We recently stumbled upon an article on financing social businesses, a comprehensive list of finance options for people starting social enterprises. Now this seemed fantastic at first glance but after taking a better look at the article and going through some of the links on the site we quickly discovered that most of these funding options apply only to America. We then began to wonder what options are there available for Europeans to get that initial capital to realise their great ideas? Here’s a quick recap of our research.
Let’s start with the terminology that you need to understand before starting to look for funding options. What most social entrepreneurs would need is called Social Venture Capital, which falls under the umbrella of Socially Responsible Investment (SRI). Now the objective of SRI is to offer initial capital for projects whose aim is to support green, sustainable and socially conscious ventures creating both profits AND social good. Basically there are financial institutions and other funding bodies available that offer Social Venture Capital (a form of initial stage high risk, high profit potential venture capital) to new businesses entering into new fields and needing the initial capital.
Where then can we find institutions or funding bodies that offer Social Venture Capital?
There is the Dutch Triodos Bank for instance with subsidiaries in several European countries. They provide financial solutions for social enterprises, so that the money they lend will create positive outcomes to people, culture and society. This way the financial markets will also be transformed little by little, and new kinds of innovative financial solutions will become available for people who have struggled to find funding streams for their ideas in the past.
Charity Bank in the UK is a bank providing funding exclusively for charities, social enterprises and community organisations. The bank itself operates as a charity. The capital for the bank to lend out comes from financial investors who want to put their money to good use and channel it to social ventures and good causes.
There are other options of course as well, and funding for charities and social ventures is offered by several foundations and organisations who want to advance social causes. In the UK Charities Aid Foundation for instance offers financial start-up money for new social enterprises, charities and social groups. They offer tailor made financial packages for individual needs and each application is dealt with personally.
Here is another useful article from Business Link in the UK on how to finance Social Enterprises. The site also has other great resources for supporting people who have aspirations to enter this sector. Additionally Ashoka has created a Changemaker Toolbox that contains a huge list of different funding options with good descriptions of the types of funds offered by each provider. Most of the funding options are competitions and usually include a component of consultancy and advice that may be lacking in more traditional funding options and loans.
Here is a very modest start to finding the initial capital for your social enterprise. We would like to make a proper long list like the one Social Earth compiled recently for the American options. So do get in contact with us if you have more ideas and resources to be mentioned here.