Starting and running an impact-minded business involves a lot of moving pieces. Not only do you have to develop a sustainably-focused business idea for your target audience, but you also need to run a sound business –both of which require money!
Now, if you have the financial means, you can absolutely use your own money (capital) to run your business! But it’s important to know that you also have the option to raise capital (i.e., fundraising) to fund your business, too. It’s a lengthy and sometimes challenging process, but it can be done and is often well worth the effort.
To make things easier and help clarify how to acquire capital funding, we’ve compiled a guide covering the 7 ways to raise capital and fund your small, medium, or large business –including which funding options are best for start-ups versus established companies.
We’ll also cover what type of purpose-led business should seek capital funding and how to start raising money for your business with helpful tips and resources to start this process today!
The 7 Best Ways To Raise Capital For Your Socially and Environmentally Responsible Business
If you’ve decided that capital funding is the right move for your conscious business, it’s essential to understand your options for raising capital because there are many cash sources to consider before you get started.
As you go through this list, consider the pros and cons of each type of funding to determine which option is right for you and your business. This list is not exhaustive, but it highlights the common ways impact-minded companies can raise capital and use their business for good.
Using crowdfunding platforms, a group of people (the crowd) donates money to a business idea, nonprofit cause, personal need, or business venture. The idea behind crowdfunding is that there is no repayment or equity disbursement obligation. Also, in exchange for funding, investors receive a tiered “gift” dependent on the amount (or level) of money invested.
This type of funding involves basic marketing tactics such as posting on social media, emailing your list, reaching out to your personal network of family and friends, or using one of the crowdsourcing platform tools to generate support from people worldwide.
The 6 best crowdsourcing platforms to consider (based on research and reviews from Investopedia)
- Indiegogo (Best Overall)
- SeedInvest Technology (Best for Startups)
- Mightycause (Best for Nonprofits)
- StartEngine (Best for Investing)
- GoFundMe (Best for Individuals)
- Patreon (Best for Creatives)
**Note that most crowdsourcing platforms charge a 5% fee plus a third-party payment processing fee.
2. Friends & Family
Friends and families are an underutilized network but can be an excellent resource for early investments, loans, or crowdfunding. Plus, one of your friends or family members may have someone in their own networks more willing to invest larger resources into your purpose-led business.
You can also throw yourself a “New Business Shower” and celebrate your new venture with a party where family and friends can bring “gifts” that contribute towards your gift. Everybody gets to enjoy a good party and your business reaps the rewards! It’s a win-win scenario. Patch Work It is a funding platform that makes contributing money, time, or skills easy for everyone involved.
You can even host local or in-person fundraisers to raise enough capital to jumpstart your business, cover the costs of new equipment, or whatever else money can supply your business with. Just don’t forget to invite your friends and family!
Some fundraising ideas include: partnering with a local restaurant (bonus points for one that is farm-to-table or sources local and organic ingredients!), peer-to-peer fundraising, used-book sales, and more.
Always ask around (or use a crowdfunding platform) to see who in your inner circle is willing to invest in your values-aligned business before you explore outside funding options.
3. Angel Investors
If you have a brand new business, you probably haven’t established enough business history to apply for the more robust capital funding options. But there are other options, including angel investors!
Angel investors are non-institutional investors who have a passion for helping startups and small businesses find their footing so they can grow a company that makes an impact. Usually, they’ll offer their own personal capital in exchange for business debt or equity.
Since angel investors invest their own money, the investment size can vary drastically. But luckily, you can find multiple like-minded angel investors willing to “pool resources to make a more sizable investment as a group.” (The Balance)
If you’re looking for “free money,” AKA money that doesn’t require repayment or comes with strings attached, grants are an excellent option for raising capital for your business. “A grant is an award, usually financial, given by one entity (typically a company, foundation, or government) to an individual or a company to facilitate a goal or incentivize performance.” (Investopedia)
The drawbacks to grants are 1) the application process is often very long and tedious, and 2) funds usually take a long time for disbursement.
