guide to financing for social · pdf fileguide to financing for social enterprise before...

Guide To Financing ForSocial Enterprise

Guide To Financing ForSocial Enterprise

Amanda Dowling Manager,CorporateSocialResponsibility,CitizensBankofCanadaDaisy Quon AssistantManager,CommunityEconomicDevelopmentCoastCapitalSavingsDerek Gent InvestmentManager,Non-profitsandCo-operatives, VancityCapitalCorporationKyle Pearce ProgramManager,EnterprisingNon-profitsProgram, VancityCommunityFoundationLiz Lougheed Green ExecutiveDirector,PotluckCaféandCateringPieter van Gils Director,EconomicDevelopment,EcotrustCanada

Advisory Group

Acknowledgements

Guide to FinAncinG For SociAl enterpriSe

Tracey Axelsson ExecutiveDirector,Co-operativeAutoNetworkCam Brewer ExecutiveDirector,Eco-LumberCo-operativeDavid Le Page CEO,FastTracktoEmploymentJanice Abbott ExecutiveDirector,AtiraWomen’sResourceSocietyJeff Calbick PlanningConsultant,UnitedWayoftheLowerMainlandKen Lyotier ExecutiveDirectorandManager,UnitedWeCanKevin Ronaghan ExecutiveDirector,CentreforSustainabilityKyle Pearce FoundingMemberandChair,StrathconaCommunityDentalClinicMauro Vescera ProgramDirector,VancouverFoundationMurray Libergantz BusinessLoansOfficer,CCECCreditUnionPetar Jelinic CommunityLendingManager,CoastCapitalSavingsGreig de Bloeme SeniorBusinessOfficer,WesternEconomicDiversification

Interviewees

Penny Handford ChangeWorksConsulting

Writer

Rich Goulet SunrichManagementLoanDecisionModelPieter van Gils TipsforRaisingCapital

Contributors

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IntroductionSomeParadigmdifferencesBeforeLookingforFinancingFinancingForSocialEnterpriseWhatdoBankersWant?TipsforRaisingCapital

CaseStudies#1StrathconaCommunityDentalClinic#2AtiraPropertyManagementIncorporated#3PotluckCaféandCatering#4Co-operativeAutoNetwork#5Eco-LumberCo-operative#6SocialPurchasingPortal–FastTracktoEmployment#7UnitedWeCan

GlossaryResources#1SourcesofFundsForBuildingOrganizationalCapacity#2SourcesofFundsforBusinessPlanning#3SourcesofFundsForStartUpCosts#4SourcesforOperatingCosts#5OtherResources-Canada#6OtherResources-International

table of contents


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Astheconcepthasdevelopedandinteresthasgrown,socialenterpriseinitiativeshaveincreasedbothinnumberandinsophistication.Entitieshavebeencreatedwithfundingandfinancingneedsthatarenotmeteitherbytraditionalgrantprogramsorbytraditionaldebt/equityinstruments.

Atthesametime,andinresponsetothecomplexandinterrelatedgoalsofbothincreasingsocialvalueandprofitability,newareasofsocialphilanthropyandsocialventurecapitalhaveemerged.Aswell,financialinstitutions,communityfoundations,governments,andanewbreedofsocialcapitalistshavebeendevelopinginnovativefinancingoptions.Exciting,creativeandflexiblesocialenterprisefinancingarrangementsarenowbeingputtogether.

ThefieldwillbecomeevenmoreinterestinginthenearfuturewiththenewfocusoftheCanadiangovernmentonthe“socialeconomy.”Thefederalgovernmenthasdefinedthesocialeconomyas:

“………‘economic’inthatitinvolvestheproductionofgoodsorservicesandtheirsaleinthemarketeconomy.………‘social’inthatitsmainobjectiveistomeettheneedsofthecommunity,includingdisadvantagedorvulnerablemembers,andbecauseofthevalues(democraticprocess,collectiveempowerment,etc.)onwhichitsgovernanceandoperationarebased.”

In2004,thefederalbudgetplacedaspecialemphasisonsocialenterpriseasaspecificcomponentofthesocialeconomythatitwishestoencourage.Thebudgetofthatyearassignedfundstotheareaanditisexpectedthat,bythefallof2005,therewillbeentitiesinplacetodistributeandadministerthesefunds.

Locatingandobtainingfundsforsocialenterprisecanbecomplicated.Thisguideisanattempttodemystifythefinancingoptionsopentobothnew,andpracticing,socialentrepreneurs.Itmayalsopointtheseentrepreneursinthedirectionoffinancialstrategiesthatmightnototherwisehaveoccurredtothem.

The idea of social enterprise is not new, some thrift shops, and Vancouver YWCA’s hotel, have existed for a long time. However, it is only in recent years that the term “social enterprise” has been applied to such ventures.


introduction

SocialEconomyBackgrounder.IndustryCanada.http://fednor.ic.gc.ca/epic/internet/infednor-fednor.nsf/en/h_fn02091e.html

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Well Researched and Written DocumentApplicationsforgrantsandfinancingbothrequireawell-writtenandwell-researcheddocument.Inthecaseofagrant,thisisaproposal.Forfinancing,itisabusinessplan.

FocusJustasapplyingforagrantforanon-profitprograminvolvesknowingtheinterestsofthegrantors,lookingforfinancinginvolvesknowingtheinterestsofthefinanciers.Forexample,ifthenon-profitprogramorserviceisyouth-focused,itisimportanttofindagrantorwhosefundingguidelinesincludesupportingyouth.Whenapplyingforfinancingorlookingforequityinvestmentforsocialenterprise,itisalsoimportanttounderstandtheparticularinterestsofthefinancier.Forexample,VancitySavingsCreditUnionisaleaderinthefieldoffinancingsocialenterprisewhereasbankshavelittleinterestinthearea.

LanguageJustasthenon-profitworldhasitsacronymsand“buzzwords”sodoestheworldoffinancing.Moreover,justasterminologycomesinandoutoffashioninthenon-profitworld,soitdoesintheworldoffinancing.Itisimportanttorememberthatfinanciallanguageisnotamystery!Itisalanguageandculturewhichcanbelearned.Donotbeafraidtoaskquestions;theworstthingtodoistopretendtounderstandforfearoflookingignorant.Mostpeopleinthenon-profitworldarenotknowledgeableaboutfinancing.(Justaspeopleinthefinancialworldarenotusuallyknowledgeableaboutthecomplexitiesofcommunitydevelopmentorstrategiesforcreatingsocialchange.)

Transparency Grantsobtainedfromcommunityfoundationsandgovernmentarerelativelytransparent;thegrantingguidelinesarepublic,themembersofthedecision-makingbodyareknown,alistofrecipientsispublicizedandanannualreportisissued.Governmenttenderingprocessesandevaluationcriteriaforproposalsarepublic,thevalueofcontractsawardedisavailable,andthenameofthesuccessfulbidderisannounced.

Financingisverydifferentfromthis.First,thedetailsofindividualfinancingdealsareconfidential.Moreover,althoughtherearestrict,andpublic,borrowingcriteriarelatedtotermloans,linesofcreditandsoon,intheareasofmoresophisticatedborrowingthereisflexibility.Financierslovedoing“deals”andoftentheloanorinvestmentismadeaccordingtoablendofanumberofelementssuchascharacter,trackrecord,capacitytogrow,collateral,marketconditionsandsoon.Eachcombinationoffactorsisunique.(SeeWhatDoBankersWant?Page23)

People who are familiar with applying for grants will find that obtaining financing is both different from, and similar to, obtaining grants.

Some paradigm differences

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RelationshipsWhilerelationshipsareimportantbothwhenlookingforgrantsandwhenlookingforfinancing,thereisadifferenceinthedegreeoftheimportance.Whengrantingfundsfortheworkofanon-profitorganizationtherepresentativeofthefundingbodyorgovernmentmustviewtheindividualsinvolvedascredible,havingintegrityandhavingtheabilitytosuccessfullymanagetheproject.However,ingeneral,therelationshipbetweentherepresentativeofthefundingbodyandthefundingapplicantwillonlypartlyinfluencetheoutcomeas,inthefinalanalysis,publicpoliciesandguidelineslimittheamountandnatureofthegrant.

Ontheotherhand,especiallyatthehigherlevels,financiershaveagreatdealofdiscretionarypowerandcanputtogethermanydifferentkindsofdeals.Thefinanciercanbethebiggestallyforthesocialentrepreneur.Forexample,Vancityhasagroupofcompaniesthatcanoffereverythingfromgrantstoloanstosubordinateddebtandthepersonnelhavemanycontactswithothergrantors,lenders,andinvestors.SomeoftheindividualsinterviewedforcasestudiesinthisguidespokeofhowVancityemployeeshadassistedthemtoobtainacombinationofgrants,loans,philanthropicventurecapital,andtechnicalassistance.Theoutcomeoftenreflectedthecreativityofthefinancierandhadnotbeenpreviouslyenvisionedbythesocialentrepreneur.

Relationshipsarethekeytoobtainingfinancing.Theserelationshipstaketimetonurtureanditisagoodideatomeetwiththefinancialinstitutionsveryearlyintheprocess.Thereareanumberofreasonsforthis:

•thefinanciergetstoknowyou,•yougettoknowthefinancier,•ifyoukeepthepersoninformed,youwillgetveryvaluablefreefeedbackandpossiblytechnical

assistance,and•iftheindividualseesfinancingpotential,heorshemaybecomeanadvocateforthesocial

enterprise.Thiscanleadtofinancingstrategiesthatyoumayneverhaveimagined.

Althoughtheenterpriseisnotinapositiontoapplyforaloan,onesocialentrepreneurreportedsendingmonthlyfinancialstatementstoafinancierwithwhomthesocialentrepreneurhasestablishedasolidrelationship.Thesocialentrepreneurnotonlygetsfeedback,butalsofeelsthat,whenthetimecomes,theenterprisewillbeinamuchbetterpositiontoapplyforfinancing.

Some paradigm differences continued...

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Before looking for financing there must be:•aclearunderstandingoflegalstructureofthesocialenterprise•clearfinancialobjectives•carefullypreparedfinancialdocuments•acapablefinancialmanager

Legal Structure Inordertousethisguide,itisimportanttounderstandthelegalstructureofthesocialenterpriseinquestion,itsborrowingcapabilities,andinvestmentpossibilities.Thebusinessstructurechosenforaparticularsocialenterpriseisacriticalpartofthedevelopmentofthebusinessplan.Althoughadiscussionofthedifferentpossiblebusinessstructuresforsocialenterpriseisoutsidethescopeofthisguide,someofthepossibilitiesare:

•In-House:Asocialenterprisewhichisoperatedbyanon-profitorganizationasadivisionofthenon-profitsociety,noseparatelegalstructureiscreated.

•WhollyOwnedSubsidiary:Asocialenterprisecreatedasacorporationwhichisowned,andcontrolled,byanon-profitorganization.

•SubsidiaryCompanywithaPartner:Similartoabovebutthenon-profitsocietyisthemajorityshareholderinacompanywhichhasothershareholders.

•JointVenture:Thisisavariationofthepartnershipdescribedabovebutthecontrolissharedequallyamongshareholdingpartners.

•Co-operative:Asocialenterprisecanbeaco-operativeofcommunitymembersoraco-operativeofnon-profitsocieties.Suchco-operativescanhaveinvestmentshareholders.

Financial ObjectivesAwell-writtenbusinessplanwillarticulatethetypeoffinancingneeded.Thebusinessplanshouldcontaincarefullyresearchedandaccuratefinancialobjectivesandfinancialstatements.

Whendevelopingabusinessplanforasocialenterprise,therewillbedifferentfinancialobjectivesatdifferentstages.Forexample,

•Attheideastage,thefinancialobjectivemaybetofindtheresourcestoconductafeasibilitystudy.

•Atanearlystage,thefinancialobjectivemaybetofindresourcestobuildtechnicalcapacity.•Atthestartupphase,thefinancialobjectivemaybetoacquiretheequipmentneeded.•Asthebusinessdevelops,thefinancialobjectivemaybetobreakeven.•Laterinthebusinessdevelopmentcycle,thefinancialobjectivemaybetoachieveaprofit

(withorwithoutborrowedfunds).•Asthebusinessgrows,thefinancialobjectivemaybetoincreasesalesthroughmoresophisti-

catedmarketingstrategies.

Eachofthesefinancialobjectivesrequiresadifferentfinancialstrategy.Asocialenterprisewillhaveanumberofdifferentfinancialstrategiesthroughthelifecycleofthebusiness.

Before looking For Financing

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Financial Documents Financialstrategiesarebasedontheinformationprovidedbycertainessentialfinancialdocuments.Thesefinancialdocumentsareanessentialpartofabusinessplan.Thefiguresusedinthesedocumentsareoftenprojectionsbasedeitheronpastperformanceoronmarketresearch.Financialdocumentsusingprojectionsarecalledproformas.

Income Statement: Afinancialperformancereportwhichsetsoutprojectedrevenueandprojectedexpendituresofthesocialenterpriseexpectedduringaspecifictimeframe.

Cash Flow Statement: Showstheflowofcashintoandoutofthesocialenterpriseduringaspecificperiod.Itincludeswhen,andwhere,themoneywillcomefromandwhatitwillbespenton.Thisisthemostrealisticpictureoftheviabilityofthesocialenterpriseasitindicateshowmuchcashwillbeavailableatanygiventime.

Break-even Analysis: Thisshowstheamountofbusinessthesocialenterprisemustdoinordertocovercosts.Atthebreak-evenpoint,thereisnolossorprofittothesocialenterprise.

Balance Sheet: Thisisastatusreport,or“snapshot’ofthefinancialstateofthesocialenterprisebusinessatagivenpointintime.Itshowswhatthesocialenterpriseowns(assets)whatisowed(liabilities)andwhatisleftover(equity).

Thesedocumentsshouldbepreparedverycarefullybecausetheyarethekeytothesuccessofthesocialenterpriseandwillbescrutinizedbyeveryoneapproachedforfinancialsupport.

Capable Financial ManagementManagingthefinancesofabusinessissubstantiallydifferentfrommanagingthefinancesofanon-profitorganization.

Itiscriticalthatthesocialenterprisehassoundfinancialmanagement.Thefinancialmanagerofanon-profitorganizationdevelopingasocialenterprisemayhavetherequiredexpertise.Ifheorshedoesnot,financialmanagementcapacitycanbedeveloped.Thiscanbeachievedinanumberofwayssuchas,

•trainingthecurrentfinancialmanager,•recruitingaboardmemberoradvisorycommitteememberwiththenecessaryskills,•partneringwithanorganizationsuchasBCTechnologySocialVenturePartnerswhosevolun-

teerscanprovidefinancialmanagementskills,or•contractingwithafinancialmanager.

Donotstartupasocialenterpriseuntilthisessentialexpertiseisinplace.

Before looking For Financing continued...

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Atdifferenttimesinthedevelopmentofasocialenterprisetherewillbevariousneedsforcapital,suchas:

•towriteabusinessplan•forfixedassets,forexamplepremises,machinery,equipmentetc•forstartupcosts,forexamplemarketingcampaignstolaunchtheproductorservice•foreverydayoperationofthebusiness.

Ingeneral,therearetwosourcesofcapital:•Equity,orinvestmentfinancing,frompeoplewhoexpecttoshareintheeventual

benefitsofthebusiness.•Debtfinancing,orloans,frompeopleandinstitutionsthatexpectthemoneyplusinterest

repaidaccordingtoanagreed-uponschedule.

Asexplainedbelow,capitalcanlookforaquickfinancialreturnoritcanbe“patient.”

Itisusuallydifficulttosecuredebt–loans–ifthereisnoequityinthebusiness.Inthissense,equityprecedesdebt.

1. EQUITY

1.1 What is Equity?

Thewordequitycanbeusedintwodifferentways:

•Equitycanmeanthedifferencebetweenthemarketvalueofapropertyorbusinessanditsliabilities.

•Equityalsoreferstotheownershipinterestofshareholdersinabusiness.

1.2 Equity and Social Enterprise

1.2.1 Internal Development of EquityCreatingequityinternallyisboththebestfirstsourceofequityandsomethingthatmostfinanciersrequire.Belowareexamplesofhowsocialenterprisescanbuildupequity.Undoubtedly,newwaysofdevelopingequitywillbecreatedasknowledgeaboutsocialenterprisefinancinggrows.

Capital is generally understood to be money that is used for the purpose of making profit. In the field of social enterprise, this money is also required to have a social impact.


Financing For Social enterprise

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Past SurplusesThebestsourceofequityispassedsurpluses3.Thisisthemoneythatanorganizationhasaccumulatedovertheyears.

Prudentorganizationssavemoneyfromoccasionalsurplusesofincomeoverexpenditures.Thismoneyhastraditionallybeenusedtocoverfutureshortfallssuchascanoccurwhenagovernment-fundedprogramisdiscontinued.

Accumulatedsurplusesaretrickyfornon-profitorganizations.Governmentagencieshavetendedtofrownuponthemunderthemistakenbeliefthatnon-profitswithsurplusesaremakingaprofitandshoulddepletethesefundsbeforereceivingfurtherfinancialassistance.However,thisattitudeappearstobechangingwiththeincreasinginterestinthebusinesslikemanagementofnon-profits.

