Funding

Financing Needs of SSE entities

This first topic introduces participants to the challenges related to SSE’s access to finance. It invests in explaining that access to finance is often a complicated issue related to both the stage and robustness of the business model development of the SSE entity as well as the intrinsic inefficiencies of available funding streams to understand SSE objectives and impact potential. The topic explains which type of services should be available to SSE enterprises in different stages, as well as the deficiencies and gaps that should be addressed in order to develop appropriate and sustainable funding sources to support SSE development. Moreover, it details that while difficulties SSE entities often face in accessing finance are connected to the lack of appropriate services and products, in many cases these mainly reflect an inability of those ventures to develop a business model that would dynamically negotiate access to private and/or public markets. Thus, access to finance usually passes through both the ability of the SSE entity to prove its entrepreneurial potential as well as the capacity of funding sources to understand the model and logic employed. To this end, this first topic invests in underlining the importance of non-financial services as both a means and the tools that facilitate SSE access to both funding and markets.

Sources of Funding [A] -Main financial suppliers for the SSE

Having assessed the deficiencies and needs related to the demand side of a social finance market, this topic focuses on the supply side of the social finance market. More specifically it describes the main funding sources that SSE entities can have access to. It explains why and how the very nature and objectives of social and solidarity economy organisations allow them to reach out to a variety of different funding sources in order to finance their activities and operations. The topic initiates its presentation from sources related to those directly involved in a social venture, such as members and their communities. It then evolves to present more institutionalised forms of capital provision, such as dedicated financial intermediaries. Furthermore, it highlights the critical role of public funding and related policy measures which, when appropriately planned, may offer multiple opportunities for SSE entities to finance their business models and deliver their impact potential. Finally, this topic places specific focus on the divergence of objectives and interests between financial suppliers and recipients of funding, and underlines the importance of selecting among possible available options the appropriate funding source to cover different funding needs. Matching the available forms and amounts of finance with the desired purpose is a challenge in most markets because the risk and return expectations (both social and financial) of investors and investees often do not align.

Sources of Funding [B] - Financial mechanisms and tools

This last topic introduces students to (readily available but also potential) financial mechanisms and tools through which social and solidarity economy entities finance their capital needs. It focuses mainly on equity capital and repayable finance/debt financing, and classifies mechanisms and funding tools into those possibly available from internal sources, and those available from external sources. In doing so, it stresses the different risks related to the source of funding even when the same financial solution is being sought. Finally, it links available sources and potential mechanisms to the development phases of an SSE entity, indicating what should be expected or searched for, when and why. The topic concludes with two important remarks and learnings:

  • it stresses the importance of good capital management and guides  articipants through a set of suggestions to mitigate the risks stemming from poor decisions and over-indebtedness; and
  • it highlights the merits that stem from a strong capital structure for  fficient and sustainable SSE initiatives