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Show Me the Money

It Isn't all About Loans and Grants...

Financing for your social enterprise, especially if you're a start-up, can be daunting. But there are several options beyond using your limited savings (or retained surplus if you're a nonprofit), bank loans (almost impossible to get without a personal guarantee), and hotly-contested grants from government and foundation sources. For this post, I'm going to focus on financing to cover the regular costs of doing business; funding for social costs (i.e. the legitimate, incremental costs of operating as a social enterprise) will be the topic for a separate post. And much (though not all) of what I'll present will only be relevant if you're planning on setting up your enterprise as a for-profit company. With those caveats stated, let's roll on.

Four Options

There are four financing options worth considering, presented below in increasing degree of complexity and scale, that don't require taking on debt:

  1. Non-equity crowdfunding (aka crowdfunding)

  2. Equity- and debt-based crowdfunding

  3. Doing a non-public offering of shares

  4. Doing a public offering of shares via a community economic development investment fund (CEDIF)

A Word About Equity

You'll notice my reference to "equity". This may be a new term for you. What it means is ownership, in this case selling a piece of the enterprise to one or more other owners. Selling an equity stake in your enterprise is only an option if you're starting or already running a for-profit company (e.g. sole proprietorship, partnership, for-profit co-operative, or corporation), an option that social entrepreneurs are increasingly choosing for their social enterprises. Even if you're already running a nonprofit, your nonprofit does have the completely-legal option of setting up and owning a for-profit company. It's only if you're committed to running your enterprise as a nonprofit that you'll be limited to option 1. (I've really got to write a post about legal structure options...). Anyway, here we go.

Non-Equity Crowdfunding

Non-equity crowdfunding is what most people just call crowdfunding. I'm making the distinction here because of the advent of equity-based crowdfunding (option 2). Anyone, nonprofit or for-profit, can use this kind of financing. With this option, supporters contribute money, generally via an established crowdfunding website (e.g., gofundme, startsomegood, kickstarter, etc.) in exchange for a "perk" (some token to acknowledge your contribution). The bigger the contribution, generally the bigger the perk. These contributions are essentially gifts given to you because the supporters believe in the impact you're making or are proposing to make, and they have no equity stake in the enterprise. The better you can articulate your impact, the more likely you are going to have a successful crowdfunding campaign. (See my previous post, Job #1..., for how to articulate your enterprise's impact.)

This would be a good place to start to generate money to pursue the other financing options (listed below), or for some other short-term need, like testing your minimum viable enterprise. Crowdfunding campaigns typically operate on a 30/30/30 time frame: 30 days to prepare for the campaign, 30 days to run the campaign, 30 days to follow up after (e.g. send out the perks, etc.). Any good crowdfunding site provides step-by-step instructions and technical support. A couple friends and I successfully launched a community-based film festival with and had a great experience.

Equity and Debt Crowdfunding

In my home province, the Nova Scotia Securities Commission (NSSC) now oversees a more formalised form of crowdfunding, where the investors either get equity in, or make a repayable loan to, a for-profit corporation. Other jurisdictions are rolling out similar schemes. While incorporating a for-profit corporation will cost you around $2000 in legal fees, it may be worth it if you have an investment-ready enterprise. In Nova Scotia's case, the maximum investment per investor is $1500, so it's not for generating huge amounts of money, but could be less daunting than doing a full-on CEDIF offering, referenced below.

Learn more at (there's a great explainer video on this page). It seems that all crowdfunding under this scheme is run by established crowdfunding portals that have registered with the NSSC. I happened to click on this one and it looks good: (They've got a great little video about how they work on their home page. They seem to walk you through the process.)

Doing a Private Offer of Shares

In Nova Scotia, you can go out and recruit from 1 to 50 private investors for your for-profit corporation without going through the Nova Scotia Securities Commission. But you'll want to have an accountant/lawyer on your side who's done these kinds of deals before. This can be where so-called "angel investors" can come into play; private individuals who believe in what you're trying to do (which you've clearly articulated, see Job #1...), and who will invest their own money in what might be a somewhat risky or untested enterprise. Or maybe you've just got a great business and they feel the potential returns outweighs the potential risks. The added benefit for the investor is that they can get an equity tax credit of 35% (up to a maximum credit of $17,500 that can be applied to the investor's income taxes payable, on an investment of $50,000).

Do a Public Offer of Shares Through a CEDIF

Community Economic Development Investment Funds (CEDIFs), available in Nova Scotia and New Brunswick, may be your most complicated option, but they can potentially raise the most money and offer the greatest tax advantage to investors. Investors get the same 35% equity tax credit as they would under the private offering (listed above), and can get get an additional 20% if they leave their investment in for at least five years. With a CEDIF, you are essentially setting up a local mutual fund, where individual investors - regular people like you and me - can pool their small investments to make substantial funds which can be used to finance large local enterprises that will benefit their community.

"There are now 47 CEDIFs in Nova Scotia that have successfully closed at least one offering. These Funds, through a total of 120 offerings, raised and invested $40 million in local enterprises. The capital of these Funds has been invested by 5,616 individual Nova Scotians..." [source:]

One of my favourite CEDIFs, the award-winning FarmWorks Investment Co-operative, regularly raises $100,000s every year, which is then used to provide loans to local food-based businesses.

Setting up a CEDIF is not for the faint-hearted, due to its strict regulation and onerous administration, but it can be an excellent source of equity financing for larger enterprises. If you're thinking that this might be a good option, I recommend you talk with the representatives of at least one CEDIF (you can see the full list of CEDIFs a, to get a first-hand understanding of potential challenges and rewards.

You Don't Have to Choose Just One...

For example, you could run a non-equity crowdfunding campaign to secure, say $10k, which you could use to help you with recruiting private investors, or to launch a CEDIF. Any of these options take time, and, with the exception of option 1, they require that you set up as a for-profit. But they can all provide you with significant, much-needed financing, without the burden of repayable debt. As always, if you have questions or concerns, email me at

P.S. Okay - There is This One Grant...

My comments about loans and grants notwithstanding, there is exciting news (announced on 21 June) about a new government funding program for early-stage startups. Learn more here.

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