Part 3: Investment Readiness and Access to Capital

We’ve all heard the phrase “you have to spend money to make money.” Traditionally associated with the business world, borrowing capital to grow has, until recently, been largely out of reach in the nonprofit sector. But a growing interest in aligning financial returns with social and environmental outcomes is beginning to change that. The final blog in the series explores social finance and why it can be a practical tool for nonprofits seeking to grow their impact and strengthen financial resilience.

As organizations integrate earned revenue into their financial models, the question of capital often arises. Growth requires investment. Infrastructure, staffing, and systems all carry costs, and expanding what works can demand resources beyond what grants and donations alone can provide.

Part 1 of this series invited nonprofits to think of grants as tools that can help establish earned revenue opportunities, while part 2 focused on testing and validating those ideas. In part 3 we’ll explore how capital can support growth once a model is proven.

Why access to capital matters

Access to capital, such as a loan or investment, has historically been associated with the private sector. These financial tools have long been used to build and scale economic activity and, in many cases, also consolidate power, generate private wealth, and contribute to social and environmental harm along the way. 

Nonprofits are not profit-driven, do not have shareholders, and rarely provide personal guarantees or traditional collateral. As a result, they have been excluded from the types of traditional financing that enable innovation, risk-taking, and growth. Thankfully, however, a growing social finance ecosystem is making capital more accessible to nonprofits and social enterprises. 

Social finance uses tools such as loans, investments, and guarantees to support initiatives that generate social or environmental benefits alongside financial returns. Social finance brings together impact investors, foundations, governments, and intermediaries to mobilize capital toward these kinds of initiatives. These approaches provide the right type of capital for organizations whose primary goal is impact.

Several forms of social finance are becoming more common, including:

• Impact investment refers to capital invested with the intention of generating both a financial return and measurable social or environmental impact. These investments may come from foundations, impact funds, or mission-aligned investors.
• Patient capital is financing that offers longer timelines and more flexible repayment structures, recognizing that social impact initiatives often take time to reach financial stability.
• Community bonds enable nonprofits to raise investment directly from community members who want to support local projects while receiving a modest financial return.
• Loans or lines of credit from social finance lenders or credit unions can support nonprofit growth when there is a clear revenue model and repayment plan.

Emerging approaches such as blended finance and catalytic capital are also helping unlock projects that would not otherwise qualify for traditional financing. These models combine capital from multiple sources, often including foundations, governments, and private investors, to reduce risk and enable investments in initiatives that deliver strong community impact. Work in this area continues to grow in Canada through initiatives such as the Thrive Impact Fund, a social finance intermediary using impact-first investments to unlock projects that benefit communities. You can find some of these opportunities in Grant Connect, Imagine Canada’s fundraising research platform.

Preparing to access capital: What investment readiness means

As capital becomes more accessible to nonprofits and social enterprises, the next consideration is how organizations can position themselves to access it. This is where investment readiness comes in.

Investment readiness refers to the organizational capacity required to secure and manage repayable capital. Lenders and impact investors need confidence that an organization has a viable revenue model, strong governance, and a realistic plan for repayment. 

An investment-ready organization has a clear understanding of:

• Its revenue model and where income will come from
• The break-even point and expected cash flow projections
• The financial and operational risks associated with growth
• The governance structures required to oversee financial decisions
• How and when capital will be repaid

Access to capital is typically unlocked once a model has been tested and refined. This is why feasibility work, pilots, and market validation are so important. When an earned revenue initiative demonstrates product market fit and financial viability, capital can be used to scale what is already working.

For example, an organization that has successfully piloted a fee-for-service training program may seek financing to expand delivery, invest in staff capacity, or build the systems needed to reach new markets.

Risk and the cost of standing still

The notion of repayable capital can introduce a risk that many nonprofits have not previously encountered. Board directors are responsible for the financial health of the organizations they serve, so it’s important to be cautious. But  risk aversion – or an over-reliance on “the way things have always been done” – prevents organizations from adapting to today’s challenges or benefitting from new opportunities. While grants and donations may be our comfort zone, it’s important to acknowledge that they’re no longer enough. Overreliance on traditional funding also puts organizations at risk. Budget cuts and shifting donor interests are leading to reduced funding, forcing organizations to scale back programs, lay off staff, or in some cases close their doors entirely. 

Developing and scaling earned revenue strategies, along with an openness to the financial tools that support them, creates new opportunities for nonprofit financial sustainability. When implemented strategically, these approaches can increase unrestricted revenue and help organizations safeguard against financial shocks. 

Investment readiness allows organizations to evaluate investment opportunities thoughtfully, with strong financial modelling, governance oversight, and strategic planning guiding the process. With these elements in place, capital becomes a powerful tool that organizations can use to advance their impact and contribute to broader systemic change.

The role of nonprofits in shifting systems

Money is not neutral. It shapes the systems around us. As nonprofits build the capacity to effectively access capital, and that capital is intentionally directed toward impact, we can disrupt extractive models and create economic systems rooted in equity, justice, and care. 

This shift is part of how we create a social impact economy, and nonprofits have a critical role to play here. They are already deeply embedded in communities, understand complex social problems, and centre impact in decision-making. With access to the right financial tools, nonprofits can move from surviving within economic systems to actively shaping them.

At Thriving Non-Profits, we are committed to supporting this shift. Through learning, coaching, consulting, and access to capital, we work alongside nonprofit leaders who want to grow sustainable revenue and build resilient organizations.