AnexampleofanorganizationusingaccumulatedsurplusesisAtiraWomen’sResourceSociety,WhiteRockBC.Atirausedsuchsurplusestoconductmarketresearchwhendevelopingtheirpropertymanagementcompany.(Page33)

Creating A Trust FundBecausefundsareoftenscarceandaccumulatedsurplusescanbeproblematic,manynon-profitorganizationsdonotdevelopsignificantcashreserves.Aswell,iftheorganizationisbrandnew,therewillnotbeanysurplusfrompreviousyears.Anothersolutiontothechallengeofdevelopingequityistocreateatrustfund.

Eco-LumberCo-op(Page42hascreatedequitybywithholding5%ofthemoneypaidforgoodsandservicespurchasedfrommembers.Thismoneyisplacedinatrustaccountwhichisusedasequitytosecureloans.Themoneyheldintrustwillbepaidtothememberswhentheloansarerepaid.Member Equity4

Peoplebecomemembersofco-operativesbyacquiringshares.Themoneypaidforthesesharesbecomestheco-operative’sequity.

Forexample,membersoftheCo-operativeAutoNetwork(Page40)purchaseaone-timerefundableshareof$500tojointheco-operative.Inaddition,familymembersoftheprimarymemberscanpurchaseassociatemembershipsfor$250.ThisprovidesalargepercentageoftheCAN’sworkingcapital.

Membershipfeescanalsobechargedbynon-profitsandcouldbecomeasourceofequity.However,itappearsthatthismethodisnotbeenused,sofar,bynon-profitsocietiestocreateequityforsocialenterprise.Onereasonthatthissourceofequityhasnotbeenexploredmaybethatmostnon-profitorganizationswanttokeeptheirmembershipaccessibletoeveryoneandsokeeptheirmembershipfeeslow.

3vanGils,Pieter.FundamentalsofCEDFinance.MakingWaves,Vol11,No.4.4VanGils,Pieter.FundamentalsofCEDFinance.MakingWaves,Vol11,No.4.

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Withsomecreativethinking,itmaybepossibletoprotectthedemocraticnatureofthemembershipofanon-profitand,atthesametime,toexploremembershipfeesasapossiblesourceofequityforenterprisedevelopment.

Equity in Property Somenon-profitorganizationsownbuildings.Theorganization’sequityinthepropertyisthedifferencebetweenthemarketvalueofapropertyanditsliabilities.Thisequitycanbeused,byanon-profitthatwishestostartasocialenterprise,tosecureloans.

1.2.2 Ways to Build Equity with External Help

Traditional PhilanthropyGrantscanbeseenasasourceofequityas,oncegranted,thegrantorhaslittleornocontroloverthemoneyexceptforrequiringafinalreport.

Increasingly,fundersaredescribinggrantsasinvestmentswhichprovideasocial,ratherthanfinancial,return.Insteadofusingtheterm“grant,”fundersaretendingtospeakabout“communityinvestments”or“investinginthedevelopmentofsocialcapital.”

Traditionallygrantsaregiventosupportsocialprograms,communitydevelopment,communityeconomicdevelopment,ororganizationaldevelopment.Manygrantscannotbeusedtofundactivitiesdirectlyrelatedtosocialenterprise.Howeversome,whiletheycannotbeusedforactivitiesdirectlyrelatedtodevelopingsocialenterprise,canbeusedforbuildingthecapacityoftheorganizationinsuchawaythatskillsandexpertiserequiredstartabusinessventurearedeveloped.

Examplesofthesegrantsare:

•PartnersinOrganizationalDevelopment(POD)grantsavailablethroughtheCentreforSustainability.www.centreforsustainability.ca(Page53)TheseincludePOD,ArtsPOD,andEnviroPOD.PODgrantsprovidefundstohireconsultantswhocangivetechnicalassistancetoagenciesengagedinstrengtheningtheirorganization,adaptingtochangeandrespondingtodiversity.

•TheCommunityEconomicDevelopmentTechnicalAssistanceProgram(CEDTAP)fundedbytheMcConnellFamilyFoundationandCareltonUniversitysupportsearly-stageandmaturecommunityeconomicdevelopmentorganizations.www.carleton.ca/cedtap(Page61)CEDTAPgrantscanbeusedtoassisttheorganizationstoaccesstechnicalassistance,tofacilitatelearningexchangesandtoacquirecriticalcomputerresourcesandtechnicalsupportinordertoengageincommunityeconomicdevelopment.CEDTAPgrantsareseedgrants,thereforeotherfinancialcontributionsarerequired.

Forexample,Eco-LumberCo-operative(Page42)receivedaCEDTAPgrant.ThiswastoppedupbyagrantfromtheMountainEquipmentCo-opandsomeoftheexecutivedirector’spersonalfundsandwasusedtowritethebusinessplanfortheco-operative.

MoreinformationaboutrelevantgrantingbodiescanbefoundonPage53.

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Venture PhilanthropyVenturePhilanthropyisnew.ThePeninsularCommunityFoundation,SanFranciscoclaimstohavefirstusedtheterm“venturephilanthropy”in1984.Itisaconfusingarea,infact,

“TheventurephilanthropyfieldissodiverseandunsettleditresemblestheWildWest.”-MarioMorino,MorinoInstitute

Venturephilanthropistsalwaysviewgrantsas“investments,”andcalltheorganizationstowhichtheygivemoney“investees.”Theymakelongterm,usually3-6year,commitmentstoanorganizationand,duringthattime,workinpartnershipwiththeorganizationprovidingbusinessskillsandtechnicalassistance.Venturephilanthropistsusesocialoutcomesmeasurestoassessthesocialimpact.

Examplesofventurephilanthropistsare:

•BCTechnologySocialVenturePartners(BCTSVP),acharitablefoundationcreatedbyindividualsinBC’stechnologyindustries,whichsupportsinnovativenon-profitgroupsservingchildren,womenatrisk,andpeoplelivinginVancouver’sDowntownEastside. http://www.bctsvp.org(Page61)BCTSVPprovidesacombinationofgrants,technicalexpertiseandentrepreneurialacumen.

AnexampleofventurewhichisworkinginpartnershipwithBCTSVP,isthesocialpurchasingportaldevelopedbyFastTracktoEmployment.Thisportalwasdevelopedtoencouragebusinessestoadapttheirpurchasingandhiringpracticestoincludeasocialvaluecomponent,specificallybyhiringcompaniesthatparticipateinFTE’sprogram.ParticipatingcompaniescommittobuyingfrombusinessesthathiregraduatesfromFTE’sDowntownEastsidetrainingnetwork,andtohirequalifiedapplicantsfromthatpool.Inadditiontosignificantgrants,BCTSVPcontributedtechnicalassistanceinsystemdesign,businessconceptdevelopment,policyandimplementation,marketingandpromotion,andwebsitedesignandhousing.

•Apartnership,betweentheVancouverFoundation,VancityCommunityFoundation,CoastCapitalSavings,UnitedWay,andthefederalgovernmentthroughWesternEconomicDiversification,hascreatedtheEnterprisingNon-profitsProgram(ENP).ENPisafundingprogramwhichprovidesmatchinggrantstonon-profitorganizationsinBCthatareinterestedinstartingorexpandingabusiness.Attendanceatanorientationprogramisrequired.(Page62)

http://www.coastcapitalsavings.com/documents/ProgramDescriptionFeb05.pdf

Forexample,AtiraWomen’sResourceSocietyreceivedagrantfromtheEnterprisingNon-profitsProgramandmatchedthiswithfundsoftheirowntohiretheInstituteforMedia,Policy,andCivilSociety(IMPACS)–itselfasocialenterprise–todeveloptheirmarketingplan.

5FromCharityVillagehttp://www.charityvillage.com/cv/ires/ires12.htmlMorinoInstitutehttp://www.morino.org

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1.3 Equity Investment for Social Enterprise

1.3.1 Equity Investment

Ownershipofaconventionalbusinessisoftendividedintoequalpartsorshares. Thesesharesareownedbyshareholders.Whenthecompanyisamakingprofit,shareholdersreceivedividends,representingtheirshareoftheprofit.Thenumberofsharesaninvestorholdsreflectstheamountofmoneyinvestedandrepresentstheirequity.Theshareholdersreceivefinancialrewards,ordividends,inaccordancewiththenumberofsharestheyholdi.e.inanequitablemanner.

Equity investment isthemoneyaninvestorputsintothebusinessinreturnforanownershipinterest.

Equityinvestorscanbeactiveorpassive.Passiveinvestorsarethosewhoarewillingtotakelittlepartinthemanagementofthecompany.Activeinvestorsexpecttoplayahands-onroleintherunningofthebusiness.

Investorsputtheirmoneyintoabusinessbecausetheyexpectittodowell,howeverifthereisnoprofittheshareholdersdonotmakeanymoney.

Whileloancapitalrequiresinterestpaymentsregardlessoftheprofitabilityofthebusiness,equitycapitaldoesnot.Forthisreason,conventionalbusinessesraiseasignificantpartoftheircapitalneedsintheformofequityratherthanthroughdebt.Thesamereasoningappliestosocialenterprise.

1.3.2 Venture Capital

Venturecapitalistslookforequityinvestmentsthataregoingtomakethemaveryhighinterestrate–or return on investment.Thereturnoninvestmentistheprofitorlossresultingfromaninvestment,usuallyexpressedasanannualpercentagereturn.

Venturecapitalisneededbyenterprisesthatareunsecuredandhaveunprovenearnings.Venturecapitaloftencomesfromapoolofinvestorswhoarewillingtoaccepthighrisksinexchangeforahighrateofreturn.

Conventionalventurecapitalcompanieslookforpromisingstart-uporexpandingbusinesseswhichmaybeabletogrowquicklyandproducesignificantprofits.

Someventureswillsucceed,somewillfail,andventurecapitalistcompanieswanttomaximizethechancesofsuccess.Therefore,theyareactiveinvestorsandwanttoplayamajorpartinthestrategicmanagementofcompaniesinwhichtheyinvest,typicallybybecomingdirectors.

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Venturecapitalistcompaniesalsolookforexitstrategies,thatistheylookforwaystoextracttheirinvestmentafterafewyearsandmoveon.

Whentherelationshipworks,thecloseinvolvementofaventurecapitalcompanywithaneworexpandingbusinesscanhelpthebusiness.However,noteveryrelationshipbetweenanentrepreneurandaventurecapitalcompanyworkswell.

Applyingtheventurecapitalconcepttosocialenterpriseisverynew,emergingattheendofthe1990s.

RenewalPartnersisanexampleofaventurecapitalcompanyinvestingwiththegoaloflong-termpreservationandsustainabilityinBritishColumbia.Theirprimaryfocusisexpandingconsumeraccesstosociallyresponsible,solutions-orientedservicesandproducts.Wheninvestinginabusiness,RenewalPartnersreservestherighttoputarepresentativeontheboardofdirectors

http://www.renewalpartners.com(Page65)

RenewalPartnerspurchasedinvestmentsharesinEco–LumberCo-op(Page42).

1.3.3 Angel Investors and Social Venture Capital

Thename“angels”wasoriginallygiventothosewhowerepreparedtohelpthetheatricalprofessionbyinvestinginnewproductions.

Angelinvestorsareprivateinvestorswhoarewillingtoputtheirmoneyintohigh-riskventures.Angelinvestorsoftenformapoolofinvestorswhoarewillingtoaccepthighrisksinexchangeforahighrateofreturn,however,theycanalsobeindividualinvestors.

SurreyDeltaImmigrantServicesdevelopedanESL(EnglishasaSecondLanguage)schoolthatwouldserveasarevenuediversificationstrategy.TodothisSDISScreatedaseparatecorporation.FriendsandsupportersoftheSociety-“theSociety’s“angels”-purchasedpreferredsharesindenominationsof$1000,providingtheSocietywithsignificantequity.

2. DEBT

2.1 What is Debt?

Fundamentally,debtisanamountthatisowed.Debtisincurredwhenaloanismade.Theamountoftheloaniscalledtheprincipal.

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Thecostofborrowingthemoneyistheinterest,whichisusuallyapercentageoftheprincipal.Theinterestchargedreflects:

•Therisktothelender.Ifthemoneyistobespentonalowriskbusiness(provenmarket,provencompany,provenmanagement)theinterestratewillberelativelylow.Ifitisahigh-riskbusiness(unprovenmarket,unprovencompany,unprovenmanagement)theinterestratewillberelativelyhigh.

•Howquicklythelendercangetthemoneyback.Iftheloancaneasilybereclaimedinashortamountoftime,theinterestratewillbelowerthanifthemoneycannotbepaidbackformanyyears.

Loansareoftensecured.Thismeansthattheborroweroffersanasset.Anassetisanyitemofvalueownedbythebusinessandcanincludecash,stock,inventories,property,andgoodwill.Theborroweragreesthatthelendercantaketheassetiftheloanisnotrepaid.Theassetthatisofferedassecurityisknownascollateral.

Whenabusinessincursdebt,itacquiresaliability.Inadditiontowhatisowedtolenders,otherliabilitiescouldbemoneyowedtosuppliers,wagesowedtoemployeesandtaxesowed.

Equityinvestmentrequiresabusinesstopayreturnswhichvaryinrelationtotheprofitabilityofthebusiness(andwhichcanbeveryhigh.)Equityinvestorscanwanttobeactiveinthemanagementofthebusiness.Forthesereasons,someentrepreneursprefertousedebtfinancingbecauseloansrepaymentsarecheaper,areusuallyinfixedamountstobepaidonpresetpaymentdatesandlendersdonotwanttobeinvolvedintheoperationofthebusiness.

2.2 Conventional Debt Financing

Conventionaldebtfinancingissometimesreferredtoas“senior”debtasitisthedebtthatisrepaidfirstifthereisabusinessfailure.

Overdraft protection Overdraftprotectioncoversshortfallsinthebusinessaccountuptoanapprovedlimit.Interestischargedonlyontheamountborrowedandtheratesarecompetitive.Monthlyadministrationfeesmaybecharged.

Credit cardsBusinesscreditcardsprovideshort-termloansforsmallerpurchases.Interestratesareusuallyhighbutthereisnointerestifthebalanceispaidoffeverymonth.Manysmallbusinesspeoplerelyextensivelyoncreditcardswhentheyaredevelopingtheirbusinesses.

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Financing For Social enterprise continued...

Operating Line of CreditAnoperatinglineofcreditisaloanwithasetlimit.Thebusinesscandrawonthelineofcreditwhenneeded.Interestratesarelowerthanmostcreditcardsandsomeloans,andinterestisonlypaidontheoutstandingbalance.Therearenofixedpaymentsexceptforamonthlyfeeandinterest.Thebusinesshastheoptionofpayingdowntheloanasitcanaffordtodoso.Propertyorotherassetsareusuallyrequiredtosecureanoperatinglineofcredit.

PotluckCaféandCatering(Page36)obtainedanoperatinglineofcreditfromVancitySavingsCreditUnion.

Term LoansAtermloanisafixedamountofmoneywhichisborrowed,overafixedperiod.Thisfixedperiodiscalledthetermoftheloan.Termloansareusuallyusedtocoverexpensiveitemssuchascapitalequipment,realestate,orrenovations.Theyhaveestablishedmonthlypayments.Thelenderwillaskforsecurityfortheloan(equityinthebuilding,cash,equipment,etc.)Ifapaymentismissed,thelenderhastherighttodemandimmediaterepayment.

Themostcommontermloanstakenbynon-profitsandsocialenterpriseareintheformofmortgages.

2.3 Debt Financing Secured by Socially Responsible Investments

Newwaysofinvestingaremakingitpossibleforpeopletoinvesttheirmoneysothatitwillhavemaximumsocialandenvironmentalimpact.Someofthesenewinvestmenttools,suchasethicalfunds,arenotavailabletosocialenterpriseastheyareinvestedinpubliccompanies.

However,VancitySavingsCreditUnionhasaninnovativeprogramcalledSharedGrowthDeposits.VancityofferstwotypesofSharedGrowthTermDeposits–CashableorFixedTerm.Vancitymanagestheseinsuchawaythattheyreturnsocial,environmentalandeconomicbenefitstolocalcommunities.

Inaddition,theinvestorcanreceiveamarketrateofreturnorcanchooseanyratebelowmarket.Theinteresttheygiveupispooledandthenusedtoprovideaccesstocredit,orreducedinterestonloansforlocalcommunitygroups.

Eco-LumberCo-opreceivedaloanthatwassecuredbythesepooledfunds.(Page42)

continued...

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continued...

2.4 Community Debt Financing

Communitydebtfinancingisgearedprimarilytowardshigh-riskventuresinruralareas.TheexceptionisPartnersinCommunityHelp(PEACH)intheDowntownEastsideofVancouverwhichoffersaformofcommunitydebtfinancing.

CommunityFuturesDevelopmentCorporations(CFDCs)(Page69)throughoutruralBCprovidebusinesscounsellingandmakeloansofuptoamaximumof$125,000tonewandexistingbusinesses.LoansreceivedfromaCFDCarefullyrepayableatcompetitiveinterestrates.

BecausetheboardsofCFDCscomefromthecommunity,theloanstheymakereflectlocalknowledgeoftheneedsofthecommunity.CFDCsarebecomingincreasinglyawareofthefinancingneedsofsocialenterprise,however,someboardsaremuchmoreconservativethanothers.

