Read or download our guides for step-by-step instructions on running a successful community energy project
You've got a project with potential, but how do you raise money for it?
Whether you're looking to start a new project or develop an existing one, you'll almost certainly need money to make it happen. You don't have to rely solely on fundraising events and appeals to individuals and businesses.
There are thousands of funders, large and small, looking for worthwhile initiatives to support. But the competition is strong, with countless good causes chasing a finite pot of money. To be successful you have to find out what's out there, make your case, and stand out from the crowd.
Grants are the most common source of charitable funding. They do not need to be paid back, but there are often restrictions on how and when you can spend the money. Applying for grants can be a time-consuming and sometimes complicated process. You need to do your research, write letters, fill in application forms and often wait a long time for a response. Funders will also want to see evidence of the impact their money is having, so you'll need to invest time into reporting this too.
Loans need to be paid back, but tend to come with fewer conditions attached. They can be useful if you need money quickly, if you need to buy new equipment or require money upfront to launch a new project.
- As well as traditional loan providers like high-street banks, there are organisations that specialise in providing finance for community groups and other good causes.
- If you're looking to develop a project that will make money - by selling renewable energy back into the grid, for example - you could also raise funds by selling shares. This is called equity finance.
Trusts and foundations
There are at least 4,000 independent trusts and foundations in the UK. Between them, they give around £3 billion each year to charities and community organisations. Most trusts and foundations work to strict criteria, so it pays to do your homework. Find out what sort of sums they give out, whether they have an interest in environmental issues and if they fund work in your area.
Don't approach a trust or foundation without a specific proposal - they'll rarely offer money to cover general running costs. You'll need to explain why you need the money, how you'll spend it and what you expect to achieve.
Community foundations manage funds from individuals, businesses and other donors who want to support causes in their local area. Because of their local basis, they are a good source of funding for small community organisations. There are around 60 community foundations in the UK.
Big Lottery Fund
For every National Lottery ticket sold, 28p goes to good causes - that's £25m a week. The Big Lottery Fund is one of the largest sources of funding for community groups - but also one of the most competitive.
Until March 2011, the UK Government made small grants to community organisations through Grassroots Grants - see the Grassroots Grants website. This £130 million programme was run by the Community Development Foundation. Go to the Community Development Foundation site.
GRANTnet has a free online questionnaire to help you find public funding for your community project.
Local government funding
Your district or county council, or unitary authority, can be a good source of funding for community groups. Local authorities' spending priorities vary from place to place, but many offer grants for environmental projects.
If your project improves economic opportunities in your area, you could be eligible for part of the 10 billion euros the UK is getting from the European Social Fund. Go to the European Social Fund website..
Funding normally lasts for three years, but applying is complicated. You probably have a better chance if you apply as part of a consortium. Your regional Voluntary Sector European Funding Advice Office can help.
Other sources of finance
Borrowing money from banks may not be an option for your project, particularly in the current economic climate. But there are lenders who specialise in working with voluntary organisations and community groups, will understand your needs and should offer more favourable repayment terms. They offer a combination of loans, grants and equity finance, often accompanied by advice and logistical support.
The Finance Finder at the Community Development Finance Association (CDFA) website has information on finance providers for community organisations. These include:
- Adventure Capital Fund - Loans, grants and mentoring support to promote community enterprise.
- Charity Bank - Loans and guarantees of £3,000-£500,000 to organisations with social aims.
- Triodos Bank - Loans and banking facilities to ethical and environmental organisations.
All funders have different aims, and you'll need to demonstrate how you meet their requirements. Don't waste your time applying to trusts that don't fund projects like yours, or asking for £5,000 from a foundation that only gives grants of £500.
You'll either need to fill in an application form or write a letter (or both). Make sure you find out exactly what each funder expects you to provide and follow their instructions carefully.
In every case, you'll need to show:
- the need or demand for your project
- why you need the money
- how you intend to spend it
Funders will be looking for evidence that you are a credible organisation and that you'll be spending their money wisely. You should provide details of:
- your group's background and track record
- how you intend to measure the success of your project
- how you will keep it going when their funding runs out
More tips for funding applications
- Keep covering letters short - one side of A4 is enough.
- Write in clear, concise language. Funders may not be specialists in your field, so avoid using jargon.
- Be realistic - make sure your figures add up, and don't necessarily apply for the largest grant available.
- Take the time to make your application look as professional as possible. Check for proofreading errors, which could damage your credibility.
In the current economic climate, raising the funds required for a community project can be a challenge. Rather than aiming to secure a large amount of money from one organisation, it can pay to try and secure smaller amounts from different funding bodies.
- Joint funding allows two or more organisations to pool their available funding and help a single project.
- Match funding is when a funder promises to finance a proportion of the project cost, 90% for example. With a commitment in place the rest of the money must then be raised from other sources.
Remember that attracting multiple funders means approaching each one with a detailed proposal of what their money will be used for.
The Energy Saving Trust provides access to case studies covering all kinds of community energy schemes. Find out where their funding came from, who was involved and the key lessons that were learned. Contact details are provided in each case study, so you can speak with the organisers to share information and gain advice on the best way to achieve your aims.