Abstract
This chapter discusses the financing instruments and transactions in the space for impact investments. This chapter will discuss the various financing instruments available to fund social sector organizations. Equity capital and debt capital are well-known examples. However, in this field there are also transactions based on mezzanine capital, recoverable grants, forgivable loans, convertible grants, revenue share agreements or grants.
There is also the question as to which social enterprises are being financed. This chapter also takes a closer look at a sample of 342 transactions and shows the transactions sizes and the use of financing instruments. Interestingly, the characteristics of the investee also have an influence on the financing structures.
This chapter closes with an analysis of exits. Investors need to have an exit option for their investments to recover their investment. It will take a look at exits in the ethical products space and also at acquisitions of social enterprises globally. At the moment, the field is still in an early phase and there are only a handful of precedent transactions available.
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Notes
- 1.
In the non-profit literature, there is a research strand which deals with the capital structure and the financing instruments of non-profit organizations. Financing of non-profit organizations different from for-profit companies through the equity limit. Being limited to non-profit legal forms, non-profit organizations cannot rely on external equity funds for financing.
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Spiess-Knafl, W., Scheck, B. (2017). Financing Instruments and Transactions. In: Impact Investing. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-66556-6_5
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