In2005,CFDCofSouthFraserobtainedfundsfromWesternEconomicDiversificationtosetupacentreforsocialenterpriseintheAbbotsfordarea.ThiswillbecomeasourceofloansandexpertiseforsocialenterpriseintheFraserValley.

2.5 Program Related Investments (PRI)

Somefoundations,insomecircumstances,willmakeloanstonon-profits,theseareknownas“ProgramRelatedInvestments.”ThereareveryfewfoundationsinCanadawhichdothis,VancityCommunityFoundationisoneofthem(Page59).

StrathconaCommunityDentalClinic(Page30)hadacombinationofatermloanandanoperatinglineofcreditfromVancityCommunityFoundation,whichmadeitpossiblefortheClinictooperateforseveralmonths.

3. WHEN THE LINE BECOMES BLURRED BETWEEN DEBT AND EQUITY

Therearesophisticatedformsofequityanddebtfinancingthatblurtheboundariesbetweenthetwo.

3.3.1 Subordinated Debt

Subordinateddebtisalsoreferredtoassub-debtfinancing,mezzaninefinancing,riskcapitalorgrowthcapital.Subordinateddebtconsistsofloanswhichareunsecuredbutwhicharebasedontheestablishedcashflowofabusiness.

page18



Subordinateddebtisahybridblendofequityandconventionaldebt.Similartoequity,subordinateddebtisusuallynotsupportedbycollateralassets.Likeconventionaldebt,subordinateddebttypicallyrequiresregularmonthlypaymentsofprincipalandinterest.

Subordinateddebtranksbelowseniordebtwhenitcomestoclaimsonassets.Inthecaseofdefault,creditorswithsubordinateddebtarenotpaidoutuntilaftertheseniordebtholdersarepaidinfull.

Ecotrust,VancityCapitalCorporationandCoastCapitalSavings(throughtheirRisingTidefunds)offersubordinateddebt.

Forexample,Eco-LumberCo-operative(Page42)receivedaloanfromEcotrust(withmoneyfromVancityCapitalCorporation)(Page72)whichfunctionslikeequityinthattheinterestrateistiedtotheamountofsales.Whenthesereachacertainlevel,itwillbefinanciallyprudenttorepaytheloan.

3.3.2 Convertible Loans6

Aconvertibleloanisfirstandforemostaloanandhastobepaidbackwithinterest.

Typically,theconversionfeaturegivesthelenderanoptiontoconvertalloraportionoftheoutstandingprincipaloftheloanintosomeformofanequitypositionintheborrower’scompany.Initsmostbasicform,thelenderhasreservedtherighttoexchangehisorhercreditorpositionwiththecompanytobecomeanownerinthecompany.

Theborroweriswillingtoprovidethelenderthatoptioninexchangeforsecuringmorefavorabletermsontheloan.Forexample,theborrowercouldaskforanycombinationofconcessions,suchas:noclosingcostsonthedeal,noprepaymentpenalties,alowerinterestrateand/or“paymentvacations”withinthetermoftheloan.(Theseareoftenrequestedfortimeswhenthecompanyanticipatessignificantfluctuationsincashflow).

SocialCapitalPartnersoffersconvertibleloans(Page66).

4. “PATIENT” CAPITAL

“Patient”capitalcanbeeitherequityordebt.

Banksandotherlenderstendtothinkin3-5yeartermsforloans.Venturecapitalcompaniestendtolookforshort-termgrowthandprofits,andfastexitstrategies.Bothcanworkagainstlong-termdevelopmentofsustainablebusinesses.

6www.entrepreneur.com

continued...

page19



continued...

Bycontrast,“patient”capitalimpliesalong-termdebtorfinancialinvestmentwithtermsandconditionsthatdonotrequirequickrepaymentoradesiretomovethemoneyoninaspeedyfashion.

Manysocialenterprisesrequire“patientcapital.”

5. BE AWARE OF THE FINANCIERS’ INTEREST

Aswasdiscussedatthebeginningofthisguide,itisimportanttokeepinmindtheobjectivesofthefinancierandtotrytounderstandwheretheprofileofthesocialenterpriseseekingfinancingfitsinthecomplicatedarrayoflender/investorinterests.Thetableonthefollowingpageisanaidtothisunderstanding.

page20



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Demystifyingloandecisionmakingprocessinvolveslookingatthetransactionfromthepointofviewofbankers.Bankerswilllookatthecharacteroftheborrower,thecapacityofthebusiness,theavailablecollateral,thecapitalavailableandeconomicconditions.ThislistisknownastheFiveCsofLending.Somebankershaveaddedadditional“Cs”howeverthefive“Cs”coverthefundamentals.Oncethebankerhasinformationabouteachelement,theloandecisionisbasedonthebalancebetweenthem.

1. THE FIVE C’S OF LENDING

CharacterLendersarealwaysconcernedwiththecharacteroftheirborrowers.Aretheyhonest?Willtheymakealltheeffortneededtomeettheirfinancialobligationtothelender?Forthemostpart,thereisnotaquantifiablemeasuretojudgecharacter.However,alenderwilllookatqualifications,experienceandmanagementskills,aswellastheborrower’spastpaymentexperience(especiallywiththelender)andreviewacreditbureaureport.Astheassessmentofcharacterislargelysubjective,ithasalottodowiththegeneralimpressionaborrowermakesonthelender.Itisimportanttobepreparedbeforemeetingalendersothatyoucanmakeagoodfirstimpression.

CapacityThelenderwilllookatthefinancialabilityofthesocialenterprisetopaybacktheloanbasedonthehistoryofthebusiness,on-goingcashflow,andassets.Profitabilityandcashflowareofcriticalinteresttothelenderwhowillbelookingatwhetherthebusinesshasthecashflowtomeetthedebtobligationsintheshorttermandtheprofitabilitytomeetdebtobligationsinthelongterm.

CollateralCollateralaretheassetsthatthelenderusesasabackuptorecoverfundsiftheenterprisedefaultsonaloan.Theliquidationvalueoftheseassets(theamountofcashanassetwouldrealizeifsold)mustbesufficienttopaybackthelenderincaseofthebusinesscollapses.Inmanycases,thecollateralistheasset(house,vehicle)thattheloanisusedtopurchase.

Capital Thisisreallythesameasequity.Asequityincreases,themoneythathastobeacquiredthroughloansdecreases.

Financiers love doing “deals.” Loans and investments are made according to a blend of a number of factors such as character, track record, capacity to grow, collateral, market conditions and so on. Each combination of factors is unique.

page23

What do Bankers Want?


Loansrequireregularpaymentsandarenotflexible.Ifthecashflowofabusinessislowonemonth,theloanpaymentstillhastobemade.Thereturnonanequityinvestment,ontheotherhand,isflexibleandvarieswiththesuccessofthebusiness.Itisthereforegenerallypreferabletohaveaslittledebtandasmuchequityaspossible.

Forthisreason,bankersareparticularlyinterestedintheDebt to Equity Ratio.DebttoEquityRatioisalsoreferredtoasDebtRatio,FinancialLeverageRatioorLeverageRatio..Forbankers,theupperacceptablelimitofthedebttoequityratioisusually2:1,withnomorethanone-thirdofthedebtbeinglongterm.Aswellasthefinancialstabilityitprovides,bankerswanttoseeasignificantlevelofequitybecause,tothem,thisrepresentsthecommitmentoftheborrower.Iftheborrowerhascreatedsignificantequityinthebusiness,bankersreasonthatthiswillprovidetheborrowerwiththemotivationtoputintheenergyandtimeittakestomakethebusinesssuccessful.

ConditionsConditions refertothenationalandlocaleconomy,theindustry,andthebankitself.Thisisoftendifficulttoquantifybutthelenderwillbethinkingabout:

•generaleconomy,nationally,provinciallyandlocally•interestrates.•economicconditionsthatexistforthebusiness.Whatarepriceprospects?Whatproblemsdoes

theindustryface?•thefinancialinstitution’scurrentleveloflossesandproblemloans•thefinancialinstitution’swillingnesstoriskmakingloansinsomeenvironments.Forexample,

somefinancialinstitutionslimitthenumber,and/oramount,ofloansmadeinone-industrytowns.Evenifthereisastrongmarket,afinancialinstitutionwhichhasalreadymadesignificantloanstobusinessesinacertainmarketmaynotbewillingtomakeanyfurtherloansinthatsector.

2. LOAN DECISION MODEL

Oncethelenderhasgatheredtheinformationaboutcharacter,capacity,collateral,capital,andeconomicconditions,eachelementhastobeweighedagainsttheothers.Theresultingdecisionwillreflectthebalanceofthesefactors.

Thediagramoftheloandecisionmodelonthefollowingpageprovidesapictureofthebalancingoftheelements.Thediagramisofabeambalancedonafulcrum.Asweightisaddedtoeitherside,thebeamwilltiptoonesideortheother.Aperfectlybalancedbeammeansthattheelementsareinbalanceanditisclearthataloancanbeapproved.Inlifehoweverthebeamisrarelyperfectlybalancedandthedecisionisajudgementmadebythebanker.

TheloandecisionmodelinthediagramcontainsfivepiecesthatcanroughlybeequatedtotheFiveC’sofLending.

page24


What do Bankers Want? continued...

Management ManagementmeansthesameascharacterintheFiveC’s.Thebankerusingthismodelisparticularlyinterestedintheexperience,education,skills,andcapabilitiesoftheborrower.Inthismodel,thebankerbelievestheidealwouldbeapersonwhohasrunthiskindofbusinesssuccessfullyinthepast.

Repayment Repaymentmeansthesameascapacity.Thebankerusingthismodelislookingatthepastperformanceofthebusiness,financialforecasts,stability,andflexibility.Inthismodel,thebankerbelievesthattheidealwouldbeabusinessthathasthreeyearsofsuccessfulpastperformance.

EquityEquitymeansthesameascapital.Thebankerusingthismodelislookingatthecashcontributionsthatcanbemadebytheborrower.Forthisbanker,theidealwouldbeabusinesswhichhasathirdoftherequiredcapitalinequity.

SecuritySecuritymeansthesameascollateral.Thebankerusingthismodelislookingattheliquidationvaluesofthepropertyandequipmentownedbythebusiness.Forthisbanker,theidealwouldbeabusinesswhichhasenoughequityinthebuildingsandequipmentthat,shouldtheyhavetobesold(liquidated),theamountoncashrealizedwouldcover100%ofanymoneyowingtothebank.

The Personal/Environment/Policy TriangleThePersonal/Environment/PolicyTriangleisroughlythesameasconditionsintheFiveC’sofLendingand,inthisloandecisionmodel,isthefulcrumuponwhichtheotherelementsarebalanced.Thediscretionarypowerofthebankerliesinthisarea.

•Personal referstothepersonalopinionsofthelender,hisorhervalues,prejudices,andprevi-ousexperiencerelatedtothetypeofloaninquestion.

•Environment referstothegeneraleconomy,interestrates,economicconditionsthatexistforthebusiness,thefinancialinstitution’scurrentleveloflossesandproblemloansandso.

•Policy referstoanybankorgovernmentpoliciesthatapplytotheloaninquestion.Suchpoliciesmayapplyinanyoftheareas,thatistheareasofmanagement,repayment,equity,orsecurity.Forexample,

•Management&Repayment:theremaybeapolicythatwaivesorreducestherequire-mentforpreviousexperienceand/orpastperformanceindicatorsinthecaseofyouthentrepreneursorentrepreneurswithdisabilities.

•Equity&Security:theremaybeapolicytorequirelessequityand/orsecurityforloanswhicharebackedbyaloanlossreservefromWesternEconomicDiversification.

page25

What do Bankers Want?


continued...

Loan Decision M

odel: Reprinted with perm

ission from Sunrich M

anagement Inc.

Loan Decision M

odelCom

ponent value and balance

Managem

ent

ExperienceEducationSkillsCapabilities

Has run this kind of business sucessfully

Has three years of successful perfom

anceAverage one third equity

100% covered on

liquidation value

Past performance

ForecastsStabilityFlexibility

CashContributions

BuidingsEquipm

ent etc,at liquidationvalues

Repayment

EquitySecurity

Personal

Environment

Policy

From Fundamentals of CED (with slight modifications.) Pieter van Gils, Making Waves, Vol11, No.4.Reproducedwiththepermissionoftheauthor.

Tip #1 - Form a board of directors.Orbarringthat,anadvisoryboard.Collectexperienced,prominent,successfulbusinesspeopleandassociatethemwithyourbusiness.

Thesepeoplecanbevaluableforacoupleofreasons.First,theywillformarichpoolofadviceandexperienceyoucanusetohelpyoubuildasuccessfulbusiness.Butsecond,theywillalsohaveanimpactontheimpressionsofthepeopleyouwanttobringaslendersorinvestors.Aboardcomposedofpeoplehighlyregardedinthecommunityoryourindustrygivesyoualotofcredibility.

Thetruthis,you’llneedaboardeventuallyanyway.Youmightaswellbenefitfromhavingoneupfront.

Tip #2 - Prepare a Business Plan.Thismayseemprettyobvious,butthereareafewimportantpointstobemadehere.

First,youneedtoknowyourbusinessplanbackwardsandforwards,insideandout.Ifyou’vewrittenityourselfthisisagiven.Ifyouhavehaditpreparedbyothers,thiswilltakesomeworktomakesureyouknoweverythingthatisinit.Youdon’twanttobestumpedbysomeinnocuousquestionsfromsomeonereviewingit.Peopleinvestingorlendingmoneywanttofeelthatyouareintopofeveryaspectofthebusiness.

Second,takethetimetowriteanexecutivesummaryyourself.Itisthesectionthatgetsreadthemost.Itneedstoprovideareallyhigh-leveloverviewthatemphasizesthecompany’spotential.Thepersonwhowrotetheplanwilltendtosummarizethedetailinsteadofthevision.Thesummaryneedstoprovidetheessenceofwhatyoudo,forwhomyoudoit,andhowbigthemarketis.Includesomeinformationonthecalibreofthetemyouhaveassembledtoaddconfidencethatthepotentialcanactuallybeachieved.Workthissummaryoverandover,andoveragain–getitdowntoonepage.

Onceyouhavesweateditdowntoonepage,writeanotherversioninoneparagraph.Thissuccinctexpressionofwhatyoudoisinvaluableforletters,telephonecalls,presentations,andgeneralcontactsyouhavewithpeopleaboutyourcompany.Youwilluseitoverandoveragain.

Thispageandoneparagraphwillalsogetplagiarizedbyyourbankersandinvestors.Theyallhaveinvestmentcommittees,quarterlyreports,andpartnerstowhomtheymustexplainyourbusiness.Havingyourwordsattheirdisposalmakestheirlifeeasierandprovidesyouwithsomeconsistencyofmessageinthirdpartydiscussions.

page27

tips For raising capital


Tip # 3 - Know how much you want. Putsomedetailtothefigure.Ifyouareatanearlystagebeforeprofitability,explainitintermsofthemonthly“burnrate”:thecashyou’reburningmonthlytokeeptheoperationontheintendedscaleandprofitability.Somehow,itisawholelotmoreappetizingtoinvestin“rampingup”growthinsteadoffinancinglosses.Ifitisyourintentiontoexpandanexistingprogramorventure,factorinahealthymarginofworkingcapital.Thinkbig.Makeprovisionsforthepossibilitythatthingswillgomuchbetter–ormuchworse–thanyouexpect.Agood(ifincrediblysimplistic)ruleistotakewhateveramountyourcashflowprojectionsyouneedthendoubleit.

Tip # 4 - Use a professional to help you.Intheunlikelycasethatthatyouloveraisingmoneyandaregoodatit,ignorethistip.Youmayactuallydobetterdoingthejoballbyyourself.However,mostbusinessownersraisemoneyinfrequently,lackconnectionsinthefinancialindustry,anddon’tlikethetask.

Withalittlelegworkyoucanfindaprofessionalwhounderstandspreciselythefinancingyouneed,whetheritisequityorsubordinateddebt.Tofindsuchaperson,askquestions.Forwhomhavetheyraisedmoney?Withwhichinvestorsandlendershavetheyplaceddeals?Phonethesepeople.Askforreferences.Youwilllearnvolumes.

Again,youarelookingforsomeonegood.Aprofessionalcantranslatetheinformationyouprovideintothekindoflanguageafinancierwantstohear.Peoplewhodon’traisemoneyregularlyforclientsinyourindustrywillbelearningonyourtabandwillbeoflessbenefittoyou.

Tip #5 - Pitch the deal in person.Youareaskingforanimportantsumofmoney.Whatyouneedtorememberisthatmostpeopleinthefinanceindustryareverybusyandaretryingtowadethroughscoresofproposalstofindthe“the”goodone.Mailinginyourbusinessplanissheerlazinessandwilllikelygetyounowhere.

Togetyououtofthemorningmailandintotheappointmentbook,pitchthedealinperson.What’smore,pitchittothepersonwhowillbereviewingyourtypeofproposal(i.e.realestateorworkingcapital,seedmoneyorcommercializationetc.)

Tip #6 - Don’t discount equity financing because you are too small.Peopleoftenthinktheyneedtobearelativelylargeorwell-establishedcompanytoattractequityfinancing.Infact,thecurrentsizeofyourcompanyisnotrelevant.Ofinteresttoaninvestorarethepotentialapplicationsofyourtechnology,thesizeofthemarket,andyourvisiontocapturethemarket.Investors’returncomesfromthefuture,notthepresent.Sotheearliertheyfindyou,infact,themore“upside(potentialprofit)theyhave.Butagain,doyourhomeworksoyoucangetourbusinessinfrontofinvestorswiththatearlystageappetite.

