Many people automatically assume that a business which addresses social or environmental issues is not going to be a profit-making venture; you need to prove them wrong!
However you plan to fund your start up costs, careful financial planning is a must, particularly in a challenging economic climate. A robust business that can survive the hard times will fly in the good times.
There are two main channels through which to raise finance for any business venture, loans and investment. That said if you are a planning a business that addresses specific social or environmental issue you may find that alternatives doors open, with numerous grants and schemes available to support social enterprise and ethical business. Explore various funding options by having a look at the links on this page
Download our cash flow template and our profit and loss template to make a start on your financial planning
Here are some key areas to consider when thinking about raising finance
Bankers want assurance of orderly repayment. If you intend using your business plan to present to lenders, include:
- Amount of loan
- How the funds will be used
- What this will accomplish—how will it make the business stronger?
- Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate but may be able to negotiate a longer repayment term, which will help cash flow.
- Collateral offered, and a list of all existing claims against collateral
Investors have a different perspective. They want fast growth and they expect to share in the rewards: To secure investment you will need to provide information about:
- Funds needed short-term
- Funds needed in two to five years
- How the company will use the funds, and what this will accomplish for growth.
- Estimated return on investment
- Exit strategy for investors (buyback, sale, or IPO)
- Percent of ownership that you will give up to investors
- Milestones or conditions that you will accept
- Financial reporting
Foundation for social entrepreneurs
Loans for businesses with social, environmental and cultural goals
Low interest start up loans
Funding for projects with a strong social and environmental ethos
British Business Angels Association
London Business Angels Network