Private Funding Techniques for Social
Enterprises
Paul Cheng
The big picture…
“A new financial services industry is
growing up around charities and
social enterprises. Its growth will
resemble the development of
commercial finance in the last 300
years.”
The Investor Universe
- 100%
Grant-makers
-25%
?
0%
Capital-protected
+ 8%
Market-rate return
Matching financial mechanisms to funding needs
Matching financial mechanisms to funding needs
HIGH
CHANCE OF
REPAYMENT
Secured loan
Standby
Facility
Overdraft
Unsecured
Loan
Patient
Capital
Quasi-equity
Equity
LOW
CHANCE OF
REPAYMENT
Grant
Matching financial mechanisms to funding needs
HIGH
CHANCE OF
REPAYMENT
Secured loan
Standby
Facility
Overdraft
Unsecured
Loan
Patient
Capital
Quasi-equity
Equity
LOW
CHANCE OF
REPAYMENT
Grant
LOW RISK
Property/Asset
purchase
(mortgage)
HIGH RISK
Cashflow
bridging
Pre-funding
Capital
Fundraising
Higher risk
working
capital
Development
Capital
Matching financial mechanisms to funding needs
HIGH
CHANCE OF
REPAYMENT
Secured loan
Standby
Facility
Overdraft
Unsecured
Loan
Patient
Capital
Quasi-equity
Equity
LOW
CHANCE OF
REPAYMENT
Grant
LOW RISK
Property/Asset
purchase
(mortgage)
HIGH RISK
Cashflow
bridging
Pre-funding
Capital
Fundraising
Higher risk
working
capital)
Development
Capital
Matching financial mechanisms to funding needs
HIGH
CHANCE OF
REPAYMENT
Appropriate Funding
(correlation)
Secured loan
Standby
Facility
Overdraft
Unsecured
Loan
Patient
Capital
Quasi-equity
Equity
LOW
CHANCE OF
REPAYMENT
Grant
LOW RISK
Property/Asset
purchase
(mortgage)
HIGHRISK
Cashflow
bridging
Pre-funding
capital
fundraising
Higher risk
working capital
Development
capital
A range of organisational models
Social Enterprise Funding Models
 Debt – secured, unsecured
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
 Convertible debt
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
 Convertible debt
 Innovative donor funding – first-loss capital, guarantees
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
 Convertible debt
 Innovative donor funding – first-loss capital, guarantees
 Crowd-funding
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
 Convertible debt
 Innovative donor funding – first-loss capital, guarantees
 Crowd-funding
 Social Impact Bonds / Pay-for-Success Bonds
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
 Convertible debt
 Innovative donor funding – first-loss capital, guarantees
 Crowd-funding
 Social Impact Bonds / Pay-for-Success Bonds
 Charitable bonds
Social Enterprise Funding Models
 Debt – secured, unsecured
 Equity – limitations, fund design, exits
 Convertible debt
 Innovative donor funding – first-loss capital, guarantees
 Crowd-funding
 Social Impact Bonds / Pay-for-Success Bonds
 Charitable bonds
 Tax reliefs
What are impact funds looking for?
 Social impact is tightly integrated into the business
model
 Robust business model that can scale
 Outstanding management team
Contact details:
Paul Cheng
pcheng@sharedimpact.org
01234 240152
Twitter: @sharedimpact @pch083
www.sharedimpact.org