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tips For raising capital continued...

Tip #7 - Treat the task of raising funds like the selling of your products.Wheninsearchofequity,don’timagineyourselfgoingonbendedknee.Approachitasyouwouldthechallengeofsellingtoamajorcustomer.Apartfrompeoplewhohappentoberelatedtoyou,nobodyisinvestingorlendingyoumoneyoutofthegoodnessoftheirhearts.Whensomeonegivesyoumoney,itisbecausethereissomethinginitforthem.Theythinktheycanmakemoneyfromwhatyouareselling,namelyyourcompany.

Ifthefinanciersays“no,”don’ttakeitpersonally.Youhaven’tmadethesale,that’sall.Ithappensallthetime.It’sneitheryounoryourbusinessbeingrejected–theproposalsimplydoesnotfitwhatthis“client”wantsto“buy”.Goontothenextpotentialbuyer.

Ontheotherhand,unlessthesepeopleinvestandlendtheydon’tmakeanymoney.Iftheydon’tmakemoney,theregoestheBMWandtheRolex.Believeme,theyaremotivatedtododeals.

Tip #8 - Find out who has done a good deal lately.Bankersandventurecapitalistsarelikeanythingelseinthisworld:therearegoodonesandtherearenot-so-goodones.Soaskaround.Ifyoucanfindagoodonewhodealsinyourindustryorcanunderstandit,youwillbemilesahead.Ifyoufindyourselfgoingintoaplaceaskingtoseejustanybody,thenyoureallyhaven’tdoneyourhomework.Youwouldn’tpickadoctororevenlawyerthatway.Don’tdoitwhenyouareoutraisingmoney.

Ifyoucangetsomeonewitharelativelystrongbusinesstorecommendafinancier,askyourcontactifyoucansaywhorefereedyou.Sometimesthatassociationitselfwillgetyouabetterfirstimpression.

Tip #9 - Avoid getting hung up on valuation too earlyOnethingaboutventurecapitalistsisthat,bytheirnature,theylovetonegotiatethemechanicsofthedeal.Thebusinesspersonisoftensensitivetothechunkofownerships/hewillhavetogiveup.Itisareapforbothpartiestoworrytoomuchaboutvaluation–abouthowmuchyourcompanyisworth-especiallyintheearlystages.

Therearesomanywaystoresolvevaluationissues,thecomplicationsmightlosethedealifyoupushittoohard.Instead,hookinvestorsonyourpotentialopportunity.Showthemwhereyouaregoing.Ratherthangettingobsessedaboutwhereyouare.

Valuationisgoingtobeanissueeventually.Whenyou’relookingformoney,however,it’smoreimportanttogenerateinterest,togettherightamountofmoney,andtogetitfromtherightpeople.

tips For raising capital


continued...

StrathconaCommunityDentalClinicoffersbarrier-freedentalservicestochildrenfromacrossVancouver.Althoughtheclinicisaccessibletoanyone,itspecializesinservingimmigrant,low-incomeandaboriginalchildren,whoarestatisticallymorevulnerabletodentaldecay,whichisthemostcommonchronicdiseaseofchildhood.Theprojectoriginatedwithacommunityorganizingprocessthatrecognizedthepoorlevelofdentalhealthoflocalchildrenanditseffectonschoolreadinessandschoolsuccess.

TheStrathconaHealthSocietydevelopedtheClinic.ThesocialmissionoftheSocietyistomeasurablyimprovethedentalandoverallhealthofchildreninVancouver’sDowntownEastside.AccordingtoKylePearce,aSocietyboardmember,theclinicstartedout“withnothingbutafewgoodideasandalotofattitude!”

From1997–2002StrathconaandSeymourelementaryschoolsrankedamongVancouver’sworstfiveschoolsintermsofthepresenceofvisiblecavitiesinkindergartenandgrade5students.Althoughtheprovincial“HealthyKids”programprovidesbasicdentalbenefitsforchildreninlow-incomefamilieswhoarenotcoveredbyfederaloremployersponsoredmedicalinsuranceplans,thesefamiliesareoftennotabletomakeuseoftheprogram.TheStrathconaHealthSocietyidentifiedthatthebarrierstogettingdentalcareincludeaccesstoinformation,languagebarriers,accesstoadentist,andincomerelatedissuesincludingthefactthatmanyparentsworklonghoursatlowpayingjobswithlittleflexibility.

ThechallengefacedbytheStrathconaHealthSocietywastofindawaytomakedentalcareaccessibletolowincomefamilies,tofinddentalprofessionalsinterestedinworkinginthisenvironmentandtodothisisinafinanciallysustainablemanner.TheirsolutionwastoprovidedentalservicesatStrathconaElementarySchoolonafeeforservicebasis.

Financing

Advice, Support and Technical AssistanceDevelopingafinancingstrategyfortheClinicwasachallenge.InitialcredibilitycamefromtheboardoftheSociety,whichincludedthechairofpediatricdentistryatU.B.C.,communityhealthadvocates,schoolprincipals,andparents.

BusinesscredibilitycamewiththesupportoftheVancitygroupofcompanies,whichinitiallyprovidedinformalbutintensive,assistancethroughVancityCommunityFoundation.Thisinitialsupportincludedconfirmationoftheviabilityofthebusiness,supportindevelopingdocumentsforthebusinessplan,andmentorshipinthefirstfewmonthsofoperations.Later,technicalassistancewasprovidedbyaninvestmentmanageratVancityCapitalCorporationwhobecameamemberoftheSociety’sboardofdirectors.

Strathcona Community Dental Clinic

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case Study #1

Start Up OneofthefirsttasksfortheStrathconaCommunityDentalClinicwastofindsuitablespace.Athree-yearlease,witharenewaloptionforanadditionalthreeyears,wasnegotiatedwiththeVancouverSchoolBoard,for1,200squarefeetofspaceinthebasementofStrathconaElementarySchool.

TheStrathconaHealthSocietywasabletodevelopafinancingstrategythatconsistedofbothequity(donationsandgrants)anddebt(loans.)TheinitialinfluxoffundscamethroughtheVancouverAgreementbywayoftheWesternEconomicPartnershipAgreement(WEPA),theLotusLightCharitySociety(aBhuddistcharityorganization)andtheJohnHardieMitchellFamilyFoundation.AloanfromtheVancityCommunityFoundation–acombinationofatermloanandanoperatinglineofcredit–enabledseveralmonthsofoperations.Withthiscapital,theSocietywasabletomoveforward.

Furthermore,beforeopening,theSocietyconductedafundraisingcampaigntoprovideresourcesforfamilieswithnoabilitytopay.Thiscampaignraisedasignificantamountofmoney,primarilyfromLowerMainlanddentists.

Becoming SustainableAtabouttheyearandahalflevel,StrathconaCommunityDentalClinicwasservingover1,100clientsandtheboardrealizedthattherewasagoodchancethatthesocialenterprisecouldbecomesustainable.TheSocietyappliedfor,andreceivedagrantfromVancitySavingsCreditUnion,todostrategicplanningandinvestmentsincriticalareasofthebusiness.Thegrantisbeingusedtobuildbusinessexpertiseandacumen,toworkwithfunders,todevelopcommunityrelationsandtodevelopmarketingandpromotioninitiatives.WhiletheexpectationwasthattheClinicwouldhaveabalancedbudgetbytheendof2005,thatgoalwasachievedinthe2004fiscalyear.

Social ImpactTheStrathconaHealthSocietyprovidesdentalservicesforfamilieswhootherwisewouldnotbereceivingtreatmentorpreventioninformation.Inaddition,itengagesinthreepreventionactivities:aweeklyfluoriderinseprograminwhichalmost90%ofthestudentsareenrolled,class-basedpreventioneducation,andpublichealthpromotioninavarietyofcommunitysettings.

Inthefirstyearofoperations,threeyear-oldpatientswithover10cavities,and9year-oldswhohadneverbeeninadentalclinic,weretypicalpatients.Inaddition,theorganizationquicklyrealizedthatseniorshadtobeincludedasbeneficiaries,sinceseniorsareoftenresponsibleforchildcareinthearea.Initsfirstyearofoperations,theclinicreferredover30childrenforsurgeryundergeneralanesthetic(themostcommonreasonforchildrenreceivingsurgery).Inthepastyear,onlythreesuchreferralsweremade,indicatingthatearlyinterventionishavingapositivepreventiveeffect.

case Study #1


continued...

Inaddition,clinicstaffhastrackedstudentswhoinitiallyhavepoordentalhygiene,andinmostcases,thishasimprovedovertime.Finally,clientsbecomemoreaccustomedtothedentalsetting,andthishasreducedpatientanxietyarounddentaltreatments.

Withthesuccessofthesocialenterprise,andtheimpactonthedentalhealthofchildrenfromlow-incomefamilies,theStrathconaCommunityDentalClinicisbecomingamodelforothercommunitieswithsimilardemographics.

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case Study #1

Atira Property Management Incorporated is licensed under the Real Estate Act and provides a full selection of residential property management services to strata corporations, non-profit and co-operative housing societies, as well as tocommercial units.

ThissocialenterprisewasdevelopedbyAtiraWomen’sResourceSociety.TheSociety’smissionstatementis:

“AtiraWomen’sResourceSocietyisacommunity-basedorganizationthatsupportsallwomen,andtheirchildren,whoareexperiencingtheimpactofviolencecommittedagainstthemand/ortheirchildren.Througheducation,advocacy,andoutreach,Atiraisanactivevoiceinthestruggletoendviolenceagainstwomenandtheirchildren.Ourfeminist-basedphilosophyinformsallourworkwithourselves,eachotherandthecommunity.”

AtiraWomen’sResourceSocietyoffersbothresidentialandnon-residentialprogramslocatedinWhiteRock,Surrey,andtheDowntownEastside.Theresidentialprogramsincludefirststagetransitionhouses,asecondstagetransitionhouse,anemergencyshelterandpermanentsupportedhousing.

AtiraPropertyManagementwasdevelopedinordertocreateasourceofunrestrictedfundsfortheAtiraWomen’sResourceSociety.Itwaschosenasanenterprisebecause,astheresultofmanagingthetransitionhouses,secondstagehousingandsoon,AtiraWomen’sResourceSocietyhad,inthewordsoftheexecutivedirector“accidentallyacquiredexcellentpropertymanagementskills.”

Financing

Writing the Business PlanAtira’sfirstchallengewastowritethebusinessplan.TheSocietyreceivedagrantfromVancitySavingsCreditUnionandusedthefundstohireaco-opstudentfromUBCtoassistthemtodothis.Thestudentandtheexecutivedirectorworkedtogethertodevelopthebusinessplan.

UsingmoneyfromtheSociety’sreservedfunds;Atirathenconductedmarketresearchusing“inhouse”expertise.

Thenextstepwastodevelopthemarketingplan.TheSocietyappliedfor,andreceived,agrantfromtheEnterprisingNon-profitsProgram.AtiramatchedtheENPgrantwithfundsoftheirown,andhiredtheInstituteforMedia,Policy,andCivilSociety(IMPACS)–itselfasocialenterprise–todevelopthemarketingplan.

Atira Property Management Incorporatedwww.atira.ca


case Study #2

9co-opstudentisauniversityorcollegestudentwhoisworkingintheirfieldforasemester.Theyreceivecreditforthesemester.

Start Up Tocoverstartupcosts,AtiraPropertyManagementIncorporatedreceivedtwoloans:onefromAtiraWomen’sResourceSocietyandonefromVancityCapitalCorporation.

TheSocietyregardsthebusinessandmarketingplansascriticaldocumentsbecausetheyformedthebasisfortheapplicationfortheloanfromVancityCapitalCorporation.Theexecutivedirectorbelievesthatthisloanwasimportant,notonlyforthedevelopmentofthebusiness,butalsobecauseitputthecompanyonthesamefootingasotherpropertymanagementcompanies,thereforedeflectinganycriticismthat,asanon-profitsociety,Atiraenjoyedanunfaircompetitiveadvantage.

ThefirstmanagerofthesocialenterprisewasawomanwhohadbeenaresidentinaprogramofferedbytheSociety.SheenrolledintheRealEstateBoard’spropertymanagementcourseandreceivedapropertymanagementlicense.Tomakethispossible,theSocietypaidhertuitionfeesforthecourseandsalarywhileshetookthecourse.

ThesocialenterprisewaslaunchedonOctober5,2002.

ThedevelopmentstrategyinthebusinessplancalledforthepurchaseofotherpropertymanagementcompaniesaswellasthemarketingoftheservicesofAtiraPropertyManagementIncorporated.In2004,Atirapurchasedtheportfolioofanotherpropertymanagementcompanyandtookonitsstaff.

Becoming SustainableAtiraPropertyManagementisaheadofthetimelinesetoutinthebusinessplan.

InthemonthofSeptember2003,forthefirsttimeandalittlelessthantwoyearsafterthelaunch,AtriaPropertyManagementIncorporatedbroughtinmorerevenuethanitputoutinexpenditures.

Atiracurrentlyearnsaregularmonthlyprofit.Thecompanyintendstolookforotheropportunitiestopurchasesuitablepropertymanagementportfoliosas,andwhen,itcan.

AtiraWomen’sResourceSocietyhasrecentlydevelopedapartnershipwithSocialCapitalPartners,whichithopeswillassistthecompanytogrowtoscale.

ThenextstepsforAtira’ssocialenterpriseare:•torevisethebusinessplan.•todevelopnewthreeyearfinancialprojections.•tomovetheirVancouverofficeintomoresuitablepremises.•todevelopastrategyorpolicyfortheuseoftheprofit.Probablythiswillbeintheformofa

percentagesplitbetweenreinvestmentinthebusinessandfundswhichwillbepassedbacktoAtiraWomen’sResourceSocietytosupporttheSociety’smission.


continued...case Study #2

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Social ImpactTheexecutivedirectorofAtiraWomen’sResourceSocietyreportsthatthepublicitysurroundingthepropertymanagementcompanyhasraisedtheprofileoftheSocietyandtheworkitdoes.

ThepropertymanagementcompanyisnotyetdonatinganymoneytotheSocietyalthoughboardmemberswilldecideatthenextboardmeetingscheduledforMayhowmuchofthecurrentprofitwillbeturnedovertotheSocietyandatwhatinterval.ThepotentialforfundinghashadapositiveinfluenceonthemoraleoftheemployeesoftheSociety.ThedevelopmentofthesocialenterprisegivestheemployeeshopethattheSocietywillbesustainableinthefuture,thatwomenwhohavebeenabusedwillcontinuetoreceivehelp,andthatthestaffwillremainemployed.


case Study #2 continued...

10Binnersarepeoplewhocollectrecyclablebottles,cansetcfromrecyclingbinsorgarbagecontainersandwhoreturnthemrecyclingdepotsinordertoclaimtherefundabledeposit.11LovingSpoonfulisavolunteer-driven,non-partisansocietythatprovidesfreenutritiousmealstopeoplelivingwithHIV/AIDSintheGreaterVancouverarea.

Potluck Café and Catering is a social enterprise which operates in the DowntownEastside of Vancouver.

Potluck’svisionistohelptransformthelivesofindividualsinVancouver’sDowntownEastsidecommunityby:

•servingdailynutritiousmealstoover100arearesidentseachweekday–manyofwhomsufferfromHIV/AIDSorHepatitisC

•runningacommunitykitchenwhichprovidesnutritionalinformationandtheopportunityforarearesidentstoprepareamealandshareamealtogetherwithleftoversbeingtakenhomebytheparticipants

•providingfulltimetrainingemploymentforeleven,formallyatrisk,DowntownEastsideresidents.

Theseprogramsarefunded,almostentirelyfromrevenuesgeneratedbyPotluckCatering,afullservicecatering&eventplanningcompany.

Start Up ThePotluckCaféSocietygrewfromaninitiativeofa“youth-at-risk”employmentinitiativestartedbyUnitedWeCanin1999andfundedbyfinancialcontributionsfrom(then)HRDC.Throughthisinitiativestreetinvolvedyouthweretrainedandemployedtoprovidenightlyhotmealsforbinners10

Thesocialenterprisecameintoformthroughtheassistanceof:

•thedonationofunusedspacebythePortlandHotel•astartupgrantfromthe(then)MinistryofCommunityDevelopment,Co-operatives

andVolunteers,•agrantfromVancouverFoundationtopurchaseequipment•acontributionagreementwithHRDCfortraining

Thefirstcontract–althoughthiswassubsidizedbyPotluck–waswithALovingSpoonfulSociety11forfoodforthosewithHIV/AIDSandHepatitisC.ThiscontractcontinueduntilJulyof2004whenitbecametooexpensiveforeitherorganizationtocoverthecosts.

Potluck Café & Cateringwww.potluckcatering.com


case Study #3

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case Study #3

WhilenewpremisesforPotluckCaféwerebeingrenovated,theenterpriseoperatedfromacommunitykitchen.Duringthistime,theoverheadcostswereverylowandtheenterprisewasabletobuildupacashreserve.

InMarch2002,PotluckCaféandCateringofficiallyopeneditsdoorsinitspermanentpremises.Atthistime,thecateringdepartmentwasservingonlynon-profitorganizations.Thesocialprogramsweresupportedbygrantsandbysomeoftherevenuefromthecateringbusiness.

