Four Alternative Financing Options for Social Enterprises and Cooperative Businesses

Rising interest in social enterprises combined with increased opportunities for alternative financing (including crowdfunding, peer-to-peer lending, and microfinancing) has led to more possibilities for individual and institutional investors to finance businesses they really support.

R.P. Burrasca, Susan Grossberg, Anne Misak, and Jason Wiener recently published a whitepaper on the topic, “An Introduction to Financing for Cooperatives, Social Enterprises, and Small Businesses” to identify existing alternative financing options that can be especially attractive to low to moderate income business owners operating social enterprises and cooperative businesses. While the whitepaper was written specifically for the metropolitan Denver area’s Community Wealth Building Network, it discusses financing options and federal law that are generally applicable across the country.

The whitepaper highlights four areas of alternative financing:

  1. Debt financing from institutional lenders, including community development financial institutions (CDFIs), credit unions, the Small Business Administration and its Small Business Investment Company (SBIC) Program, and public banks.
  2. Crowdfunding in its various forms including donation crowdfunding, rewards-based crowdfunding, debt-based crowdfunding (microfinance loans, peer-to-peer lending, and peer-to-business lending), and equity-based crowdfunding.
  3. Equity financing for cooperatives from the cooperative’s patron-members and outside investors (non-members who own non-voting preferred stock). The Securities and Exchange Commission has in recent cases declined to enforce its general registration requirement with regards to cooperatives’ membership equity, taking the position that such investments from patron-members are not securities and do not need to be registered with the SEC.
  4. Funding from charitable foundations, including program related investment (PRIs), mission related investments (MRIs), and convertible grants.


Federal and state laws and regulations govern each type of financing. To further explore if an alternative financing might be the right option for your enterprise, consult with an attorney or drop by our next Resilient Communities Legal Cafe.

Ashley Poon is a second-year student at Boston College Law School and was a Summer 2015 GC3 law clerk.


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