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New funding and financing models
With the increasing tightening of funding of not-for-profits, and the ever-present unmet social and environmental needs, new funding approaches are emerging.
Australia is beginning to adopt some approaches pioneered internationally, that seek to provide funding for activities that generate positive social or environmental impacts. These approaches include:
- social or environmental impact investments
- microfinancing
- community finance
- new lending practices, and
- social impact bonds
Many of these approaches offer a blended return - a financial as well as social or environmental impact.
Each of these approaches raises legal issues for not-for-profits. In particular:
- for a not-for-profit to be able to seek impact investors, it must set up a structure that can attract investors
- not-for-profits can’t attract equity investors
- not-for-profits can’t be 'owned' in the same ways that for-profits can be (ie. they can’t have shareholders), and
- not-for-profits can’t distribute profits
For these reasons, legal structuring needs to be carefully considered if a not-for-profit wants to be able to attract investors.
More information
Our Social Enterprise Guide steps through legal structuring in more detail, including hybrid structuring that can enable not-for-profits to benefit from equity investors.
Social impact bonds
Social impact bonds (SIBs) are a financial instrument that pays a return based on the achievement of agreed social outcomes. To date in Australia, SIBs have been initiated by state governments to address social problems that were previously funded exclusively by government grants.
Our fact sheet covers:
- whether a SIB is right for your organisation
- how to set up a SIB
- how to measure outcomes, and
- key legal issues associated with SIBs
Debt financing
Debt financing is one way an organisation can enhance its financial position and long-term sustainability.
Our fact sheet provides an overview of the key concepts in debt financing and explains some of the terminology that is used in debt financing arrangements.
Equity financing
Equity financing is the way that an organisation raises money by ’selling’ an ownership stake in itself to a third party.
Our fact sheet provides an overview of the key concerns in equity financing, including:
- what is equity financing?
- types of equity
- dividends
- transferring equity
- issuing equity
- governance
Financing glossary
To assist in your organisation's understanding of debt financing, equity financing, social impact investing and investors (definitions and resources), we have developed a comprehensive financing glossary. It is a useful tool for reading alongside our other resources in this section on new funding approaches.
More information
The content on this webpage was last updated in March 2022 and is not legal advice. See full disclaimer and copyright notice.