However,thereweresoonchallenges:

•thetrainingprogramwasinjeopardybecausethecontributionagreementwithHRDCcametoanendinAugust2002.ThesocietycontinuedtobeabletoobtainminimalHRDCfundsthroughtargetedwagesubsidiesandsummercareerplacementprogramsbutthiswasnotsufficient.

•therewasnoassistanceavailablefromtheprovincialgovernment•cashreserves,beingusedtosupplementoperatingcosts,werebeingdepleted.

Newmanagementwasbroughtinandtheenterprisefocuseduponbecomingsustainable.AgrantwasobtainedfromtheEnterprisingNon-profitsProgram(whichtheSocietymatchedwith“in-kind”contributions)fortheredevelopmentofthebusinessplan.

PotluckobtainedtechnicalsupportforwritingthebusinessplanfromaconsultantwithPriceWaterhouseCooperswhoagreedtodomostoftheworkpro-bono.ThispersonlaterjoinedPotluck’sboardofdirectors.

Toward SustainabilityFrom2002to2005,Potluckmovedforwardusingacombinationofgrants,loansandtechnicalassistance.Grantsincluded:

AgrantfromCentralCityMissionforthemealsprovidedtotheDowntownEastsideresidents,thisgrantendedinMarchof2004.AsofApril2004,gamingfundswereobtainedforthemealsprovidedtotheDowntownEastsideresidentsAmulti-yearcommitmentfromtheCo-operatorsGrouptosupportcapacity-buildinginitiativesforPotluck’sbusinesses,AgrantfromVancityCommunityFoundationtopaypartofthesalaryofafulltimefoodservicesmanager,

•Amulti-yearcommitmentfromBCTechnologySocialVenturePartnerstosupportcapacity-buildinginitiativesforPotluck’sbusinesses.Theseincludepartiallysupportingavanpurchase,cateringequipmentpurchases,softwarepurchaseanddevelopmentofamarketingplan

continued...


case Study #3

•GrantfromVancitySavingsCreditUnionforservicedeliverycosts•GrantfromVancityCommunityFoundationforservicedeliverycosts•GrantfromVancouverFoundationforservicedeliverycosts

Loans included:•AnoperatinglineofcreditfromVancitySavingsCreditUnion.AloanfromVancityCapitalCorporationtopayforthebalanceofthecostofasecondvan.(by

2005,Potluckhadthreevans.)

Technical Assistance included: •TheVancitygroupprovidedagreatdealofmoralsupportandtechnicalassistance,particularly

intheearlydays.Continuingassistanceisofferedthroughinformalconsultations.•BCTSVPhasprovidedtechnicalassistanceintheformof•Helpingtodevelopalongtermmarketingplan•Assistingintheimplementationoftacticalmarketingcampaigns•Helpingtodevelopanonlineorderingchannel•Assistingseniorstafftomanagegrowth•Assistingintheimplementationofnewbackofficesystemtools

Sustainability by the end of 2006Since2002,grantfundinghasaccountedforonly10%oftotalrevenuesandonlyoneofPotluck’ssocialprogramsreceivesanyfundingsupport.Thisisthefreemealprogramwhichgets25%ofitsfundsfromgaming.

Bytheendof2004,PotluckCateringofferedadiversemenuforanytypeofdietandforeverythingoccasionandwasbuildingareputationforqualityfoodandservice.Theenterprisehadover700corporateclients,aswellassomenon-profitsandmanypersonaleventclients.Potluckaveragedapproximately$40,000permonthincateringandthisdidnotincludeotherbusinessrevenues.Theirtargetfor2005istoincreasetheserevenuesby20%.

Potluckisnowfacingthedilemmaoftenencounteredbytrainingsocialenterprises.Thischallengeisrelatedtotheabilityoftheenterprisetobecomefullyself-sufficientwhentherearesignificantadditionaloperatingcostsrelatedtoemployingpeoplewithsignificantbarriers.Efficiencysometimesdictatesthatpeoplewithindustryrelatedskillsmustbeincludedfortheventuretobecomeprofitable.Potluck’sboard,management,andadvisorswerestrugglingwiththeissueofhowtobalancetheobjectivesofthesocialmissionwiththedemandsofthemarketplace.

WithfundsfromCEDTAPandWD,Potluckiscurrentlyexploringtwopotentialnewbusinessesthatwillbothexpandthesocialmandateandcontributetothesustainabilityoftheenterprise.

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Social ImpactPotluckiscurrentlyengagedindevelopingaSocialImpactAssessmentproject.Funders,financialinstitutions,academics,governmentrepresentatives,andpractitionersareworkingwithPotlucktodevelopameasurementofsocialimpactthatcanbeusedasamodelbyothersocialenterprises.

Ingeneral,Potluck’ssocialimpactliesintheprovisionofjobstothepreviouslyunemployableandtheprovisionoffoodtothemostneedy.

Wisdom Gained

“ThepathhasnotbeenstraightforwardforusbutIdon’tbelievewearealone.Iworrythattoomanysocialenterprises,likePotluck,receivesupportinstartupbelievingerroneouslythattheywillcontinuetofindsupportalongtheway.Forthemostpart,thishasnotbeenourexperience.Potluckonlybecamea“sexy”organizationtofundagainwhenwebegantobreakevenunderourownsteam.Ibelieveinthevalueofsocialenterprise,however,IguessIamcautiousaboutbeingoverlyoptimisticandinsteadIamreallyfocusedthesedaysonputtingarealisticmessageoutthereaboutwhatsocialenterprisetrulytakes.”

-LizLougheedGreen,ExecutiveDirector



The Co-operative Auto Network (CAN) is a non-profit co-operative incorporated to foster car sharing as an alternative to the privately owned automobile. Members share access to over 95 vehicles located in neighbourhoods throughout Vancouver, Burnaby, and North Vancouver. Car sharing provides a flexible alternative to owning a car – whether for close-to-home trips or longer ones. It works best for those who need a car 4 days per week or less often.

CANpaysforallfuels,maintenance,permanentandpermitparking,insurance,BCAAandaircare.Memberspayforthetimeandkilometrestheydrive.Memberspurchaseaone-timerefundableshareof$500tojointheco-operative.Inaddition,familymembersofthemainmemberscanpurchaseassociatemembershipsfor$250.Membersalsopayasmallmonthlyadministrationfee.Thethreecharges:admin,hourlyandperkilometrearesetupinthreeusageplanstomeettheneedsofmembers(high,medium,andlowuse).CANcarsareinsuredforbothworkandpleasureusewiththeco-opholdingtheinsuranceunderafleetplanoption.Aswithprivatelyownedvehicles,carcostscanbeclaimedasbusinessexpenseswhenthevehicleisusedforworkpurposes.

Start Up CANwasstartedinthelate1990’sasastudentprojectatSimonFraserUniversityandisbasedonsimilarsuccessfulmodelsinEurope.Startupfundsincluded:

•AgrantfromVancityCommunityFoundation•AgrantfromTheCo-operatorsInsurance•AnEcoActiongrantfromtheGovernmentofCanada.

The(then)MinistryofCommunityDevelopment,Co-operativesandVolunteers,paidforthelawyers’feesontheunderstandingthatanythingdevelopedwouldbesharedwithothercommunitieswhowantedtodevelopsimilarco-operatives.

Atthispointinthedevelopmentoftheenterprise,therewerethreepeopleinvolved.Thesethreeindividualspooledtheirassetstouseascollateralfortheloanstheyneededtopurchase4-5cars.

Becoming SustainableCANquicklydemonstrateditsviabilityandVancitySavingsCreditUnionandVancityCapitalprovidedloanfinancing.Thisallowedthepersonalloanstoberepaidandtheacquisitionofmorecars.

Co-operative Auto Network (Can)www.cooperativeauto.net


case Study #4

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Dependentuponanumberoffactors,CANcurrentlybothpurchasesandleasescars.TheCo-opisalsoacquiringhybridvehiclestofurtherimprovetheirenvironmentalimpact.

CAN’soperatingcapitalcomesfromthemonthlyfees,feesforservicechargedwhenamemberusesacarandmembershipshares.

Theco-operativebegantobreakevenat65cars.Itnowhas95carsand1800members.

TheCityofVancouveralsoassistsbyallowingco-opvehiclestobeparkedinanypermitzoneintheCityforthesameratesaspermitsfortheWestEnd.

Inaddition,CANhasanalliancewithDiscountCar&TruckRentalstoprovidediscountsformembersgoingmanykilometresinashortperiodoftime.

GrowthCANcontinuestogrowandevolvethroughinnovativenewpartnerships,forexample,withrealestatedeveloperswhoofferCANcarsinsteadofparkingspacesandwithTranslink,whichispartneringon“stationcars”forSkyTrainriders.

Measuring the Social and Environmental ImpactFouryearsafterCANwascreated,theexecutivedirectorwantedtobesurethattheautonetworkwasachievingthegoalsthathadbeensetforitandsoCANaskedfor,andreceived,agrantfromVancityCommunityFoundationtodoasocialaudit.

Inadditiontothegrant,Vancityalsoprovidedtechnicalexpertiseabouthowtoconductasocialaudit.TheauditshowedthattheCo-opwasmeetingitsobjectivesbyreducingthenumberofprivateautomobilesontheroad,improvingthelocalairqualityandreducinggreenhousegasemissions;andpromotingalesscardependentcommunity.



Eco-Lumber is a co-operative, created in 2001, with the mission “ to promote, develop appropriate markets for, and distribute, members’ eco-certified forest products.”

TheCo-opmembersarepractitioners(communityforests,woodlotmanagers,small-scalesawmills,furnitureandcabinetmakers,andothervalueaddedwoodprocessors)andadvocates.Theseadvocatesincludemanyofthebest-knownandmosteffectiveenvironmentalorganizationssuchasGreenpeaceandtheDavidSuzukiFoundation.

TheCo-oplinkssmall,eco-certifiedwoodsuppliers,suchastheHarrop-ProctorCommunityForest(nearNelson)andIisaakForestResources(aninnovativeNuu-chah-nulthnation-ledforestservicescompanyoperatingexclusivelywithinClayoquotSound,BC)toeco-certifiedmanufacturers.

TheCo-opthenconnectstheproductsoftheseeco-certifiedmanufacturers,suchasflooring,doors,plywood,decking,paneling,loghomepackagesandcustomfurniture,toenvironmentallyconsciousconsumers.Forexample,theHillsideLibraryinPortlandOregonfeaturesIisaakForestResources’ForestStewardshipCertified(FSC)certifiedsidingmanufacturedfromwesternredcedarandprovidedbytheEco-LumberCo-op.

Financing

Developing the Business PlanTheideagrewoutoftheworkofnon-profitenvironmentalorganizations.ItwasthebrainchildoftheexecutivedirectorwhenheemployedbytheSilvaForestFoundation.Theconceptwasdevelopedthroughmeetingsoflikemindedpeople.ThesegatheringsweresupportedbyagrantfromtheEndswellFoundation.

MarketresearchwasfinancedbyagrantfromtheConservationFinancingTechnicalAssistanceProgram,ajointinitiativeofVancitySavingsCreditUnion,EcotrustCanada,andWesternEconomicDiversification.

ThewritingofthebusinessplanwaslargelyfundedbyagrantfromtheCommunityEconomicDevelopmentTechnicalAssistanceProgramThiswastoppedupbyagrantfromtheMountainEquipmentCo-opandsomeoftheexecutivedirector’spersonalfunds.

Canadian Eco-lumber Co-operativewww.ecolumber.ca


case Study #5

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Start UpThepiecingtogetherofstart-upfinancingfortheCo-opwascomplex.Ontheirwebsite,theCo-opthanksseventeenorganizationsandfoundationsfortheirsupport.TheexecutivedirectorsaidthatthesupportersoftheconceptcametotheCo-op,

“…withvariousofferingsintermsofequity,intermsofdirectsupport,intermsofdebtfinancing,andintermsofmentoring.Andoverthe(period)thatwehavebeentryingtogetthisco-opupandrunningallthesepieceshavecometogetherquitenicelyatvarioustimesandallowedustomoveahead.”

Grants•RichardIveyFoundation•DavidSuzukiFoundation•EndswellFoundation•RainforestSolutionProject•WestCoastEnvironmentalLaw•SilvaForestFoundation•GreenpeaceCanada•NaturalResourcesDefenseCouncil

Equity•SaleofinvestmentsharesintheCo-op.ShareswerepurchasedbyRenewalPartners,

Co-opmembers,friendsandfamily.Theexecutivedirectorreceivedsharesinsteadofpartofhissalary.

•Afundestablishedbywithholding5%onpurchases.Thatis,whenaproductispurchasedfromamember,theCo-oppaysonly95%ofthecost.Theremaining5%isputintotrust.Thisequityisusedtosecureloansandthemoneyintrustwillbepaidtothepurchaserswhentheloansarerepaid.

•AloanfromEcotrust(withmoneydonatedfromVancityCapitalCorporation)whichfunctionslikeequityinthattheinterestrateistiedtothenumberofsaleswhenthesereachacertainlevelitwillbefinanciallyprudenttorepaytheloan.

Loans•AnunsecuredloanfromRenewalPartners.•ACommunityInvestmentDeposit(CID)loanfromVancitySavingsCreditUnion.(CIDloansare

securedbymembersofVancity.Memberstakealesserpercentageofinterestontheirdepositaccountssothatthismoneycanbeusedforthegoodofthecommunity.

•AloanfromEcotrustCanadaguaranteedbyEcotrust,RenewalPartnersandatrustaccountsetupbyagroupofenvironmentalorganizations.



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Becoming Sustainable

Marketing AssistanceEcotrustCanadaandVancitySavingsCreditUnionhaveprovidedtheCo-opwithmarketingsupport.

OneofEcotrustCanada’sstaffofferedacontactwhichledtoEco-LumberCo-op’sfirstsale,anFSC-certifiedpolishedDouglasFirfloorinanEastVancouverhome.ItssecondsalerefurbishedtheVancouverofficeofEcotrustwithFSC-certifiedbirchdesktops.TwoEcotrustCanadastaffmembershavealsorecentlypurchasedwoodfloorsfromtheCo-op.

Aswell,VancitySavingsCreditUnionpurchasedlumberfromtheco-optobuilditsfirstgreenbranchontheNorthShoreofVancouver.

GreenpeacehasalsobeenassistingwiththemarketingbylinkingtheCo-optotheirglobalconnections.

Growth and DevelopmentInJune2003,theCo-opopenedashowroomandwarehouse,whichtheyrentinRichmond.

Ayearlater,EcotrustCanadaandVancityCapitalCorporationprovidedfurtherloanstomakeitpossiblefortheCo-optobuyalargeinventoryofeco-certifiedwoodfromIisaakForestResources.Thisloanissecuredbytheinventoryandisatahighrateofinterest.

Next StepsAccordingtotheexecutivedirector,thenextstepsare:

•tosecureanoperatinglineofcredittoallowtheCo-optopurchaseinventorywhichcanbequicklymovedintothemarketplace,

•tobuildupequity,and•tocontinuetoreinventtheCo-opastheylearnwhatworksandwhatdoesnot.

Environmental ImpactTodate,theCo-ophasbeensuccessfulonthreefronts,

•theFSCcertifiedproductsofthepractitionermembersarerecognizedinthemarketplace,thereisanoutletforthem,andtheyarefindingappreciativemarkets.

•those,suchasarchitects,artistsandcraftspeople,whowanttopurchaseFSCcertifiedproductsknowwheretofindit.

•BecausetheyarefindingmarketsforFSCcertifiedproducts,theadvocacygroupscanpointtotheCo-opasademonstrationthateco-forestryasaviablealternativetoclearcutting.



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Vancouver Social Purchasing Portal is a venture developed by Fast Track to Employment (FTE) in partnership with BC Technology Social Venture Partners.

Thesocialportalisaweb-basedapplicationwhichintegratescorporatesocialresponsibilityintopurchaser/supplierrelationshipsandbuildsonexistingcommunitybasedemploymentservicesandcommunitydevelopmentefforts.

Throughthewebsite,businessescangetintouchwithsuppliers(forexample,foodservices/catering,printing,packaging,couriers,promotionalmaterials,buildingmaintenance,recycling,andlandscaping)thatgeneratesocialvalue.Thesocialvaluecreatediseconomicdevelopmentinareasofeconomicdepression,employmentopportunitiesforthehard-to-employandsocialenterprisegrowth.

Forexample,whenPivotalSoftwareneededcaterersforcompanyevents,throughthesocialportal,theychoseCookStudioCatering,aDowntownEastsidecatererthatisalsoatrainingprogramforwelfarerecipientsmovingtoworkandyouthatrisk.

BackgroundThepurposeofFTEistoprovideasupportiveandsuccessfulpathtoemploymentthatassiststheunemployedtore-enterandsustaintheirparticipationinthelabourmarket.

ThegoalofFTEistoguideandfacilitateexistingcommunity-basedtrainingprovidersandeducationalinstitutionsintoacoordinatedandintegratedarrayofservices,usingindustry-designedcurriculumthatisdirectlylinkedtoemploymentopportunities

FTEwasinspiredbyFITIrelandwhich,in1998,developedaconceptforthetrainingoflong-termunemployedpeopleforafull-timecareerintheIT(InformationTechnology)sector.Withtheactivecooperationoflocalgovernment,ITcompanies,community-basedtrainingprovidersandeducators,FITIrelandprovidedIrishcommunitieswithpreviouslyhighlevelsoflong-termunemployment,theopportunitytoprosper.

