Association
A legal form that is broadly characterised by the following features: a group of individuals or entities organised on the basis of a written agreement to further a shared mission; can be established to further a range of social missions; profits are used for purposes stated in the governing document and are not generally distributed to members or otherwise.
Bevilling
Bevillinger fra den offentlige eller den private sektor til et specifikt formål.
Boot- strapping
A situation where an entrepreneur starts and grows a venture using only their own personal finances and the venture’s revenues.
Capital
Refers to all types of wealth owned by an entrepreneur or a venture, including cash and assets. Other forms of capital can include (but are not limited to) property, equipment, human resources and intellectual property.
Co-operative
A legal form that is broadly characterised by the following features: jointly owned and democratically controlled by the people who work in it, trade through it or use its products or services; can pursue almost any mission provided there is a common economic, social or cultural need or interest shared by members of the co-operative; can distribute profits to members.
Collective Impact Initiatives
Collective impact initiatives are long-term commitments by a group of important actors from different sectors to a common agenda for solving a specific social problem. Their actions are supported by a shared measurement system, mutually reinforcing activities, and ongoing communication, and are staffed by an independent backbone organization
Contracting authorities
‘Contracting authorities’ can be the State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law;
Convertible loans
Unsecured loan or subordinated loans, with the option (either to the debtor or the lender) to convert into equity stake. This option to convert may be exercised by the a finance provider or a venture philanthropy organisation when financial return perspectives unexpectedly rise, thus offering the opportunity to generate additional return on the investment by owning an equity stake with upward potential rather than a loan with limited financial gains. Alternatively, this instrument can be used in situations where the prospect of loan repayment may drop below earlier expectations, hence offering the social entrepreneurship a possibility to get rid of a liability and convert it into a form of funding that cannot be reclaimed.
De facto social enterprises
Entities that operate as social enterprises in practice but which are not easy or possible to distinguish from other businesses.
Debt financing
Debt financing is borrowed money used to finance a business, either a traditional enterprise or a social enterprise. Usually, debt is divided into two categories: short-term debt for funding day-to-day operations and long-term debt to finance the assets of the business. The repayment of short-term loans usually takes place in less than one year. Long-term debt is repaid over a longer period.
Donative intent
The conscious desire to make a gift, as distinguished from giving something as a gift by mistake or under pressure.
Equity financing
Funding provided by an investor to an organisation that confers ownership rights on the investor. These rights allow the investor to share in the profits of the organisation, usually in the form of dividends. Equity investors are diverse, including the organisation’s founders, friends, family, institutions and angel investors. Venture philanthropy funds may provide a source of equity financing for social enterprises. Newer, and still experimental, means of ownership (e.g. a community interest company in the UK) allow equity purchase but place a cap on the financial return.
Exit
The end of the relationship between the investor and the enterprise. The nature of the exit will normally be agreed upon before the investment is completed. In the case of a charity, the funder will ideally be replaced by a mix of other funders. The time scale for the exit can be agreed upon at the outset. In the case of a social enterprise, exit may require the repayment of a loan, for example, and the timing will depend on the commercial success of the enterprise. Exit may be the result of a trade sale of the enterprise to another social enterprise or, more commonly, a commercial enterprise.
Financing
It is the process of receiving capital or money by the social enterprises or more generally for business purposes, and it is usually provided by the relevant finance actors.
Foundation
A legal form that is broadly characterised by the following features: established by one or more “founders”; allocating assets to further a social mission; can be established to further a range of social missions (such as, philanthropic, artistic, cultural or religious missions); assets and surpluses can only be used for social missions stated in the governing document and are not distributed.
Grant financing
Non-returnable money, property, services or anything else of value that is transferred to an organisation without conferring any form of ownership rights on the donor. Some investors use ‘returnable grants’ from time to time. This may involve the return of all or part of a grant, contingent upon an agreed event. For example, a grant might be given to enable fundraising, but if the fundraising is successful or exceeds agreed upon levels, a portion of the grant may be returned.
Hybrid finance: The allocation of financial resources to impact- oriented deals, combining different types of financing instruments and investors.
Hybrid finance
The allocation of financial resources to impact- oriented deals, combining different types of financing instruments and investors.
Impact investing
A form of investment that aims to generate social impact as well as financial return. It is also known as 3D investing because it considers not only risk and return in investment decision making but also the social and environmental impacts. It is differentiated from responsible investing or ESG investing because it seeks out opportunities to create positive social, environmental or cultural impact.
Investment readiness
This work helps enterprises to get ready to take on debt, equity or other kinds of investment. For those that do not move onto investment, investment readiness work may have helped them understand money better and prepare business and financial models with greater confidence. Investment readiness can be provided by support organisations or by investors.
Legal form
The foundational legal structure adopted by a business, to which member state law, regulation and tax treatment primarily attaches and relates. Examples include the legal forms of sole proprietorship, partnership, foundations, associations, co-operatives and share company legal forms, which are present in most member states, subject to local variation. Typically, constitutional, statute and case law will treat each legal form as a different kind or type of legal structure.
