Social entrepreneurs starting to work on their business models are often overwhelmed with the amount of information they receive. There seems to be an almost unlimited number of ways to combine income streams with key activities, delivery methods and target markets to create an innovative business model.

Finding capital to fund your business model might be an additional challenge. However, there is a good chance that any reasonable business idea can be realized and implemented. Social enterprise can use philanthropic capital as well as commercial capital and are thus more flexible.

There are a few things you should keep in mind. It all depends on the level of flexibility, long-term planning, and cash flow needs.

The figure below shows the main considerations. Do you think that you can pay back an investment and pay a certain amount each year? Depending on the answer to this question you might have a preference for specific financing instruments.

Debt finance means that a bank or a loan fund is giving you a certain amount of capital which you need to repay. Each year you also need to pay a certain amount in the form of interest payments. Expect average interest rates between 2% and 7% depending on the intermediary, collaterals and the credit period.

The regular payment obligations imply that you should have a sustainable business model. Default on your payment obligations triggers bankruptcy proceedings which might include personal liability.

You can go to virtually any bank and submit your documents. The list below is a good starting point as they have experience in working with social enterprises.

Austria (Erste Bank), Belgium (Credal, Hefboom), Croatia (Erste Bank), Czechia (Erste Bank), Denmark (Merkur Andelskasse, Folkesparekassen), Finland (Oma Säästöpankki Oyj), France (France Active, Société Financière de la Nef, Credit Cooperatif, Caisse Solidaire), Germany (GLS Bank, Umweltbank), Greece (Cooperative Bank of Karditsa), Hungary (Erste Bank, MagNet Hungarian Community Bank), Ireland (Community Finance), Italy (Banca Popolare Etica, Banca Valsabbina, Cooperfidi Italia,Cassa Padana,Cassa Rurale di Bolzano), Malta (APS Bank), Netherlands (Triodos Bank), Poland (TISE), Romania (Erste Bank), Serbia (Erste Bank), Slovakia (Erste Bank), Spain (Colonya Caixa Pollenca, Nueva MicroBank), Sweden (Ekobanken), United Kingdom (Key Fund Investments).

Another way to finance your social enterprise is with equity. Equity means that an investor receives shares in your company. She will be involved in all major decisions and will need to sell her investment after a few years. In Europe, the following social venture capital funds might be a good place to start:

Ananda Ventures (Munich), BonVenture (Munich), Creas Impacto (Madrid), Change – Credal Social Innovation Fund (Greater Brussels), Den Sociale Kapitalfond (Copenhagen), FASE (Berlin), idacapital (Istanbul), FEIS Bizkaia (Bilbao), France Active (Paris), INCO (Paris), Mustard Seed Maze (Lisbon), NESsT (Budapest, Warsaw, Timișoara), Oltre Ventures (Milan), Phitrust Partenaires (Paris), Planet A (Hamburg), SEFEA Impact (Padua), SI2Fund (Brussels), Social Impact Ventures (Amsterdam), Tilia Impact Ventures (Prague) or We Share Ventures (Den Hague).

It might be preferable if you have someone to introduce you to the fund, but you can also send your pitch deck directly.

In addition, there are a few crowdfunding platforms with a good track record in funding social enterprises. La Bolsa Social is based in Madrid, LITA.co is based in Paris and oneplanetcrowd in Amsterdam.

There are also all other kinds of funding. Foundations are often providing grants to social enterprises. A good place to start might be a national network such as the Association of German Foundations or the Donors and Foundations Networks in Europe (dafne).

Competitions are also good sources. There are regular competitions on various topics. One example is the annual European Social Innovation Competition. Incubators and accelerators could also be worthwhile places to go. For example, Innovate21st is a program run in Istanbul by Idacapital or Maze X in Lisbon.

Do not underestimate the impact of funding on your business models. My recommendation is that all aspects of your business should be well aligned to avoid conflicts at a later time. Commercial business models should focus on commercial funding sources, while non-commercial business models should focus on philanthropic resources and can add other instruments later.