FTEapproachedtheITsectorinVancouverandfoundthattheFITIrelandmodeldoesnottransferdirectlybecausetherearenoentrylevelITjobsinBC.However,theVancouverITsectorwasinterestedindiscussingotherinnovativemodels.

Vancouver Purchasing Portalwww.sppvancouver.org


case Study #6

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Business Development and StartupTherewereanumberofsourcesofdevelopmentfunds:

•FTE’sretainedearnings•AgrantfromVancityCommunityFoundation•AgrantfromtheVancouverFoundationfordevelopingwaystoincludethenon-profitsector•AgrantfromBCTSVPforeachofthethreeyears,2002–2004(3yearsisthemaximum

periodforBCTSVP)•BCTSVPprovidedtechnicalassistanceintheformof•Systemdesign•Businessconceptdevelopment•Policyandimplementation•Marketingandpromotion•Websitedesignandhosting

TheSocialPurchasingPortalwaslaunchedJune2003.Inlessthanayearover50purchasingpartnersand35supplierswereonlinegeneratingover$300,000oftargetedbusinessactivityandcreatingoveradozenfull-timejobsforyouthatriskandhardtoemploypersonsthroughtheparticipatingsuppliers.

Becoming Sustainable TheSocialPurchasingPortalisnotexpectedtobecomefullyself-sustaining.Therewillalwaysbetheneedforsomefundingsupport.

Currentlythesourcesofincomeinclude:•FundsfromWesternEconomicDiversificationthroughtheVancouverAgreement•BCTSVP•Somefundsfromadvertisinggeneratedbyplacingmemberprofilesonthewebsite

However,theSocialPurchasingPortalwillbecomelesscostlyinthefuture,asFTEisplanningtoexpandintonewareas.ThiswillreducethefixedcostsoftheSocialPurchasingPortal,assomeofthesecostswillbeassignedtootherventures.Social Impact Increased Corporate Social Responsibility

Businessesstillbuyproductsandservicesbasedonprice,quality,andservice.However,theSPPenablesthemtoinjectsocialvalueintotheirbuyingdecisions,givingthemtheopportunitytocontributetotheircommunity.Inaddition,theyhaveareadylabourpoolofqualified,dedicatedindividualsforentry-leveljobssuchasforkliftoperation,officeadministration,cleaning,shipping,woodworking,andrestauranthelp.



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Increased Employment Opportunities for Disadvantaged PeopleTheSPPprovidesnonprofitswhotraindisadvantagedindividualswithanopportunitytomatchtheirclients’skillstoemployerswholookbeyondtheirresumetothequalityoftheworkanddedicationtheseindividualscanbringtotheirjobs,thusincreasingthenumberofhiresfromthegraduatesoftheirprograms.

Increased Customers for Social EnterprisesSocialenterpriseswhichparticipateassuppliersofgoodsandservices,haveaccesstonewcustomerswhichincreasesdemandfortheirproductsandservicesenablingthemtobecomemoresustainableandhireevenmoredisadvantagedpersons.

Increased Social/Community Capital Everyoneinthecommunitybenefitsthroughnewanddevelopingrelationshipsbetweenalltheplayers:non-profits/forprofits,public/private,educationalprograms,andsoon.

continued...


case Study #6

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United We Can Bottle Depot is a recycling depot in the DowntownEastside of Vancouver.

UnitedWeCanisaregisteredcharitywhichdescribesitselfas“acharitywhichmeansbusiness.”UnitedWeCancreatesselfsustainingenterprisesthatfocusoncaringfortheurbanenvironmentandwhichcreateincomeandjobtrainingopportunitiesforpeopleoftheinnercity.UnitedWeCaniscommittedtosupportingprojectsthatprovidelongtermsustainabilitywithoutongoingdependenceonpublicfunding.

BackgroundInthelate1980sandearly1990stherewerenobottledepotsintheDowntownEastsideandthelocalretailerswerenotabletohandleallthebottlesandcansthatwerereturnedtothem.First,theydidnothavethespacetostorethevolumeofcontainersbeingreturnedtothem.Second,manyofthecontainerswerenotsoldintheretailoutletstowhichtheywerebeingreturned.Third,thecontainerswereoftenunsanitaryandinappropriatetobestoredatoutletswherefoodwasbeingsold.

Thecurrentexecutivedirectorandanother“binner”approachedaministerfromalocalchurchtoseeksupporttoaddressthisissue.Theyappliedfor,andreceived,asmallgrantfromtheDendorffMorrisTrustFund.Thismoneywasusedforademonstrationeventinwhichpeoplewereinvited,onacertainday,tobringcontainerstoVictorySquareintheDowntownEastsideofVancouver.Peoplewerepaid10centsforcontainersunderalitreand25centsforcontainersoveralitre,toamaximumof$10perperson.Therewasahugeresponseandallexcept$2-300wasusedforrefundsandatrucktohaulawaythecontainers.

WiththismoneyplussomeassistancefromMHR,theUnitedWayandRayCamCommunityCentre,aseriesofworkshopswereheld.Thesemeetingswereessentiallystreetlevelconsultationsabouttherefund/depositsystem.Theresultwasthebeliefthatthatagrassrootsoperatedrecyclingdepotshouldandcouldbecreated.

However,translatingthisideaintorealitytookalongtimeandentailedtruegrassrootsorganizing.Fortunately,theinitiativehadachampion,apersonwhohadlivedonthestreets.Thischampionkepttheinitiativealivewithhisdonationoftime,energy,andoftenmoneyandanon-profitsocietycalledSaveOurLivingEnvironment(SOLE)wasformed.UnitedWeCanBottleDepotwasdevelopedasaprojectofSOLE.UnitedWeCanwaslatercreatedasaregisteredcharity.

United We Can Bottle Depotwww.unitedwecan.ca


case Study #7

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case Study #7

Business Development and Start UpSomeofthesourcesoffundsforthebusinessdevelopmentandstartupwere:

•Contributionagreementwith(then)HRDCfortraining.However,becauseSOLEwasanun-provensociety,thefundswerechanneledthroughtheGastownBusinessImprovementSociety.Acomputerwaspurchasedwiththesefunds.

•AgrantfromtheProvincepaidtherent,broughtacashregister,andasafe.•GrantfromVancityCommunityFoundationforletterhead,signageetc•GrantfromWEDtowritethebusinessplan.•TherewasinitiallyalineofcreditwithVancityCreditUnion•WiththehelpofthesignatureofamemberofVancity,thelineofcreditwasreplacedwithalow

interestloanfromVancityCommunityFoundation•WesternBrewer’sAssociationdonatedatruck

TheBottleDepotopenedinJanuary1995.Atthistime,noneofthebottlerecyclingdepotswereabletomakeaprofitbecauseoftheratestructuresdeterminedbytheconsortiumsestablishedbythemanufacturers.UnitedWeCanBottleDepotstruggledtosurvive,developingotherinitiativessuchasalanecleaningserviceandabikerepairshopwhichcontributedtotheoverheadcosts.UnitedWeCanreceivedhelpfrommanydifferentsourcesduringtheseyearsincludingfundsfromSamuelandSaiydeBronfmanFamilyFoundation,PEACH,BusinessImprovementAssociations,VancouverCity,MinistryofSkillsTraining&Labour/SFUandmanyothers.

SustainabilityWhenthesehandlingfeestructureswerechangedin1999,UnitedWeCanBottleDepotwasabletobreakeven.Itisnowsustainablewithasurplusofincomeoverexpenses.Thesesurplusesaredirectedtogrowingothersocialenterprises.

However,UnitedWeCancurrentlyfacessignificantcompetition.Whereas,atonetime,noonewasinterestedinoperatingarecyclingdepotintheinnercity,therearenowfourinthegeneralvicinity.AsthesedepotsarenotusingaCEDmodel,theymaybemoreefficient.Alsobecausetheyhavemorecapitalandloweroverheadcosts,(theyarelocatedinanareazonedlightIndustrial)theymaybeabletogrowotheraspectsofthebusiness(suchasscrapmetal,paper,etc.)withwhichUnitedWeCancannotcompete.

TheExecutiveDirectoralsocommentedthatUnitedWeCandoesnothavetheskillsetsorbusinessacumenwhichareneededinacompetitiveenvironment.Inaddition,becauseUnitedWecanisnon-profitorganizationandnotaregisteredcompany,theyareaskedtorespondtomanydifferentinterestsincludingacademics,governmentservices,socialandcommunitydevelopmentbodiesandpublicrelations.Thisworkalleatsintothetimeandmoneyoftheorganizationbecauseitisusuallynotcoveredinbudgetsofthoseseekingservice.

continued...

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case Study #7

Incubation and DiversificationUnitedWeCanhasdevelopedtwoothersocialenterprises,thelanecleaningservicehasdevelopedfromaprojectintoanenterprise,andrecentlyacommercialcollectionservicehasbeenlaunched.Therearealsoanumberofinitiativesincluding:abikerepairshopandaplantshopwhichdonotcreatesurpluses.

Social Impact

Annually:•$2millionflowsintotheeconomyoftheDowntownEastsidethroughrefundsonrecyclable

containers•$500,000paidinwagesforeverythingfromonedayaweekpart-timeemployeestofulltime

employees.•UnitedWeCanhasmadesignificantcontributionstocommunitydevelopmentintheDowntown

EastsideofVancouver.•UnitedWeCanhasplayed,andcontinuestoplay,asignificantadvocacyrolebothonanindi-

viduallevelandatthesystemslevel.

continued...

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Asset: Anitemofvalueownedbyyourbusiness,e.g.cash,stock,equipment,inventory,property,goodwill.

Burn rate: Thecashthebusinessisusingmonthlytokeeptheoperationontheintendedscaleandprofitability.

Capital: Themoneythatisusedformakingprofit.

Collateral or security: Propertyorgoods(assets)pledgedtothelenderuntiltheloanisrepaide.g.equityinyourhouse,car,savings,orequipment.Iftheloanisnotraidthelenderwillseizetheassetandsellittorecovertheunpaidbalanceoftheloan.

Credit: Anarrangementbetweenthebusinessandthelendersorsuppliersandthemaximumamountsthattheywillextendtothebusiness.

Credit rating: Yourhistoryofrepayingloans,creditcards,andotherfinancialobligationsonschedule.

Debt: Anamountthatisowed.

Debt to Equity Ratio.

Equity: Thevalueofyourbusinesswithliabilitiesdeductedfromyourassets.Alsoreferstotheownershipinterestofshareholdersinyourbusiness.

Equity investment: Themoneyaninvestorputsintothebusinessinreturnforanownershipinterest,usuallythroughshares.Theequityinvestorsharesinthegainsandthelossesofthebusiness.

General security agreement: UnderthePersonalPropertySecurityAct,aGeneralSecurityAgreementgivesalendertherighttosecurityoverabroadrangeofassets,receivablesandinventory,aswellasafter-acquiredproperty.(After-acquiredpropertyispropertythatmightbeacquiredinthefuture,butnotownedatthetimeofsigningtheGeneralSecurityAgreement.)ThelendernormallyregistersafinancingstatementwiththePersonalPropertyRegistrytoestablishthepriorityofitsclaimtoassetsrespecttootherlenders.

Going to Scale: Growingthebusinesstothesizeoftheindustrynormortothelargestitcanbeinagivenmarketplace.


Glossary

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Interest: Achargeforaloan,usuallyapercentageoftheamountloaned.

Liability: Moneyyourbusinessowestootherparties,whichcouldincludesuppliers,lenders,andemployees.

Loan: Asumofmoneylentatinterest.

Principal: Asumofmoneyowedasadebt,uponwhichinterestiscalculated.

Pro formas: Financialdocumentsusingprojections.

Ramping up: Growingabusiness.

Return on investment: Theprofitorlossresultingfromaninvestmentusuallyexpressedasanannualpercentagereturn.

Senior debt: Loanswhichcanbefullyandwhicharemadetobusinesseswhichhaveprovenearnings.

Shares: Theequalpartsintowhichtheownershipofacompanyisdivided.

Shareholder: Apersonwhoownssharesinacompany.

Subordinated debt: Loans,whichareunsecured,butwhicharebasedontheestablishedcashflowofabusiness.Inthecaseofdefault,creditorswithsubordinateddebtarenotpaidoutuntilaftertheseniordebtholdersarepaidinfull.

Term: Thefixedperiodoftimeforwhichaloanismade.

Valuation: Howmuchacompanyisworth.

Working capital: Moneyneededfortheeverydayoperationthebusiness.

continued...


Glossary

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resources

1. CENTRE FOR SUSTAINABILITYhttp://www.centreforsustainability.ca

Mission:toincreasethecapacityandeffectivenessofpeopleandorganizationsengagedinthenon-profitsectorinBritishColumbia.

PartnersinOrganizationalDevelopment(POD)grants.TheseincludePOD,ArtsPOD,andEnviroPOD.ThePODgrantsprovidefundstohireconsultantstogivetechnicalassistancetoagenciesengagedinstrengtheningtheirorganization,adaptingtochangeandrespondingtodiversity.

3. COAST CAPITAL SAVINGS – COMMUNITY ECONOMIC DEVELOPMENT DEPARTMENThttp://www.coastcapitalsavings.com/Community/CommunityInvestments

CoastCapitalCommunityEconomicDevelopmentDepartmentprovidesgrantsandtechnicalsupporttonon-profitorganizationsfortheincubationofsocialenterprisesandtoadvancethecapacityoforganizationsworkingonCommunityEconomicDevelopment.

Priorities•Businessstart-upsandafter-care•Affordablehousingandyouthemployment•Communitycapacitybuilding

3. COAST CAPITAL SAVINGS COMMUNITY FUNDhttp://www.coastcapitalsavings.com/Community/CommunityPrograms/CorporateSponsorship

CoastCapitalCommunityFundprovidesfinancialsupporttocommunityorganizationsthroughsponsorshipsanddonations.

Priorities•Healthandwellness•Education•Environment•Communityservices•Artsandculture

Resources #1Sources Of Funds For Building Organizational Capacity

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resources

Program Criteria•Donationorsponsorship.•Non-profitand/orcharitableorganization.•ProjectmustdirectlybenefitthecommunitiesservedbyCoastCapitalSavings.

Deadline•Applicationsreceivedbythelastbusinessdayofthemonthwillbereviewed

thefollowingmonth.•Applicationsarereviewedbyacommitteeofstaff

4. COAST CAPITAL SAVINGS FOUNDATIONhttp://www.coastcapitalsavings.com/Community/CommunityPrograms/Coast%20Capital%20Savings%20Foundation

CoastCapitalSavingsFoundationprovidesgrantsforyouthinitiativesthatwillhelp“growstrong,confidentandhealthyyoungCanadians.”

PriorityFocusonsupportforinitiatives,programs,andpartnershipsthatbuildorenhanceleadershipskillsforyouth.

Criteria•Organizationmustbearegisteredcharity.•Projectmustpromotethedevelopmentofleadershipskillsforyouth.•Organizationmusthavedemonstratedfiscalresponsibilityandeffectivemanagement.

DeadlinesFourtimesayear:March,June,September,andDecember.

Proposalsforfundingarereviewedonaquarterlybasis.

5. ENDSWELL FOUNDATIONhttp://www.endswell.org

Mission: TobeacatalystforchangeandaninvestorincapacityEndswellFoundationisthecharitablearmofRenewalPartnersandhasthesameCEO.ThefoundationassistsRegisteredBCcharitiesdedicatedtoconservationandrelatedpubliceducationin

resource #1 continued...

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BritishColumbia,thatrespecttherightsofaboriginalpeoplesandtheirtraditionallanduse.Endswelltypicallymakesgrantsforgeneralsupportofthecoreoperationsofexistingorganizations.Specialprojectswillalsobeconsidered.ApplicationismadebyLetterofInquiryfollowedbyanapplicationprocess.Therearetwograntingcyclesayear.6. TIDES CANADA FOUNDATION

http://tidescanada.org

Mission:TidesCanadaFoundationactivelypromoteschangetowardssocialandenvironmentalwell-beingthatisfoundedontheprinciplesof:

•Socialjustice•Broadlysharedeconomicopportunity•Robust,inclusiveandparticipatorydemocraticprocess•Farsightedenvironmentalstewardship

ContacttheFoundationformoreinformation.

7. VANCITY SAVINGS CREDIT UNION GRANTShttp://www.vancity.com/Community/CommunityPrograms/Grants

ThereareseveralgrantsofferedbyVancitySavingsCreditUnionthatcouldassistnon-profitstodevelopsocialenterprises.TheseincludetheCommunityPartnershipProgram(CommunityProjectGrantsandCapacityBuildingGrants),EnviroFundGrants,andtheVancity/RealEstateFoundationGreenBuildingGrantProgram,andtheMillionDollarAward.


resources resource #1 continued...

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7.1. Community Partnership Program

TheCommunityPartnershipprogramconsistsofCommunity ProjectandCapacity Building Grants.

