Capital Sources for Social Enterprises
Many entrepreneurs - social, triple bottom line or otherwise - do not avail themselves of all potential capital sources when seeking funding to grow or scale, limiting prospects to cash flow their initiatives. This paper explores a range of options for funding: external in the marketplace, internal within an organization, new ideas and classics not to overlook.
Entrepreneurs have too much to do and limited time in which to do it. Making good choices based upon understanding priorities and trade-offs is valuable in order to pursue best matched capital sources. For example, bank relationships take time to build and the money can seem expensive at first, especially for start-ups, but might be a best choice over the long term. Socially responsible investors / Impact investors may have closer mission alignment and more attractive rates, but might be difficult to access, require extensive documentation, which carries a cost, as well.
Organizations often overlook sources of capital, within their own finances. Controlling expenses, increasing cash turnover, and leveraging the balance sheet improve cash flow. “Crowd funding” has emerged as an exciting tool to access funds through the Internet.
To develop and secure the money needed to grow a social venture, social entrepreneurs must understand what financiers’ value, establish long-term networks, build their credit history over time, formally register the enterprise, and have contingency back-up plans.
Looking into the future, there are financial tools that are becoming available to support social enterprises and community betterment. These include community guarantees, cross collateralization, and social investment bonds, among other tools.