We Asked 277 CICs What They Need — The Answer Was Depressingly Predictable

We ran three surveys as part of our dividend cap review for the Regulator. Our annual baseline questionnaire (277 responses), a dedicated dividend cap survey (135 responses), and a stakeholder review (27 responses from finance and legal intermediaries). The results won’t surprise anyone who’s actually tried to run a CIC.

Finance is the number one obstacle. It was the single biggest challenge identified by respondents, and it wasn’t close.

Let me give you the numbers that keep me up at night. Forty-three percent of CICs applied for some form of finance in 2012. Only 37% of them succeeded. That’s a 63% failure rate. If any other sector had that kind of rejection rate for business financing, there would be a parliamentary inquiry.

And what happens when CICs can’t access investment? They fall back on grants. Sixty-two percent of respondents said grant funding was their primary external funding strategy. Only 15% had applied for investment. The grant culture isn’t a preference — it’s a default born of desperation. When the investment route is blocked, you go where the money is.

The irony is that the appetite for investment is there. Sixteen percent of respondents saw attracting equity investment into CICs as a threat. But 49% saw it as an opportunity, with another 33% wanting further debate. The demand is there. What’s missing is the supply of appropriate investment products and the regulatory framework to support them.

Our survey also dug into the specific barriers. Investment readiness was a factor — some CICs aren’t prepared for what investors need. But the bigger issues were lack of security (CICs are typically asset-light, which traditional lenders don’t understand) and lack of financial skills within the organisations themselves. Transaction costs and access to suitable advice also featured heavily.

The collective economic footprint of CICs is now a minimum of £1.4 billion, and by some calculations over £2.5 billion. We have 7,500 organisations generating that kind of impact — and they’re being starved of the capital they need to grow. It doesn’t add up.

The Regulator’s dividend cap review is focused on one specific part of this puzzle, and the recommendations in “A Fair Share” would help. But the finance problem goes deeper than the cap structure. It’s about whether the social investment market is willing to develop products that work for small, asset-light, community-focused enterprises. It’s about whether mainstream lenders will ever understand a business model that prioritises purpose over profit maximisation.

We asked 277 CICs what they need. They told us, clearly and consistently: access to appropriate finance. Now the question is whether anyone’s listening.