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Financing the Social Economy    Demand, Barriers and Gaps George Karaphillis Cape Breton University Community research pro...
Financing the Social Economy  research project <ul><li>Examines how social economy organizations (SEOs) access and utilize...
Financing the Social Economy  research project <ul><li>PHASE B </li></ul><ul><li>Survey the  supply  of external financing...
Literature Review <ul><li>Importance of financing in  entrepreneurial  activity & economic  growth  well researched </li><...
Methodology <ul><li>Research began in the Summer of 2008 </li></ul><ul><ul><li>13,000 incorporated organizations and regis...
Project Methodology Source: Bouchard et al, CRES, 2006
Survey Response
SEO Profiles N=159
SEO Profiles N=136
SEO Profiles Reasons given for not pursuing external financing  No need 36% Prefer donations  29% Board members, trustees ...
Results - Demand  <ul><li>The majority of SEOs (77%) have  pursued external financing .  </li></ul><ul><li>SEOs predominan...
Supply of Financing <ul><li>Compiled a list of  224 branches  of financial institutions, government granting agencies, fou...
Supply of Financing
Supply & Demand of Financing N=68
Summary <ul><li>Research finding:  SE startups face major obstacles  in    accessing capital </li></ul><ul><li>High reject...
Summary <ul><li>Research finding:  SEOs have expansion plans that require    sizeable financing  </li></ul><ul><li>Expansi...
Summary <ul><li>Research finding :  </li></ul><ul><li>Community organizations typically have low financial and management ...
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Surveying the Financing of the Social Economy: Demand, Supply, and Gaps

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Presentation by Margie Mendell of Concordia University at the ANSER Annual Conference in Montreal on June 2, 2010.
Examines how social economy organizations (SEOs) access and utilize external financing in Atlantic Canada.

Published in: Economy & Finance, Business
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Surveying the Financing of the Social Economy: Demand, Supply, and Gaps

