Growing social enterprises across the UK
Nick Boyle believed that older and disabled people should receive high quality care services in their own homes. So in 1994 he set up Highland Home Carers to deliver that vision in the Scottish Highlands. Ten years later the business was flourishing but Nick was looking to retire. He felt that the best option for staff and service-users would be to set up an employee-owned company, enabling the workforce to share in the profits and have a say in its future direction.
HHC went from strength to strength, employee retention rates amongst its 240 staff and quality of care scores were higher than its private sector competitors.
Investment deal
But the investment deal that enabled employees to buy the business was structured in such a way that limited future growth, making it difficult for HHC to take on higher volume, lower margin work, services that were in keeping with the company’s social ethos.
So CEO Stephen Pennington went in search of a new finance deal. Without any assets they weren’t eligible for bank finance, but they found exactly what they needed from Big Issue Invest (BII), a CDFI that specialises in financing social enterprises.
Big Issue Invest partnered with fellow CDFI Co-operative and Community Finance to lend £300,000 to HHC to buy out their previous investor. The lower interest rate and better terms have enabled the company to expand, take on new contracts and move forward.
Stephen says, “The new deal means there will be more profit and therefore more money to invest in our staff. These people are our asset and in investing in your people you improve the quality of your service – which is at the very heart of caring.”
Tackling poverty and inequality
As the social investment arm of the Big Issue, BII seeks to finance social enterprises that are helping to tackle poverty and inequality. Sarah Forster, Deputy CEO at BII, explains,
“We look to invest in social enterprises that embody the ethos of Big Issue – a hand up not a hand out. We liked the business model of HHC, the passion of staff and their commitment to delivering really good quality care. They are able to help people in very remote areas and so people are receiving home caring where no one else is willing to provide it.”
Sarah adds, “The rewards for us come through the enterprises we back. Organisations like HHC are on the frontline doing amazing things, making a real difference.
Seeking social and financial returns
HCC was supported through BII’s social enterprise investment fund (SEIF), a £10m fund which provides growth capital for social enterprises. It was established after a major fundraising effort which resulted in 22 investors – including corporates, foundations and individuals – providing funding. The investors are seeking both a financial and social return over ten years.
One of those investors was Esmée Fairbairn Foundation (EFF), an independent funder that has supported the CDFI sector for a number of years.
Danyal Sattar, Social Investment Manager at EFF, comments,
“We recognised the access to finance problem BII put to us. In the past, we supported the CDFI sector in its early growth phase. Our focus is now on investing in initiatives that are taking new approaches to the market and the BII SEIF fund resonated with that.”
“We were told social enterprises need patient capital to grow, scale up and replicate. We felt investing in an intermediary would give us a specialist team of people who could support enterprises better than we could. It could also attract other funding spreading the risk with a group of investors. That led us to invest £750,000 in Big Issue Invest.”
BII put their success in raising private investment down to their lending track record, brand and the reputation of staff. Sarah adds, “We know our market well and as a social enterprise ourselves we know what it takes to succeed.”