There are two great resources to find federal-level grants. Grants.gov is a database filled with federally sponsored grants, and the Environmental Protection Agency, who offers small business grant opportunities to companies focusing on environmentally responsible initiatives like innovative food systems, green infrastructure, and more. (Entrepreneur)
- Amber Grant: every month, WomensNet awards $10,000 to a woman-owned business with the possibility of winning an additional $25,000 at the end of each year.
- SoGal Black Founder Startup Grant: offer startup grants to businesses owned by Black women or Black nonbinary entrepreneurs in amounts of either $5,000 or $10,000.
- Comcast RISE: awards $10,000 grants to businesses owned by women and people of color several times per year.
If you’re looking for city or state grants, many offer their own programs to apply to, like women’s business centers, economic development resources, minority business development agency centers, and small business development centers.
A thorough Ecosia search can help you find relevant grants in your area. Some other grant options include:
- Small Business Innovation Research and Small Business Technology Transfer Program: provide contracts and grants for early-stage small businesses that are looking to commercialize innovative research and development.
- Fast Break for Small Business: a grant program is funded by LegalZoom, the NBA, WNBA and NBA G League and administered by Accion Opportunity Fund where selected applicants can win a $10,000 business grant plus free LegalZoom services.
Microloans are small-scale loans specifically targeted for startup business ventures and vary on interest rates, term length, and eligibility requirements depending on each lender.
In general, microloans are almost always a desirable option for most small businesses looking to raise capital because they have fewer strings attached since they are “fully funded by the U.S. Small Business Administration and administered by an intermediary network of nonprofit community-based lenders, rather than traditional banks” (Nerd Wallet).
U.S. Small Business Administration (SBA) offers microloans of up to $50,000 (the average is around $13-14,000) for small businesses to get started and expand. The SBA also offers Lenders Match, an excellent resource for businesses to get matched to interested lenders offering SBA-backed funding.
Depending on your industry, accelerator programs (sometimes called Incubators) can give your eco-business the leg up it needs.
Accelerator programs usually support early-stage businesses by offering resources like mentorship, operations, marketing, and access to investors to pitch your business idea or venture. The idea is to “accelerate” your business towards success by tapping into the program’s resources.
A few startup accelerators for eco-conscious businesses include:
- Echoing Green.
- GoodCompany Ventures.
- Better Ventures.
- Rutgers EcoComplex.
- Fashion for Good.
- Food Future Co.
Another similar option is joining a fellowship. Fellowships typically foster professional development provide training, and allow for high-level networking opportunities rather than provide financial capital for businesses.
For example, the Tory Burch Foundation’s Fellow’s Program helps 50 selected women business owners “grow their businesses through workshops, coaching sessions, network-building, and financial resources” over the course of one year.
For European-based small businesses, an amazing organization called Impact Shakers is on a mission to create a more ethical and inclusive movement to counter existing startup and venture capital culture. They offer programs and funding opportunities including Incubators, Accelerators, Microfunds, Ventures, Impact Angel investing, and even Summit.
7. Venture Capital (VC)
Usually, VC funding is better suited for start-ups or early-stage businesses with very high growth potential OR more established businesses that have achieved successful milestones and might already have gained market share in their industry.
Venture capitalists “generally provide financing that often has higher rates of return instead of taking a share of the company. However, some may take an ownership share of the company.” (GoFundMe) So it’s essential to research and predetermine what parameters you’re willing to accept in exchange for capital.
Other fundraising options
There are so many other options to raise capital funding beyond what we’ve covered, including a purchase order or invoice financing, business contests, product pre-sales, supplier or distribution partners, big bank loans, and more.
If you’re savvy and do the research necessary, you can find plenty of options to raise capital and fundraise the money needed to grow and expand your eco-conscious business.
What type of business should raise capital?