  1. 1. Financing the Social Economy Demand, Barriers and Gaps George Karaphillis Cape Breton University Community research project collaborators: Seth Asimakos ( Saint John Community Loan Fund ), Peter Hough ( Canadian Community Investment Network Co-Operative) Funding from the Social Sciences and Humanities Research Council of Canada*
  2. 2. Financing the Social Economy research project <ul><li>Examines how social economy organizations (SEOs) access and utilize external financing . </li></ul><ul><li>PHASE A </li></ul><ul><li>Survey the demand of external financing in the Social Economy in Atlantic Canada, including: </li></ul><ul><ul><li>Amoun t of financing used by the SEOs </li></ul></ul><ul><ul><li>Purpose/use of and type financing </li></ul></ul><ul><ul><li>The results of past searches for financing </li></ul></ul><ul><ul><li>Intent for future financings. </li></ul></ul>
  3. 3. Financing the Social Economy research project <ul><li>PHASE B </li></ul><ul><li>Survey the supply of external financing in the Social Economy in Atlantic Canada, including: </li></ul><ul><ul><li>Government agencies </li></ul></ul><ul><ul><li>Financial institutions </li></ul></ul><ul><ul><li>Foundations </li></ul></ul><ul><li>Identify criteria applied in SEO financing requests </li></ul><ul><li>Identify problematic factors in SEO applications </li></ul>
  4. 4. Literature Review <ul><li>Importance of financing in entrepreneurial activity & economic growth well researched </li></ul><ul><li>Importance of SME financing recognized by governments </li></ul><ul><li>Governments have not identified SE financing as a significant issue </li></ul>
  5. 5. Methodology <ul><li>Research began in the Summer of 2008 </li></ul><ul><ul><li>13,000 incorporated organizations and registered charities operate in Atlantic Canada and they generate revenues of $5.7 billion </li></ul></ul><ul><ul><li>Survey SEOs as users of finance: samples of SEOs in 5 broader communities </li></ul></ul><ul><ul><li>Compiled databases of SEOs in Cape Breton NS, St. John NB, </li></ul></ul><ul><li>Halifax NS, PEI, and Newfoundland - from many sources </li></ul><ul><ul><li>Used the ‘Chaire de Recherche en Economie Sociale’ (Bouchard ) criteria to select SEOs to survey: </li></ul></ul><ul><ul><ul><li>Economic activity </li></ul></ul></ul><ul><ul><ul><li>Limited distribution of surpluses among members </li></ul></ul></ul><ul><ul><ul><li>Voluntary association: accessible, not government </li></ul></ul></ul><ul><ul><ul><li>Democratic governance </li></ul></ul></ul><ul><ul><ul><li>List of 5,036 organizations was screened down to 1,142. 281 surveys were received: 207 surveys meet all criteria </li></ul></ul></ul>
  6. 6. Project Methodology Source: Bouchard et al, CRES, 2006
  7. 7. Survey Response
  8. 8. SEO Profiles N=159
  9. 9. SEO Profiles N=136
  10. 10. SEO Profiles Reasons given for not pursuing external financing No need 36% Prefer donations 29% Board members, trustees won’t take risk 8% Management / Director won’t take risk 2% Not enough income 5% Not enough assets 4% Banks don’t understand us 3% Legal restrictions preventing borrowing 4% Other 11%
  11. 11. Results - Demand <ul><li>The majority of SEOs (77%) have pursued external financing . </li></ul><ul><li>SEOs predominantly use grants, loans, and lines of credit for financing </li></ul><ul><li>Rejection experience for SEO financing is fairly high (42%) </li></ul><ul><li>A large percentage of SEOs (42%) plan to expand or start a new venture . </li></ul><ul><li>Large amounts of financing required for new ventures: 24% of the growing </li></ul><ul><li>SEOs require funds in excess of $500K for expansion, but less than 13% of </li></ul><ul><li>SEOs have raised this level in the previous 12 months. </li></ul><ul><li>Heavy reliance on government grants : 60% of SEOs received grants in the </li></ul><ul><li>previous 12 months, 74% of SEOs planning an expansion are pursuing </li></ul><ul><li>grants to finance the expansion. 40% of SEOs are pursuing public/corporate </li></ul><ul><li>fundraising for expansion also </li></ul><ul><li>  </li></ul><ul><li>Risk-averse boards and directors: little borrowing, little use of Lease financing </li></ul><ul><li>  </li></ul>
  12. 12. Supply of Financing <ul><li>Compiled a list of 224 branches of financial institutions, government granting agencies, foundations etc. in the five study areas. </li></ul><ul><li>Surveys were completed by 61 agents and officers of financial institutions and government agencies. </li></ul><ul><li>List types of financing offered to SEOs </li></ul><ul><li>Identify criteria applied in SEO financing requests </li></ul><ul><li>Identify problematic factors in SEO applications </li></ul>
  13. 13. Supply of Financing
  14. 14. Supply & Demand of Financing N=68
  15. 15. Summary <ul><li>Research finding: SE startups face major obstacles in accessing capital </li></ul><ul><li>High rejection rate. </li></ul><ul><li>Financiers concerned over heavy reliance on grants, lack of security, no personal guarantees, no personal equity, low profitability </li></ul><ul><li>Gap in financings over $100,000 (Quebec’s RISQ fund-$10M) </li></ul>
  16. 16. Summary <ul><li>Research finding: SEOs have expansion plans that require sizeable financing </li></ul><ul><li>Expansion planned by 42% of SEOs. </li></ul><ul><li>A quarter require over $500K for expansion </li></ul><ul><li>Only 11% of SEOs have raised this amount in previous year </li></ul>
  17. 17. Summary <ul><li>Research finding : </li></ul><ul><li>Community organizations typically have low financial and management expertise and submit incomplete business plans </li></ul><ul><li>15% of SEOs think the quality of the business plan document was responsible for failing to receive financing </li></ul><ul><li>40% percent of the surveyed financiers stated that SEOs submit incomplete business plans and have low financial expertise. </li></ul><ul><li>30% of the surveyed providers also stated they had concerns over the management of SEOs </li></ul>

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