Social enterprises are in danger of becoming over reliant on grants and not developing long-term entrepreneurial strategies, according to London Rebuilding Society.
The society provides loans of between £5,000 and £50,000 to social enterprises that actively reinvest in their communities.
But the society's research suggests many fledgling enterprises get caught in a cycle of grant dependency and fail to plan beyond the period of their funding.
Enterprises that fall prey to this short-term approach often show a lack of awareness about the need for loans and a reluctance to take risks at managerial level.
Society project manager Rumbi Tarusenga said: "They are living hand-to-mouth and don't plan beyond six months. We are looking at ways for community development finance institutions to help these organisations build up their capital base so they have fallback options.