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Exploring Various Options When Financing a Green Business

by DrPrem Jagyasi
green-business

Every business needs to be financed in some way, and no matter how good an idea you may have it isn’t going to get off the ground unless you can secure the capital that you need. In some ways it is easier to finance a green business nowadays than it was in the past. Over the last few years there has been an increased interest in environmentally-friendly and sustainable businesses, and that has led to more options emerging. That isn’t to say that securing financing will be ‘easy’ – just that there are more avenues that you can look to.

Among the options that you should explore when financing a green business are:

  • Bank loans

 bank-loan

Conventional as they may be, bank loans are still an excellent source of financing – provided you are able to fulfill their criteria. Before you approach a bank for a loan you will have to have a solid business plan, credit score, and track record. Both your personal and business credit score can be important when you are trying to secure a loan, you should take steps to manage any existing debt – including looking at debt consolidation loans if need be.

  • Venture capitalists

Typically venture capitalists look for businesses that offer high returns in a relatively small time frame – which may not be the best fit for most green businesses. That being said nowadays many venture capitalists have funds set aside for investing in environment-friendly and sustainable businesses, and some even make social-ventures the focus of their portfolio. With that in mind you should research venture capitalists with a track record of financing green businesses, and approach them accordingly.

  • Government loans or grants

Depending on where your business is located and what it deals with it may be possible to secure a loan or grant from a government agency. Naturally, this will only be on a case to case basis. Generally, the competition for such loans and grants is quite high.

  • Crowdfunding

Crowdfunding

While far from conventional, crowdfunding has allowed many green businesses to get on their feet. Typically this financing model works best if you are producing a product that is environmentally-friendly or green in some way, but there are situations where it can also work under other circumstances.

Needless to say there are several other options for financing green businesses including angel investors, raising money from friends and family, and so on. The four listed above tend to be the best options however, but as mentioned previously that doesn’t mean that it will be ‘easy’ by any means.

Regardless of the method that you choose to try to finance a green business, you should make sure that you give yourself the best possible chance of succeeding. Think about what the people or organizations that you are asking to fund you expect out of it, and see how good it fits with your business plan. Just check if there are any areas that you can improve to make it better before trying to raise the capital you need.

Article Submitted By Community Writer