A bank has launched a £6 million fund for the most promising charities, social enterprises and other community businesses.

The Social Entrepreneur awards have been set up by Bank of Scotland Corporate to recognise the work of entrepreneurial not-for-profit organisations.

It said many were currently suffering from very difficult financial circumstances, with some losing millions of pounds in the recent collapse of Icelandic banks.

It is offering a £5 million interest-free loan to the best social organisation in the country, with £1 million for the runner-up.

John Taylor, the head of specialist banking at Bank of Scotland Corporate in Birmingham, said: “There is no doubting the importance of not-for-profit organisations to our economy and I believe passionately that they should be encouraged and nurtured as much as possible.

“However, social entrepreneurs are often overlooked and do not receive the recognition of their peers in more commercial businesses and those who generate substantial personal wealth.

“Bank of Scotland Corporate has created the £6 million Social Entrepreneur Awards specifically to recognise those not-for-profit organisations who combine outstanding business acumen with a genuine passion for helping others.

“Not only will this award discover the UK’s most exciting and aspirational social entrepreneurs, it will also provide the winner with a level of support that will revolutionise their organisation and allow them to expand their work.”

There are more than 2,000 not-for-profit businesses in Birmingham, covering a wide variety of sectors. One recent success story has been CentralVision TV station, an internet-based not-for-profit channel launched last month after three years of planning.

The social enterprises, unlike charities, are run for a profit, but put all money made back into their organisation.

Kevin Brennan MP, the minister for the Third Sector, welcomed the awards scheme, adding: “I know the value of social enterprise having had my first job in one after university.

“The Bank of Scotland Social Entrepreneur Awards will help two of the best social entrepreneurs reach the next level.

“These businesses, that reinvest their profits for a social or environmental aim, have great potential to help tackle some of the most difficult issues facing our society.

“I think it’s great that these awards will help raise the profile of social enterprise and offer great investment packages for the winners alongside expert mentoring.”

The Social Entrepreneur award is open to any not-for-profit organisations whose primary purpose is to further social or environmental goals. This could take in anything from classic social enterprises to charities, churches, schools or universities.