Investment – show me the money

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Most entrepreneurs and new enterprises will need an injection of cash at some stage. This might be seed money of just a few thousand pounds, funding to cover start-up costs like buying some office equipment, or much larger investment to cover the cost of, for example, renewable energy infrastructure.

Our research shows that there’s not necessarily a shortage of investment cash out there, but that the same four things generally get in the way of an enterprise getting the money it needs, when it needs it. Through the REconomy Project, we are looking for ways to address these issues, and help ensure the right finance is available at the right time. The common issues are:

  1. Lack of investment readiness – the enterprise often doesn’t understand what is needed to successfully engage with a potential investor.
  2. Lack of independent advice and knowledge sharing to help an enterprise become investment-ready.
  3. Lack of financial knowledge, e.g. understanding the difference between debt and equity, and that choice of legal entity type can then restrict type of investment options.
  4. Lack of appropriate finance on offer – few finance offers are designed to suit the social enterprise market e.g. the need for ‘patient’ capital that offers returns over a longer period.

To help address these barriers, we are working closely with Transition Town Totnes and Transition Town Brixton to explore how this support and investment finance can be provided from within the local community, in a low-cost, sustainable yet professional and effective way – then we will share these models.

We’ll also be mapping out all of the larger, national sources of investment finance, loans and grants that would be of interest to Transition-oriented enterprises – this is a fast moving field so we will keep this information current as it changes. Where there are gaps, we will consider how these might best be filled.

Meanwhile, the investment needs of some of the community based enterprises emerging from Transition have been illustrated in the summary table at the end of the New Economy in 20 Enterprises report.

OK, back to the burning question, where can you go for cash today?

This is hard to answer simply, as it depends how much you need, what for and what stage you are at. Are you wanting a loan or are you happy to issue shares? It might also depend on where you live. And at the risk of being repetitive, it depends how investment-ready you are.

There’s a range of individuals and organisations  that offer investment to start-ups and existing enterprises, though mostly aimed at traditional business models. Often people start financing their enterprise by using their own money, or borrowing from family and friends.

There’s an increasing number of platforms for crowd-funding that offer opportunities to donate to, or invest in, new businesses or projects.

Then there’s local credit unions who can now loan to businesses, angel investor networks, traditional bank loans and specialised investors.

Some enterprises are using community bond and share issues, that use the savings of the local community to help finance new Transition Enterprises like OVESCo in Lewes. Others like Bath & West Community Energy are accessing finance from corporations as well as individuals.

Some sector-specific loan funds are emerging such as The Community Generation Fund, which funds community-owned renewable energy infrastructure. Organisations such as ClearlySo and UnLtd also offer access to funding and investment for social enterprise. The Community Development Finance Association help enterprises that are struggling to get finance from banks or loan companies.  The Community Action Network helps with investment readiness and introductions to investors.

There are lots of other investment organisations out there, and the results of our mapping work will be shared via this website later in 2014.