In financing a new social enterprise, one of the biggest problems is often an
absence of securities (assets which a lender may ask to stand as a guarantee
against the borrowing). This problem can be overcome in a number of ways.
There are a growing number of Community Development Finance Initiatives
(CDFIs) that specialise in lending to social enterprises and small businesses
with little or no securities. They aim to limit their risk by understanding the
applicant's business, rather than relying on securities. Also, a growing number
of banks are becoming interested in lending against the value of secured local
authority contracts, in the knowledge that these represent a secure asset.
Partnership can also be a key to unlocking finance, with a public or private
sector partner acting as guarantor, or even buying capital equipment on
behalf of a social enterprise. More on CDFIs can be found in the section
on Funding and finance.
Waste management is a highly regulated industry, and a whole section is
devoted to the main regulations governing the industry. However an issue that
should be addressed at this stage is the speed with which new and sometimes
contradictory regulations come into force. Those considering a new recycling
venture need to keep up to speed with this rapidly changing situation.
For example, after the foot and mouth crisis, the Animal By-products
Order was brought into force, banning the use of compost that might
at any time have come into contact with uncooked meat. This has had
obvious implications for schemes composting household food waste,
which it is almost impossible to be sure has not come into contact with
meat. To make matters more complicated, this regulation contradicts the
government's Waste Strategy 2000 aim of increasing the proportion of
household organic waste being composted. Although this issue is certain
to be resolved in favour of composting sometime in 2002, it serves as a
good example of how important it can be to keep up with emerging
regulation. The news service on the website www.letsrecycle.com, or the
weekly trade journal Materials Recycling Week are the best places to get
up-to-date information on regulatory and other issues.
The markets for selling collected recyclable waste are known as secondary
materials markets, and prices are subject to global fluctuations in both
secondary and virgin commodity prices. The UK has little reprocessing capacity
of its own, and what there is, is dominated by a small number of multi-
nationals. This can result in sudden price fluctuations, with downturns often
more sudden than upturns. In this context, it is not safe to base the long-term
viability of a recycling enterprise on the value of the materials collected.