South Africa needs a thriving Social Entrepreneurship sector in order to overcome some of its critical social and development challenges. Social Entrepreneurs find creative and sustainable ways to address challenges confronting society; their approach innovates and combats challenges in ways that government, traditional charities or NGOs can’t.
WHAT ARE SOCIAL ENTERPRISES?
Social Enterprises are revenue-generating businesses with a twist.
Whether operated by a non-profit organisation or by a for-profit company, a social enterprise has two goals:
- to achieve positive social, cultural, community, economic and/or environmental outcomes and
- to earn revenue and maintain sustainability
IS THIS GUIDE FOR YOU?
This guide to finance is aimed at Social Enterprises that need to access funding to grow and scale their enterprise.
Funding is increasingly available for all kinds of Social Enterprises and not dependant on life-stage or scale of your Social Enterprise; the reason you are seeking funding or your legal status.
There is a myriad of different funding mechanisms and channels through which you can access finance. This guide has been designed to help you navigate your way through what is available and finding the most appropriate source of funding for your unique Social Enterprise.
The information in this guide will be most useful for small and medium sized enterprises. These enterprises will have managers with financial understanding but will not necessarily have access to specialist financial advisors and fundraisers.
Identify the type of funding your unique enterprise qualifies for
Understand what financiers are looking for and how to look attractive to each type of investor
Understand the due diligence process and how to prepare for it
At the very start of your journey
Funding is more difficult for seed and early-stage businesses with no track record or assets; there are several support and funding options available for these enterprises. Private sector organisations such as incubators and accelerators typically fill this role.
These are organisations that provide mentoring, training, business services and sometimes funding for promising entrepreneurs to develop their business ideas.
The South African government is also involved in the support of seed stage businesses through the provision of technology transfer offices, business incubators and an accelerator that targets high growth enterprises.
Incubators are organisations that help promising start-ups acquire the resources needed to succeed. Services offered by incubators may include office space, professional services and business advice.
Accelerators are interested in assisting promising start-ups so that they have a better chance of succeeding. The major difference from an incubator is that an accelerator will typically make an investment in the early stages of the business.
Technology Transfer Offices
Technology Transfer Offices assist in supporting the commercialisation of research and development projects.
Be confident in your business. A Social Enterprise must have a period of positive trading on record; many funders will need to see this track record before they even consider your application for finance.
Utilised and exhausted all local funding options. The initial test phase of a business often comes from personal savings, contributions from friends or family, cross-subsidization from another business or loans secured against your own property.
Run as leanly as possible. Minimizing your cost base will both make you more attractive to finance providers and reduce the amount of finance that you will likely have to attain to expand your operations.
Make sure the numbers add up. Applications for finance depend heavily on solid evidence that the business is on track towards profitability. Important points to consider are sustainability and scalability.
Obtaining finance for a business that has no proven track record is extremely difficult so only apply after an initial period of positive trading.
Crowdfunding and entrepreneurship competitions are exciting new ways to attract funds for business ideation.