Priority areas for the Community Partnership Program

Social Justice SocialJusticemeansthepromotionofequityforsociallyandeconomicallymarginalizedgroups.VancitySavingsCreditUnionwillconsiderfundingprojectsandprogramsthat:

•Enhancethecapacityofmarginalizedgroupstoadvocateforthemselvesandparticipateinpublicdecision-makingregardingissuesthataffectthem.

•Eliminateorreducebarrierstoaccesspublicandcommunityservicessuchaseducation,housing,andchildcare.

•Challengehatredanddiscriminationandpromotehumanrightsanddignity.

Economic self-reliance Economicself-reliancemeansbuildingontheinternalstrengthsandresourcesofindividualsandcommunitiestoreduceeconomicvulnerabilityanddependency.VancitySavingsCreditUnionwillconsiderfundingprojectsandprogramsthat:

•Helptoreducepoverty,unemployment,andunderemployment.•Enhancethecapacityofmarginalizedgroupstoaccessfinancialservices,buildfinancial

knowledgeandassets,andcreateeconomicopportunitiesforthemselves.•Increaseaccesstoeducation,training(includingemploymentandpre-employmenttraining)

andotherservicesthathelptobuildeconomicopportunity.

Environmental responsibility Environmentalresponsibilitymeansimprovingsocialandeconomicwellbeingthroughthecreationofhealthyecosystems.VancitySavingsCreditUnionwillconsiderfundingprojectsandprogramsthatcreateawarenessandsolutionsthathelpto:

•Protectandrestoreindigenousspeciesandhabitats.•Preventthereleaseofsubstancesthatdamageair,water,earth,oritsinhabitants.•Improveairquality,includingthepromotionofalternativemodesoftransportationsuchas

publictransit,cycling,andcarco-operatives.•Conserveenergyandpromoteenvironmentallysafeandsustainableenergysources.

Preference given to•Projectsandprograms,whichintegrateoneormoreofthethreepriorities.•Partnershipsbetweenorganizationsthatenhancecooperation.•Projectswhichimprovetheeffectivenessofexistingprojects.



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Community Project Grants •Grantsofupto$10,000.•Designedtosupportprojects.•Onegrantperorganizationinacalendaryear.•Applicationdeadlines:4peryeare.g.January,March,May,August,November.

Capacity Building Grants •AvailableonlytoVancitySavingsCreditUnionmembers.•Designedtosupportorganizationsthemselves,ratherthanspecificprojects,toassistwiththe

developmentofbusiness,financialand,fundraisingplanning,aswellasthetechnology/computertrainingrequiredtobuildfinancialsustainability.

•Grantsofupto$10,000.•Onegrantperorganizationinacalendaryear.•Applicationdeadlines:4peryeare.g.January,March,May,August,November.

7.2 Envirofund Grants

•Thepurposeistoencouragepositive,actionablesolutionslocalenvironmentalconcerns.•Thefundsarebasedonaminimumof5%ofVancityVISA*cardprofitsand

individualdonations.•Grantsofupto$40,000.

Priorities•Eachyear,VancityEnviroFund™VISAcardholdersvoteonwhichissueareastheEnviroFund™

willsupport.Thevotesaretabulatedandthetopthreeissueareasaredetermined.ThesearepostedonthewebsiteinMayeachyear.

Program Criteria •Local:TheprojectmusttakeplaceintheLowerMainland/FraserValleyorGreaterVictoriaareas

anddirectlybenefitourlocalcommunities.•Action-Oriented:Althoughtheprojectmayincluderesearchandeducationcomponents,the

primaryfocusshouldbeontakingconcretestepswhichworktoresolvelocalenvironmentalproblemsandhelptodevelopsustainablecommunities.

•InnovativeAlternative:Thefocusoftheprojectshouldbeonthedevelopmentandimplementa-tionofaninnovativeprojecttoaddressoneoftheyear2004issueareaschosen.

•NotforProfit:Theprojectmustbecarriedoutthroughanot-for-profit,charitablenon-govern-mentorganization,orcooperative.



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Preference are given to projects that also meet the following criteria:•Ongoing:Theprojectwillcontinuebeyondtheoneyearperiodforwhichfundingisrequested.•CommunityBenefits:Theprojecthassocialbenefitstothelocalcommunity,suchasjobcre-

ationfordisadvantagedgroups,communityeconomicdevelopmentoryouthtrainingopportu-nities.Theprojectincorporatescommunityparticipationintheplanningandorganizingoftheproject.

•EcologicalImpact:projectshavethepotentialtogeneratethesignificantenvironmentalim-provements.

•CreditUnionMembership:PreferenceisgiventogroupsthataremembersofVancitySavingsCreditUnionoranothercreditunion.

Grant Deadline •ThedeadlineisannouncedinMaywhenthepriorityissuesareannounced,Itisusuallyinthe

falloftheyear.

7.3 Vancity/Real Estate Foundation Green Building Grant Program

•ThepurposeistominimizetheimpactsofclimatechangeandtoimprovesustainablelandusepracticeswithanoverallgoaltoreduceCO2emissions.

•Thereis$100,000availableeachyear.•Grantsofupto$50,000.

Priority Areas •InnovativeBuildingRenovations/Retrofitsthatreducetheenvironmentalimpactsassociated

withthebuildingandoperationofnon-industrialbuildings.Projectelementsthatwillbeconsid-eredforfundingare:

•Design•Equipment/technologypurchases•Project-relatedresearch•Structuralchanges•Siteimprovements

TheadvancementofPolicyorRegulatoryChangewiththepurposeofremovingbarriersimpedingthedevelopmentofgreenbuildingsandtheincorporationofgreenbuildingtechnology.Projectelementsthatwillbeconsideredforfundingare:

•Research•Multi-stakeholderconsultations/meetings•Policydevelopment•Publicationofmaterials/casestudies



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Program Criteria•Charitableorganizations,not-for-profitorganizations,orcooperatives.•Aneducationalcomponentwhichaimstoencouragegreenbuildinginitiativesbysharingthe

benefitsoftheprojectwiththepublicandotherpractitioners.•Partnershipsbetweenorganizations(government,businessandnot-for-profit)areencouraged.

Grant Deadline Thedeadlineforsubmissionsisintheearlyfall.

7.4 Million Dollar Award

Thisawardishandedoutannuallytoanon-profitorganizationforamajorprojectthatsupportsthesocial,environmentaloreconomicwellbeingofthecommunity.

•Fundingmaygotowardsdevelopment,capital,operational,orendowmentneeds.•Opentonon-profitorganizationsinVancouver,theLowerMainland,FraserValley,andVictoria.

Theprocessisusuallythatatwo-pageletterofintentissubmittedinthespring;acommitteeofstaff,creditunionmembers,andboardmembersselectashortlistoforganizationswhichareinvitedtosubmitaprojectproposal;andfinallyVancitymembersvoteonashortlistoffinalistsinthefall.

8. VANCITY COMMUNITY FOUNDATIONwww.vancity.com/Community/AboutUs/Subsidiaries/VanCityCommunityFoundation

Mandate:toprovidegrantsandcommunitylendingintheareaofcommunityeconomicdevelopment.

PrioritiesfortheFoundation•AffordableHousing•Communitybuildingandmobilization•CommunityEconomicDevelopmentOrganizations•EmploymentDevelopment•Non-profitSector•Reachingnewcommunities•SocialEnterprise

Application deadlines•ApplicationsareconsideredattheFoundation’squarterlyBoardofDirectors’meetingswhich

areheldinMarch,May,SeptemberandNovemberofeachyear.•ApplicationsshouldbereceivedatleasteightweeksbeforetheFoundation’squarterly

boardmeeting.•Thereisnodeadlinefortechnicalassistance.



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8.1. Grants

•Annualgrantsbudgetof$175,000.•Grantstendtorangefrom$500to$20,000.•Looksforlongtermrelationshipswithgrantrecipients.•Willfundnewinitiativesandtheexpansionofsuccessfulexistingprojects.

8.2. Loans

•Guaranteedloansandlinesofcredit(typically$10,000to$100,000)•Mortgages•LoanPools•Low-interestloans(typically$10,000to$100,000)

8.3. Technical Assistance

•Ofteninconjunctionwithaloanorgrant.•TheFoundationusesitsownstaff,orbrokersorpurchasestheresourcesofothers,toprovide

non-profitswithtechnicalassistance.

9. VANCOUVER FOUNDATIONhttp://www.vancouverfoundation.bc.ca

Mission: Throughthegrowthandstewardshipofpermanentendowmentfundsandthedistributionofincometoabroadrangeofeligibleorganizations,VancouverFoundation,inmeetingcommunityneeds,providesphilanthropicleadershiptoimprovethequalityoflifeforallBritishColumbians.

VancouverFoundationisaphilanthropicnon-governmentalcommunityfoundationwhichoperatesprimarilyasapermanentcollectionofendowedfunds.

Relevantfundsare:•AnimalWelfare•ArtsandCulture•Children,YouthandFamilies•Education•Environment•HealthandSocialDevelopment



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1. BC TECHNOLOGY SOCIAL VENTURE PARTNERS (BCTSVP)http://www.bctsvp.org

Mission:Tosupportinnovativenon-profitgroupsservingchildren,womenatrisk,andpeoplelivinginVancouver’sDowntownEastside.

BCTechnologySocialVenturePartnersisacharitablefoundationcreatedbyindividualsinBC’stechnologyindustriesandusesa‘venturephilanthropy’approachtoprovidingmoneyandbusinessexpertisetoentrepreneurialnot-for-profitorganizations.

BCTSVPhastwograntcycles,oneinthespringandoneinthefall.Averageannualgrantstoorganizationsareintherangeof$30,000,withapossibilityofmulti-yearcommitments.

BCTSVPhashelpedgroupswith:•Strategicplanning•Boarddevelopment•Facilitiesplanning&acquisition•Marketingplanning•InformationTechnologyplanning&implementation•Fundraising&RevenueGeneration

2. COMMUNITY ECONOMIC DEVELOPMENT TECHNICAL ASSISTANCE PROGRAM (CEDTAP)http://www.carleton.ca/cedtap

Mission: Toenhancethelegitimacyandeffectivenessofcommunity-basedorganizationsengagedincommunityeconomicdevelopmentbysupportingactivitiesthatwill:

•strengthentheircapacitiesand•increasethevisibility,knowledge,coherenceandresourcesoftheCEDsectorasawholein

cooperationwithotherorganizationswithsimilarinterests

CEDTAPissupportedbytheJ.W.McConnellFamilyFoundationandCarletonUniversity.ItisCanada’slargestnon-profit(non-governmental)grantingagencyinthefieldofCommunityEconomicDevelopment(CED).CEDTAPprovidesgrantstoearlystageandmaturecommunity-basedorganizationsandalsopromotesactivitiesthatstrengthentheCEDsectorasawhole.Thegrantsareseedmoneyandthereforeotherfundingwillberequired.

Resources #2 Sources Of Funds For Business Development


resources resource #2

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CEDTAPsupportsearlystageandmatureCEDO’sinthreedifferentareas:- technicalassistance- exchanges- technologicalenhancement–computerresourcesandtechnicalsupport

neededtoengageinCED.Inaddition,supportisprovidedtoemergingCEDorganizations,ormarginalizedgroupsnotyetinvolvedinCED,priortodevelopingafull-scaleinitiative.

3. ENTERPRISING NON-PROFITS PROGRAM (ENP)http://www.vancity.com/Community/AboutUs/Subsidiaries/VanCityCommunityFoundation/EnterprisingNon-ProfitsProgram

ENPisafundingprogramthatprovidesmatchinggrantstonon-profitorganizationsinBCwhoareinterestedinstartingorexpandingabusiness.ItisajointfundingprogramofUnitedWayoftheLowerMainland,VancityCommunityFoundation,CoastCapitalSavingsCreditUnion,VancouverFoundationandWesternEconomicDiversificationCanada.

Program Goals •Tosupportnon-profitorganizationstodevelopenterpriseswhicharelinkedwiththeircharitable

mandateandcontributetoorganizationalsustainability.•Toincreasethecapacityofnon-profitorganizationstoimprovesocioeconomicconditionsin

theircommunitiesthroughthecreationofemploymentortrainingopportunitiesand/oren-hancedprogramprovision.

CriteriaInordertobeeligibleforfunding,anorganizationmust:

•beanon-profit,•haveitsbase,activitiesandbenefitsinBritishColumbia,•haveanannualbudgetofgreaterthan$200,000peryearandpermanentstaffpositions,•commitmatchingfunds(cashorin-kind)forthebusinessand/ororganizationaldevelopment

process,and•usethefundstopayforprofessionalfeesofaconsultantorresourcepersonand/orstaffcosts

andresourcesdirectlyrelatedtobusinessplanningandorganizationaldevelopmentactivities.

Funding Available Theprogramprovidesbetween10and15organizationsannually,matchinggrantsofupto$10,000.

Activities Funded Activitiesmustbedirectlyrelatedtobusinessplanningandorganizationaldevelopment.



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Business Development Planningandresearchactivitiestosupportthedevelopmentorexpansionofabusinessventure,suchas:

•businessfeasibilitystudies•businessplandevelopment•marketresearchstudiesand/ormarketingplans

Organizational Development Theseactivitiesmustbeinrelationtothepreparation,launchorexpansionofabusinessventure,suchas:

•activitiesaimedatbuildingorganizationalunderstandingandsupportforchange•facilitationofstaff/boarddevelopmentrelatedtospecificissuesofbusinessmanagement•developmentofplansinspecificareassuchas:staffing/management,strategicplanning,risk

managementandfinancialmanagement•developmentofnewpolicies,procedures,systemsandtoolsformanagementofthebusiness

Proposal Assessment Criteria Keycriteriaconsideredbythefundingpartnersinclude:

•Theproposedenterpriseisclearlyrelatedtothecharitablemandateoftheorganization.•Theproposedenterprisecontributestocommunitythroughemploymentcreation,trainingop-

portunitiesand/orenhancedprogramprovision.•Thereisevidencethattheorganization(includingtheboardofdirectors)hasbeguninitialorga-

nizationalassessmentand/orbusinessplanningprocesses.•Theproposaldemonstrates:i)thebusinesshasthepotentialtogeneraterevenueandii)the

organizationhasidentifiedapotentialmarketforthebusiness’productsand/orservices.•Thereiscommitmentfromtheorganization’sboardofdirectorstopursuebusiness/enterprise

activities.•Thereiscommitmentofmatchingdollars(cashandin-kind)fortheprogramgrant•Thereisevidencethattheorganizationhasthecapacityandthewillingnesstocommitaddi-

tionalfundstoimplementtheenterpriseonceaviableplanisinplace.•Astaffperson(orpersons)hasbeendedicatedtotheinitiative.

Application Process •Grantapplicationsareacceptedtwotimesperyear,inspringandfall.•Organizationsarerequiredtoattendaone-dayorientationsessionbeforeapplying.Grantap-

plicationformsaremadeavailabletoparticipantsduringthesession.



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The Orientation Session Therearetwoorientationsessionsperyearwithgrantapplicationsgenerallydue6to8weeksafterthesession.Organizationsthatdonotapplyforfundingdirectlyfollowingtheorientationsessiontheyattendareeligibletosubmitgrantapplicationsinsubsequentfundingcycles.

Theorientationsessionprovidesparticipantswithinformationthatwillassistthemto:•assesstheirorganization’sreadinesstolaunchanenterprise,•identifyorganizationalandbusinessdevelopmentneeds,and•learnmoreaboutthefundingprogramandtheapplicationprocess.

Thesessionitselfincludes:•Adiscussiononthenatureandtypesofnon-profitandsocialenterprises.•Adiscussionoflegalandstructuralimplications,includingCanadaCustomsandRevenue

Agencyguidelines,inregardstocharitiesandenterprises.•Anoverviewofkeyfactorsofsuccessinnon-profitenterprise,includingorganizationaland

businessdevelopmentissues,andkeyrisksandrealities.•Presentationsbyrepresentativesofexistingenterprisingnon-profits.•Discussionofbusinessideasofparticipatingorganizations.•AnoverviewoftheENPprogramhistory,initiativesfundedbytheprogram,programguidelines,

andapplicationprocess.•Adiscussionofnextsteps,includingtipsforfindingaconsultant,reviewofresourcesavailable,

andgeneralquestionandanswer.


Seeabove



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EQUITY FINANCING

1 THE CO-OPERATORS GROUP: CO-OPERATIVE DEVELOPMENT PROGRAMhttp://www.cooperators.ca/english/in_the_community/CDF_fund/content.html

EachyearTheCo-operatorsmakesavailable$100,000fortoco-operativesandsimilarorganizations.

Criteria •Inordertobeconsideredforaninvestment(maximum$25,000),applicantsmustprovidea

satisfactoryplan,budgetandbusinesscase,referencesandothersupportingmaterial.•Ifaninvestmentismade,TheCo-operatorswillrequiresharesorotherevidenceofthe

investment,andmayrequireappropriatesecurity.•Sincetheprimaryresponsibilityforfinancingtheco-operativebelongstothemembers,

TheCo-operatorsportionofthetotalfinancingwillalwaysbeaminority.2. RENEWAL PARTNERS

http://www.renewalpartners.com

RenewalPartnershasacloserelationshipwiththeEndswellFoundationandhasthesameCEO.

RenewalPartnersworkwithentrepreneursandpartnerswhoarehighlymotivatedbothtomakemoney,andtoprovidesociallyresponsibleproductsorservicesthatenhancetheircommunities.Theylookforventuresthathavestrongpotentialtobecomelucrativealternativestotraditionalenterprises.

