enterprise..this MUST have lots of community aims and goals and it is not a blank cheque from the grants people..they'll want pages and pages of cashflow forecasts, detailed information on why they should give you this money..and they won't give you anything at all either, you have to invoice them usually e.g. YOU buy the computer on day one and on day two YOU send off an invoice to the people supplying the grant with a copy of the receipt to prove you're not taking more money than you should.

I know this. I have been through all the business link grants since before we started and there are none which apply to us. We are now looking at specific trusts that deal with our market such as the Gatsby Trust and http://www.esmeefairbairn.org.uk/grants2008/main.html. The latter do fund salaries (see the listed previous grants) but do not offer funding for capital purchases (assets or buildings etc)

I am aware of all the hoops a company must go through when a grant is issued and that the grant is for a specific purpose and recorded in detail as such.

 

[Esk247]

then i stand corrected but in my area we cannot get grant funding for salaries..unless it's to support university leavers or those wanting to get back in to work.

 

[Officebird]

I won't bang on about you not being a social enterprise as you know this already. If you truly believe that your business benefits the community and has strong social aims then converting to a social enterprise would be a good move. The Social Enterprises will not make enough of an impact on the way business is run in the long term unless more people set up as an SE.

The term non profit or not for profit is one I really don't like as all businesses, even local bingo groups, are for profit. Even if they aren't currently making any. Its what the business does with this profit that defines it as an SE or not. A SE will reinvest all profit back into the development of the business to increase sustainability and donate profit back into the community it was set up to serve in the first place. I think the term more than profit is much more appropriate

As far as the grant goes I don't think you should convert your company to an SE just to get the grant. You need to look at what you wish your business to achieve, why you started it in the first place and its future stability. To convert purley for the chance of a grant is a little underhand in my book. If, however, this has been something you have been thinking about for a while then there's no need for you to put the decision off waiting for confirmation from the grant making body you are looking at. You have said:

I wouldn't want to change the structure of the business and still get rejected but I agree we would probably be rejected if we remain as we are.

This tells me that you aren't really interested in being a SE and rather just after the grant money.

Another thing to think about is if you did convert to a CIC or something and you did get the grant funding for 3 years..... what other income generation activities would you carry out in those three years to ensure self sufficiency when the grant comes to an end? The problem with a lot of grant funding is that when the grant comes to an end so does the project.

If you have income generation ideas that will sustain you after the grant has ended then why are you not doing them now so that you can see your project through without the need of a grant?

I have worked in the Third Sector and currently run a CIC. My company has not applied for grants but I administered them where I used to work. Generally you with submit Quarterly monitoring returns and once this has been checked they will give you the money for the previous quarter. So you would indeed have to pay out first, and then have it refunded. The grant making body will also impose targets that you will have to meet and these may not necessarily fit in with your current business model. Many people make the mistake of looking what grants are around and then adapting a project to fit it. This make targets harder to reach.

An example of a bizarre target is a community transport scheme being ofered funding and one target being the reduction in crime or the area by 10% Now thats really hard to prove, even if it does happen as a side effect.

Good luck with your decision and sorry for the huge post! You could always try asking this question over on www.thirdsectorforums.co.uk to see what SE and charities over there suggest.

 

[emonkey]

I appreciate that officebird. Sorry if I sounded flippant by making it sound like we are just interested in the grant money, we aren't. We have thought hard about this and we think the SE approach as you mention may be an option for us. As we are we work part time and voluntarily on our site. If we were to go down that route it may give us the opportunity to put more work in, devolop what we do further and also give the whole community we aim at access to it (rather than the limited amount of subscribed members who currently benefit)

As for sustaining the website after a funding period, we would anticipate that the increase in traffic (when made free for all) could result in further advertising opportunities which currently is not possible with a limited subscriber's area. Not just ads but sponsored features. We have look at the possibility of this and feedback has been favourable.

I will look at that link. Thanks/.

 

[Officebird]

There are 1500 SE's in the North East, which isn't a lot. A lot of SE's would like to see social companies being the default supplier of public services because of the added value they can bring to the table, and because services would then be run by companies who have a vested interest in the way they are run and the way they effect the community. Rather than being run by companies that have shareholders and investers to please, often at the expense of the service being provided. This will never be the case until more SE's are formed and the movement is much larger, because at the moment SE's are still largly thought of as charities and voluntary organisations rather than viable businesses.

We are a CIC but that may not suit you. You can find more info about CIC's at http://www.cicregulator.gov.uk/.

I hope that you can untangle things and indeed make a nice living for yourselves whilst benefitting others.

 

[jennyjenny]

Hello OfficeBird,
You really know your stuff! I am in the process of setting up a CIC. What does yours do?
Jenny