Research on Third Sector Access to Finance, which was carried out by economic development consultants SQW, is based on nineteen focus groups held across the UK.
The report's key conclusion was that the third sector's reliance on goodwill grants had led to organisations being "under-resourced, under-capitalised and over-stretched, and consequently not sustainable without continuing grant aid or contract awards."
It warned that this financial vulnerability meant that voluntary groups are "focusing continually on organisational survival, sometimes necessitating some mission drift". Another problem in the current funding climate was that the struggle to secure finance reduced many organisations to having a short-term focus.
The report added that while loans may sound like a good solution, in principle they require a level of personal liability that trustees are often unwilling to take.
Recommendations included the need for external assessors for grant applications, provision of materials to aid bid preparation and a method for calculating social return on investment. The report added that such a measurement tool could in turn lead to the development of a social equity market.