Thebusinessesinvestedinaregenerallysmall(under$10millioninsales).Investmentscoverabroadrangeofindustries,representingacrosssectionofbusinessesworkingtowardsaconservationsociety:food,shelter,communications,education,nature,andenvironment,“green”consumerproducts.Theyfocusprimarilyonsectorstheythinkmaybeunderservedbyconventionalfinancingsources.

RenewalPartnersbecomesinvolvedatanearlystageandmakesalong-termcommitmenttotheenterprise.Theyprovidementoring,advice,andnetworkingandassistancewiththedevelopmentofinnovativeemploymentandcommunitypractices.

Theydobothconvertibledebtandequitydeals.RenewalPartnersrarelyconsidersdealsinwhichtheyaretheonlyinvestor.Theydonotseekacontrollingpositioninthecompaniesinwhichtheyinvest.However,theydoreservetherighttoappointaboardmember.

Resources #3Sources Of Funds For Start Up Costs



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RenewalPartnersexpectstheirinvestmentstobeprofitablewithinareasonablenumberofyearsrealistictotheindustry.Theydeterminewhatconstitutesareasonablereturnonacase-by-casebasis,balancingtherateoffinancialreturnwiththesocialbenefitstheyestimatetheinvestmentmayyield.

ThefollowingstepsoutlinethegeneralprocessRenewalPartnersfollowbeforeinvestinginabusiness:

•InitialContact:E-mailormailabriefoutlineoftheproject.•BusinessPlanandProposal:Oncetheyhavedeterminedthatthereisamatchintermsofmis-

sion,productorserviceandmanagementphilosophy,theyrequestaformalbusinessplanandfundingproposal.Uponreviewofthesematerials,theythenmeetthecompany’sprincipalstoengageinanin-depthdiscussionoftheproject.

•DueDiligence:Inordertoestablishthesoundnessoftheinvestment,theyengageinduedili-genceactivities,whichcanvarydependingonthesizeofthecompanyandthecomplexityandamountoftheinvestment.Thisprocessinvolvesadetailedanalysisofthecompany’sbusinessplan,financialsystems,personnel,trackrecord,andkeyadvisors.

•LegalDocumentation:Whiletheirbusinessrelationshipisfriendly,personal,andofteninformalinstyle,theydorequirefulllegaldocumentation.Eachsocialenterprisemustseekindependentlegalandaccountingadvice.

•DealClosing:Oncealldocumentsareagreeduponandsignedbyallparties,fundsareissuedimmediately.

Theperiodfrominitialcontacttoclosingthetransactioncantakeanywherefromthreetoninemonths.

3. SOCIAL CAPITAL PARTNERShttp://www.socialcapitalpartners.ca

SocialCapitalPartners(SCP)fundsbusinessesthatdemonstratethedisciplineandcompetitivespiritofaprivatesectorcompanywhilestrivingtogenerateoutstandingsocialoutcomesfortheindividualstheyemployandcommunitiestheysupport.Theylookforbusinessesthatdemonstratethefollowingcharacteristics.

•Hirethemajorityofemployeesfromaneconomicallydisadvantagedcommunity.•Provideskillsandexperiencethatpromotelong-termemployment.•Considermultipleneedsofthetargetpopulation(e.g.housing,counselingetc.)•Competesuccessfullywithinastrongsegmentofthemarket.•Haveaplantoreachbreakevenorprofitabilitywithin3years.•Havearealisticshort-termgrowthplanthatinvolvesemployingatleast12individuals.•Havearealisticlong-termgrowthplanthatinvolvesemploying20ormoreindividuals.•ArecapableofmeetinganyrepaymentobligationstoSCPandotherfinanciers.•Haveanoutstandingmanagementteamthatiscapableofcarryingouttheplan.



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Todeterminesuccess,SCPmeasuresboththeprogressofthetargetemployeestowardasustainablelivelihoodandofthesocialenterprisetowardprofitability.Theyconsidertheinitiativeasuccesswhenboththetargetemployeeandthesocialenterprisebecomeself-sufficient.

InitiallySCPrequiresabriefexecutivesummarythatoutlinesthebasicelementsofthesocialenterprise.Theexecutivesummaryshoulddescribethebusinessconcept,theneedthatitfulfillsinthemarket,andhowthebusinesswillbecomefinanciallysuccessful.Itshouldalsoprovideadescriptionofhowthebusinesswillfulfillitssocialmissionbydetailinghowanat-riskpopulationwillbeemployedbythebusiness.

SCPwillcontactthoseentrepreneursororganizationsfromwhomtheyareinterestedinseeingafullbusinessplan.Ultimately,SCPmakesitsfinancingdecisionsbasedonacarefulreviewofafullbusinessplanandanin-depthduediligenceprocess.

4. WATCH FOR A NEW SOCIAL VENTURE CAPITAL FUND

Atthetimeofwritingthisguide,withtheleadershipoftheVancouverFoundationandwithanumberofpartners,anewventurecapitalfundwasbeingdevelopedwhichwillprovidebothcapitalandtechnicalassistancetosocialenterprises.Itisexpectedthatthisfundwillbepilotedin2005.

DEBT FINANCING

1. CCEC CREDIT UNION

CCECisasmallcreditunionfoundedbytheCommunityCongressforEconomicChangeSociety,whichiscommittedtocommunityeconomicdevelopment.Itisaclosedbondcreditunionandmembersmustbenon-profits,co-operatives,orindividualswhoaremembersofnon-profitorganizationsorco-operatives.CCEChasagreatdealofexpertisewithcommunitybasedorganizations.Althoughallloansmustadheretotraditionallendingrequirements,CCECcanbeverycreative.Forexample,theloanofonecommunityorganizationwassecuredbypersonaldepositsof$500by40members.



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2. COAST CAPITAL SAVINGS: RISING TIDE LOANS AND TECHNICAL ASSISTANCEwww.coastcapitalsavings.com/Community/CommunityInvestments/Microcredit#TargetArea3a

2.1 Rising Tide 2 Loans

CoastCapitalhasaportfoliocalledRisingTideLoans,whichareavailableforcommunityinitiativesandlocalsmallbusinessventuresthatdonotqualifyforconventionalcredit.Theseloansfocusonthreemainareas:

•Businessstart-upsandafter-care•Affordablehousingandyouthemployment•Communitycapacitybuilding

TherearethreetypesofloanswithRisingTide.RisingTide2loansareforSocialEnterprises.

Loan Amount•Upto$150,000

Loan Rate•Interestratesfortheseloansaregenerallyhigherthanconventionalrates,reflectingthead-

ditionalrisktheintentiontofinanceinitiativesthatdonothaveaccesstoalternativesources.

Priorities•Initiativesthatshowbenefitstothecommunity’seconomic,socialorenvironmentalwell-being.

Criteria•Organizationisamember/clientofCoastCapitalSavings.•Thereisafinanciallyviablebusinessplan(includingmarketanalysis,operationaldetailsand

financialinformation(specifically,acashflowstatement)withdemonstratedbenefitstothecommunity’seconomic,socialorenvironmentalwell-being.

•Proofofcommunitysupport(2lettersofreference,documentationoutliningsupport.)•Proofoforganization’sowncontributiontothebusiness(financialorin-kind.)

2.2 Technical Assistance

CoastCapitaloffers“Pre-andAfter-Care.”

Pre-CareIfanorganizationhaswhatappearstobeasoundbusinessideaandabusinessplanwhichmayqualifyforaloanbutwhichneedsfurtherdevelopment,CoastCapitalwillprovidepre-carefortheorganization.Pre-caremeansthatCoastCapitalwillassisttheorganizationtopurchasetechnicalassistance.However,pre-caredoesnotguaranteethattheorganizationwillreceivealoan.



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After-CareIfanorganizationhasreceivedaloanfromCoastCapitalbutisrunningintoproblems,orispreparingtomovetothenextstageofdevelopment,thecreditunionwillassisttheorganizationtoobtaintherequiredtechnicalassistance.

Consulting Hours PurchasedIngeneral,CoastCapitalwillpayforthefirstthreeconsultinghoursand50%ofthenext4hours.Anyfurtherhoursarepaidforbytheorganization.

3. COMMUNITY FUTURES DEVELOPMENT CORPORATIONSwww.communityfutures.ca

LoansandTechnicalAssistance

FundedbyWesternEconomicDiversificationCanada,CommunityFuturesDevelopmentCorporations(CFDCs)throughoutruralBC,offerdebtfinancingandtechnicalassistancegearedprimarilytowardshigh-riskventuresinruralareas.(TheexceptionisPartnersinCommunityHelp(PEACH)intheDowntownEastsideofVancouver,whichoffersaformofcommunitydebtfinancing.)

CFDCsmakeloansofuptoamaximumof$125,000tonewandexistingbusinesses.LoansreceivedfromaCFDCarefullyrepayableatcompetitiveinterestrates.

BecausetheboardsofCFDCscomefromthecommunity,theloanstheymakereflectlocalknowledgeoftheneedsofthecommunity.CFDCsarebecomingincreasinglyawareofthefinancingneedsofsocialenterprise,althoughsomeboardsaremuchmoreconservativethanothers.

4. ECOTRUST CANADAhttp://www.ecotrustcan.org

4.1 Loans

EcotrustCanadahasaNaturalCapitalFundthatsupportsaBusinessLendingprogram.Theyoffernon-bank,higher-riskloanstoentrepreneurs,cooperativesandnon-profitgroupsthatincorporateecologicaland/orsocialvaluesintheiroperationsorthatpromotejobsanddiversificationinruralandAboriginalcommunities.

Theylookatabusiness’triple-bottomline,assessingwhetheritpromoteseconomicopportunities,protectstheenvironment,andfosterssocialequityinB.C.’scoastalcommunities.



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Theyprovidetermloansofupto$500,000for:•workingcapital,•equipmentandotherfixedassets,•newproductionandservicecapacity,•productormarketdevelopment.Interestratesaresettoreflectrisk.Flexiblerepaymentschedulescanbetailoredtofitthe

venture’scashflow.

4.2 Technical Assistance

Ecotrustexpertiseiswithconservation-baseddevelopmentinforestry,shellfishaquaculture,fisheries,tourism,energy,andrealestatedevelopment.TheyhaveextensiveexperienceworkingwithFirstNationsandlocalcommunityenterprisesupanddowntheB.C.coast.

Theyofferasuiteofconsultingservicesinsupportoftheseeffortsincluding:•Marketresearchandanalysis,•Businessplanning,•Feasibilitystudies,•Strategicplanningforcommunityeconomicdevelopmentandresourcemanagement,•Management,trainingandproductdevelopmentservices,•Networkingservices–promotingcontactandexchangewithotherentrepreneursworkingin

theconservationeconomy.

5. VANCITY SAVINGS CREDIT UNION

SharedGrowthDeposits.SavingsCreditUnionofferstwotypesofSharedGrowthTermDeposits–CashableorFixedTerm,whichsupportloanstosociallyresponsiblebusinesses.

Inaddition,theinvestorcanreceiveamarketrateofreturnorcanchooseanyratebelowmarket.Theinteresttheygiveupispooledandthenusedtoprovideaccesstocredit,orreducedinterestonloansforsocialenterprises.


Referto5.0VanCitySavingsCreditUnion



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EQUITY FINANCING

1. RENEWAL PARTNERSReferPage65

2. SOCIAL CAPITAL PARTNERS RefertoPage66

3. A NEW SOCIAL VENTURE CAPITAL FUNDRefertoPage67

DEBT FINANCING

1. VANCITY SAVINGS CREDIT UNIONRefertoPage70

2. VANCITY CAPITAL CORPORATIONwww.vancitycapital.com

VancityCapitalCorporation,specializesingrowthfinancing.Theyprimarilyprovidehigherrisk,repayablegrowthcapital—knownalsoassubordinateddebtandmezzaninefinancing—tosmallandmedium-sizedBC-basedorganizations.Startupcapitalisnotavailable.TheCapitalCorporationisinterestedtalkingtoanyemergingsocialenterpriseswithsignificantpotentialforgrowthinachievingsocial,environmentalandfinancialimpacts.

Similartoequityinvestments,growthcapitalisusuallynotsupportedbycollateralassets.Likeconventionaldebt,growthcapitalrequiresregularmonthlypaymentsofprincipalandinterest.

VancityCapitalCorporationsupportsnon-profitentitieswithhigher-risklending,whilealsotakingintoaccountthenon-financialbenefitstobeachieved.Whilegenerallythistypeofunsecuredventurecapitalinvestmentrequiresmuchhigherratesofreturn,theygenerallypricetheirloansonlyslightlyhigherthanconventionalfinancing,soastomakethemaccessibleforventureswhichmaynothavetheabilitytopayfullyriskadjustedrates.

Inpart,theyareabletoprovidethisfinancingbecauseofarisksharingagreementwiththeFederalGovernmentthroughWesternEconomicDiversification.The2004federalbudgetopenedtheirGrowthCapitalProgram,alongwithallothersmallbusinesssupportprograms,to“socialeconomy”enterprisesaswellasconventionalbusinesses.

Resources #4 Sources Of Funds For Operating Costs



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Loan RatesWithnon-profitentities,theloanrateschargedbytheCapitalCorporationgenerallystartatprimeplus3%.

Loan AmountsLoansrangefrom$50,000toover$1million.

Technical AssistanceLimitedtechnicalassistanceisavailablefromCapitalCorporationstaff.ItisusuallyprovidedifasocialenterprisehasthepotentialtoobtainaloanfromtheCapitalCorporationorifanexistingclientneedsassistanceinordertobesuccessful.



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Othersourcesoffundsworthexploringinclude:

CANADA

FEDERAL GOVERNMENT•WesternEconomicDiversification•HRSD•NaturalSciencesandEngineeringResearchCouncil•IndustrialResearchAssistanceProgram(IRAP)•NationalResearchCouncil(NRC)•CMHC(MortgageInsurance,RRAPGrants)•CanadaCouncil•IndianandNorthernAffairesCanada(INAC)•BusinessDevelopmentCanada(BDC)•TaxCreditsandIncentives(RRSP,CharitableDeductions)

PROVINCIAL / TERRITORIAL GOVERNMENTS•CommunityVentureCapitalCorporations•EmployeeShareOwnershipPlans•GreenEnergysupport•Taxcredits/incentives•Ministerialspending

MUNICIPAL/REGIONALENTITIES•ColumbiaBasinTrust•GwaiiTrust•ClayoquotBiosphereTrust•ABCCanada,ACCs,PeaceHillsTrust•CommunityFoundationse.g.McConnellFoundation,RichardIveyFoundationetc.

UNITED STATES

1. INVESTOR’S CIRCLE www.investorscircle.net

AlthoughtheInvestor’sCircleisintheUS,ithasacceptedanapplicationfromaVancouver-basedsociallyresponsiblebusiness.TheredoesnotappeartobeanyreasonwhyasocialenterprisethatmeetstheICmissioncouldnotapply.

Resources #5Other Sources - Canada14



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FFromDerekGent,FinancingCommunityEconomicDevelopment(PowerPointpresentation.)SFUCommunityEconomicDevelopmentProfessionalsCertificateprogramwithadditionalinformationfromAmandaDowling,Manager,CorporateSocialResponsibility,CitizensBankofCanada

Resources #6Other Sources - International

TheInvestorscircleisaUSbasednetworkofabout450earlystageprivateequityinvestorswhoseekfinancial,social,andenvironmentalreturnsontheirinvestments.Theirmissionis“togalvanizetheflowofcapitaltoentrepreneurialcompaniesthatenhancebioregional,culturalandeconomichealthanddiversity.”

Businessesmustfallintooneormoreoffivespecificinterestareas:•Energyandenvironment•Foodandorganics•Communityandinternationaldevelopment•Educationandmedia•Healthandwellness

Theyarealsoparticularlyinterestedinwomenand/orminorityledbusinessesaslongastheymeetthemission.

2. GLOBAL SOCIAL VENTURE COMPETITION (GSVC)www.socialvc.net

TheGlobalSocialVentureCompetitionisaninternationalbusinessplancompetitionthatpromotesthecreationbusinesseswithbothhighfinancialandsocialreturnsoninvestment.TheHassSchoolofBusinessatUCBerkley,ColumbiaBusinessSchool,LondonBusinessSchool,andTheGoldmanSachsFoundationjointlysponsorthiscompetition.

TheGSVCawardsprizestothebusinessplansthatshowthehighest,mostintegratedfinancialandsocialreturns,aswellasanawardforSocialImpactAssessment.ToqualifyfortheCompetition,aproposedventuremust:

•Plantobefinanciallysustainableorprofitable;whetheritisacommercialbusinessoranon-profitorganization,itmustbeself-sufficientonitsearnedrevenue.

•Haveaquantifiablesocialand/orenvironmentalbottomlineincorporatedintoitsmissionandpractices.

Eachentrantteammustincludeagraduatebusinessstudentfromanybusinessschoolintheworldoranindividualwhohasgraduatedfromgraduatebusinesseducatewithinthepasttwoyears(fromthedatethattheplanisfirstsubmitted).Thegraduatebusinessstudentmustbeactivelyinvolvedintheventure(ie,activelyparticipatingindevelopmentofthebusinessplanandpresentationoractivelyworkingonthebusiness).



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