Between 94 and 96 per cent of funding available specifically to social enterprises is in the form of grants, according to research by the social enterprise support organisation Can.
A study of the funding available from charities, government and other specialist social investors in 15 sectors where social enterprises operate found that there was little intermediate funding to help organisations move from grant funding to a situation where they could attract commercial investment.
"We looked at funding available for growth and capacitybuilding, but we did not look at purely commercial finance," said Kate Markey, deputy chief executive of Can.
According to Markey, the "prevalence of grant-funding is a double-edged sword because it prevents organisations moving towards a state of investment-readiness".
She said: "This means funders are not maximising the return on their money. Organisations are giving away cash to organisations that could take loan finance.
"We believe there's a massive opportunity to create more funding in the space between grants and commercial finance.
"We're seeing some examples of intermediate funding, which helps the social enterprise sector move towards investment-readiness, for example, with a mixture of grant and loan. However, there's a massive opportunity to create more of this."