With so many capital funding options, businesses of all shapes and sizes can raise capital at different stages of their business journey. From startup money for the idea-stage businesses to Venture Capital for the more advanced businesses, the options –while not endless– are plentiful depending on where you’re at and the amount of money you need to succeed.
Consider your options, but also remember that some businesses can sustain themselves on revenue alone and don’t need to seek out capital funding.
How To Raise Money For Your Business
Before you start your fundraising journey, there are a few steps you need to take to be successful in raising the money you need for your business to grow and expand.
Do your research
The most effective way to get the capital you need for your business is to be prepared. Focus on the details, prepare beforehand to take the proper steps, and gather the correct information you need to acquire the money you need to grow your business.
Business plans, value propositions, finances, revenue streams, product lines, and growth projections are great starting points.
Leverage your network
Don’t underestimate the benefits of networking. Networking –or extending your existing network– can help you connect with people willing to invest in your business venture.
Consider your start-up costs
Determine how much money you realistically need to start your business, grow your business, and expand your business. Consider your present costs, but more importantly, consider your projected expenses and capital needs.
Other things to consider are the size of your business now, the size your business is projected to be, and what you’ll be spending monthly. Use financial projections to determine how long it will take before your revenue can sustain your business so you can acquire the correct amount of capital to get you to that point.
More detailed financial considerations might include:
- Inventory costs, licensing fees, insurance, mortgages, office space, utilities, or other overhead costs if you’re a brick-and-mortar business.
Other costs for both service and product-based businesses include
- Web (or app) design and development, product design and development, digital marketing, software, outsourcing costs, legal fees, equipment costs, salaries
Seek out experts
Speak to an accountant or bookkeeper knowledgeable about the eco industry, so you know exactly what’s needed to run your business now and in the future. Bookkeepers are also a necessary asset for your business and future financial lenders and investors looking for proof that your business is sound.
In the same vein, if you’re unsure how to start your capital fundraising journey, seek a consultant, mentor, or advisor who can help walk you through the capital funding process.
If you want to find a bookkeeper, accountant, consultant (or other vendors) that aligns with your eco-conscious values and can help you navigate capital funding, check out the Tidal Pages, a curated directory with expert purpose-led businesses that value people and the planet over profit.
Use Funding Finder Tools
We’ve already mentioned a few ways to find capital funding in this post, but some funding finder tools might help you narrow down your search depending on your industry, your financial needs, your business idea or venture, or something else.
- The Tory Burch Foundation has an excellent Funding Finder Tool for exploring different funding options best suited for your business.
- GrantWatch is a search engine that identifies different grant opportunities for various industries.
- The Environmental Protection Agency (EPA) offers grants to help visionary organizations achieve their environmental goals.
- Inside The Ecosystem community, you can find an expansive space filled with financial resources to help you navigate funding opportunities for your business or organization.
There is no one size fits all approach to fundraising, even within the same industry. But having a plan of action, helpful resources, and a running list of qualifying funding options can help you understand how to piece together enough funding from various sources to meet your financial goals and build a business that positively impacts the people and the planet.
Looking for more financial resources? Inside The Ecosystem, you can discover various funding options and network with business-minded people who want to inspire and take action toward sustainable change. Become a member of The Ecosystem today!
Article Resource Links:
- The Balance Publication: A Guide To Raising Capital For Startups. May 4, 2022.
- GoFundMe Publication: How to Raise Money for a Business: 11 Sources of Funding.
- Entrepreneur Publication: How To Get Funding and Grants For Green Startups. October 27, 2022.
- Nerd Wallet Publication: SBA Microloans: What Businesses Qualify & How To Apply. February 7, 2023.
- GrantWatch Publication: 10 BIPOC Grants To Business Owners & Entrepreneurs. May 18, 2022.
- Forbes Publication: 11 Business Grants For Women: Receive Free Money. February 9, 2022.
- Environmental Protection Agency (EPA) Grants
- Small Business Administration (SBA): Lender Match & Microloans
- US Government Grants and Loans
- The Tory Burch Foundation Funding Finder Tool