Five Factors- Part 2- Capital

The first of the five factors is capital. More specifically, the kind of capital you have access to that you are using to launch your enterprise. 

Not surprisingly, many businesses struggle to find/raise the money to launch their business well, and in the cases where small businesses find access to business loans, investors etc. the terms of those agreements might prove difficult to meet in the early stages of business development. Now imagine, that, in addition to trying to launch a sustainable business, you are also committing to a slightly more vulnerable bottom line (or at least one with more pressure points) because you have a double bottom line that includes impact in an economically vulnerable neighborhood. Traditional forms of business investment can prove all the more costly because you get tied down to terms that your social enterprise can’t sustain, at least in the early years. 

This is why we ask social entrepreneurs to look for natural advantages when it comes to raising start-up capital. A few examples…

  • Are you a church or non-profit group? 
    • Consider raising money through your already existing charitable/philanthropic platform. You might be surprised at the new channels of giving a social enterprise opens up. When you are able to speak with potential donors and describe the normal world of philanthropic giving—where every dollar is re-raised year after year— and offer the alternative vision of a dollar given to a project that has a higher probably of sustainability, where a single dollar is used and used again, thereby multiplying the impact of each dollar donated, you might find your donor base energized by the vision you are setting forth. 
  • Granting foundations
    • Increasingly, community foundations and other organizations that provide grants for community investment and impact are highlighting economic development initiatives and social enterprises as providing a bigger transformational possibility. If your organization qualifies for grants you might explore potential fits locally and nationally. The capital raised through grants—while requiring work in terms of reporting, oversight, accountability etc.— is likely not a loan and certainly does not come with interest.
  • Personal loan to nonprofit
    • Depending on the ordinances in your state, many individuals can make a loan to a non-profit for use in their work. This might appeal to a potential donor who is not concerned about a tax-deductible gift but might be interested in an approach that would challenge the business model to be disciplined. 
    • While this is a loan—you gotta pay it back!— it would come without interest and so is a ‘cheaper’ form of capital than a business loan through a lending institution. 

Since CovEnterprises is committed to LAUNCHING social enterprises in and through the ECC, we designed our investment to ensure the greatest possibility for each enterprise while trying to maintain our ability to continue to launch projects over the long haul. We are blending the grant/loan model as a means to putting equity into businesses on the ground and disciplining business models to trend toward success. We are excited about the opportunities we’ve had to invest in high impact projects and help seed God’s shalom in and through faith communities across the country in a relatively short period of time.

As you plan your business… ask yourself, can we be more strategic about the launch capital we are raising? Do we have a natural advantage here that we might make better use of?

About Adam Gustine

Adam Gustine leads CovEnterprises for Love Mercy Do Justice and the Evangelical Covenant Church. He is also the founder of Jubilee Ventures; an economic incubator in South Bend, IN. He and his wife, Ann, live in South Bend with their three kids.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.