Legal status
A legal status attaches to a number of legal forms and is typically tax driven, such as in the case of (a) the charitable tax reliefs on donations and income tax which are available for certain forms of foundations, associations and non-profit companies and (b) integration enterprise tax status, which exists in some countries. There are also examples of legal statuses in some countries which attach to legal forms satisfying a local interpretation of ‘social enterprise’ or ‘social economy’.
Loan guarantees and loan guarantee funds
Commitment by a third party to cover part of the losses related to a loan default. It can be provided by the government and/or or by a private business association. It is backed up by a fund acting as collateral.
Mezzanine finance
An instrument that bridges the gap between debt and equity/grant through some form of revenue participation. It involves the provision of a high-risk loan, repayment of which depends on the financial success of the social enterprise.
Patient capital
A form of long-term capital. The investor is willing to make a financial investment in an enterprise with no expectation of financial return in the near term. The investor defers any financial return, usually until agreed targets are triggered, such as an agreed level of turnover. In the meantime, the investor focuses on the social impact that the enterprise is achieving. Repayment can be triggered or interest called if the enterprise fails to meet its social impact targets.
Public procurement
It refers to the purchase by governments and state-owned enterprises of goods, services and works. As public procurement accounts for a substantial portion of the taxpayers’ money, governments are expected to carry it out efficiently and with high standards of conduct in order to ensure high quality of service delivery and safeguard the public interest.
Public-private partnership
A forms of cooperation between public authorities and the private sector that aim to modernise the delivery of strategic public services.
Quasi-equity
This is a financial instrument that aims to reflect some of the characteristics of shares (preference or ordinary). However, it is neither debt nor equity, and it is usually structured as an investment, whereby repayment is linked to the investee’s financial performance (e.g. repayment is calculated as a percentage of the investee’s future revenue streams).
Recoverable grant
Loans that must be paid back only if the project reaches certain previously defined milestones. If the milestones are not reached, the recoverable grant is converted into a grant. This mechanism can be used if success of the project enables the social enterprise to repay the loan to the social impact investor.
Reserved contract
EU Member-States may reserve the right to participate in public procurement procedures to a specific group of operators or for a specific type of services.
Retail investment
A investment that being done by an individual investor, who buys and sells securities for their personal account, and not for another company or organization.
Royalty
A form of financing, where the investor takes a stake in a product or service and has to be paid a percentage of the surplus in return for its investment.
Secured/unsecured loans
Loans may be secured against the asset to be financed or against all of the assets of the enterprise, or it may be unsecured, meaning that if the initiative being financed does not generate sufficient income and there is not enough from other sources, the investor will lose all or some of their money.
Seed financing
This is money used for the initial investment in a start-up company, project, proof-of concept or initial product development.
Senior debt
The money invested in an enterprise which has the first claim for repayment. It is usually represented by security in the form of a first charge over assets of the company. In any repayment or liquidation, the lenders, starting with the senior debt, have priority over the equity investors
Share company
A legal form that is broadly characterised by the following features: a form of share company that is usually used by for-profit organisations, typically established with commercial aims to distribute profits to shareholders, which is owned by its shareholders and which typically distributes profit to shareholders in proportion to shareholding.
Social clauses
Public procurement procedures can refer to social and labour standards that contractors have to fulfil in order to tender for public contracts. For this purpose, contracting authorities can use social clauses.
Social considerations
Contracting authorities in order to achieve sustainable development, social and environmental objectives can take into account social considerations in procurement procedures. Social consideration can be included into technical specifications, selection criteria, award criteria and contract performance clauses. Social considerations can be combined with green considerations in an integrated approach to sustainability in public procurement.
Social enterprise
The ‘social enterprise’ is an operator in the social economy whose main objective is to have a social impact rather than make a profit for their owners or shareholders. It operates by providing goods and services for the market in an entrepreneurial and innovative fashion and uses its profits primarily to achieve social objectives. It is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders affected by its commercial activities.
Social Impact
Social impact is usually defined in reference to four key elements: (i) the value created as a consequence of someone’s activity; (ii) the value experienced by beneficiaries and all others affected; (iii) an impact that includes both positive and negative effects; (iv) an impact that is judged against a benchmark of what the situation would have been without the proposed activity.
Subordinated debt and subordinated loans
These are types of loans that get paid back to investors last, but ahead of equity. Investors have a junior (subordinate) status in relationship to the normal or senior debt and thus rank after the senior debt holders in any repayment. As subordinated debt entails higher risk and often carries a higher rate or yield.
Venture philanthropy
It works to build stronger social organisations by providing them with both financial and non-financial support in order to increase their social impact. The organisations supported may be charities, social enterprises or socially driven commercial businesses, with the precise organisational form subject to country-specific legal and cultural norms.
Work Integration Social Enterprises (WISEs)
Social enterprises whose main objective is the professional integration – within the WISE itself or in mainstream enterprises – of people experiencing serious difficulties in the labour market. This integration is achieved through productive activity and tailored follow-up, or through training to qualify the workers. WISEs are active in various sectors.
