How to Access Circular Economy Funding for Your SME
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The circular economy is an attractive model for today's sustainable small businesses. It aims to eliminate waste and continually reuse resources, benefiting the environment and the bottom line. As a fundamental part of Environmental, Social, and Governance (ESG) criteria, the circular economy unlocks innovation opportunities and access to growing pools of green investment. For companies focused on social and environmental impact, adopting these ESG-aligned strategies can lead to increased credibility, stakeholder trust, and sustainable success.
By adopting circular principles, small businesses can tap into demand from eco-conscious consumers and purpose-driven investors. For nimble ethical entrepreneurs, 'going circular' means gaining competitive advantage, attracting like-minded customers and securing green finance.
With governments and investors ramping up support for low-carbon initiatives, ‘going green’ paves the way for small businesses to achieve resilience, relevance and positive change.
Government Grants
Government grants like the Industrial Energy Transformation Fund (IETF), Low Carbon Innovation Fund (LCIF) and Green Deal help UK businesses find investment for sustainability initiatives in several ways.
Firstly, they provide direct funding in the form of grants that businesses do not have to pay back. This allows businesses to implement sustainability projects and technologies that they may not otherwise be able to afford.
Government funding helps emerging green sectors and supply chains scale up, deploy new technologies, reduce costs over time through learning effects and achieve commercial viability. This unlocks opportunities for more businesses to invest.
Furthermore, these grants reduce the risk and costs associated with investing in new sustainability technologies and practices. The funding from these programs can help offset initial capital costs and the risks of piloting new technologies. This makes businesses more willing and able to invest in sustainability.
Industrial Energy Transformation Fund (IETF)
Open to industrial businesses of any size in England, Scotland and Wales.
Projects must aim to significantly improve energy efficiency and reduce carbon emissions. This could include upgrading equipment, improving industrial processes, installing on-site renewable energy, etc.
Businesses need to provide evidence that the project could not proceed without grant funding. They must also commit some of their own funds to the project.
Applications are assessed based on the project's value for money, carbon reduction potential, innovation and more.
Low Carbon Innovation Fund (LCIF)
Open to small and medium-sized businesses in the East of England.
Projects must involve developing or applying an innovative low carbon product, process or service. This could include new renewable energy technologies, energy storage solutions, sustainable transportation, etc.
Businesses need to provide evidence of the commercial potential and environmental benefits of their innovation. They must also contribute at least 50% of the project costs.
Applications are evaluated based on the innovation's technical viability, carbon reduction impact, commercial potential and economic benefits.
Green Deal
Open to homeowners, private tenants and landlords in England and Wales. Businesses can promote and install measures through the Green Deal, but cannot receive funding directly.
Allows for funding energy efficiency improvements like insulation, heating systems and double glazing. Measures must be approved under the Green Deal and meet minimum energy performance standards.
Loans and finance are attached to the home's electricity meter, so repayments are made through the energy bill savings. This means no large upfront costs for homeowners.
Assessments are done by registered Green Deal assessors to determine which measures are appropriate and ensure estimated energy savings meet or exceed repayments.
In summary, the main requirements are demonstrating environmental and commercial benefits, ability to co-fund a portion of costs, focus on energy efficiency and low carbon solutions, and meeting location, technology and assessment criteria specific to each program.
Bank Loans
Green business loans are loans specifically aimed at helping businesses fund environmentally friendly projects and technologies. Here are some examples:
NatWest Green Loans – are available to businesses with an annual turnover of less than £25 million. The loans can be used to fund a wide range of green projects, including energy efficiency improvements, renewable energy, and sustainable transport.
HSBC Green SME Fund – provides loans of up to £500,000 to businesses with an annual turnover of less than £25 million. The loans can be used to fund a wide range of green projects, including energy efficiency improvements, renewable energy, and sustainable transport.
Barclays Green Loan – is available to businesses of all sizes. The loans can be used to fund a wide range of green projects, including energy efficiency improvements, renewable energy, and sustainable transport.
Virgin Money Sustainable Business Loan – is available to businesses with an annual turnover of less than £50 million. The loans can be used to fund a wide range of green projects, including energy efficiency improvements, renewable energy, and sustainable transport.
Crowdfunding
Crowdfunding can help sustainable businesses gain investment. This method taps into the growing interest in impact investing, attracting individuals who wish to support causes and companies that provide social and environmental benefits. Crowdfunding platforms give these investors a chance to put their money towards sustainable businesses and projects.
Embarking on a crowdfunding venture attracts values-aligned investors as these campaigns allow companies to share their vision, mission and sustainability objectives. This exposure helps them gain backing from investors who share their environmental and social values while also building brand awareness and loyalty.
Some crowdfunding platforms with ties to sustainable investment include:
Abundance – This platform offers bonds and other investment products that are linked to sustainable projects, such as renewable energy and green infrastructure. Abundance has a dedicated UK section where you can find projects that are specifically targeting UK companies.
Ethix – This platform allows you to invest in companies and projects that are working to make a positive impact on the environment and society. Ethex has a dedicated UK section where you can find companies that are based in the UK.
Seedrs – This platform allows you to invest in early-stage companies that are working on sustainable technologies. Seedrs has a dedicated UK section where you can find companies that are based in the UK.
Improve Your Investment Chances
Implementing sustainability goals and practices can help companies with green business loan applications in several ways:
It demonstrates a commitment to environmental responsibility. Lenders will favour borrowers with a proven track record of sustainability progress and motivation for continued improvement.
It improves credibility and impact. Companies able to show measurable sustainability benefits and outcomes will be viewed more favourably by green lenders looking to maximise environmental and social impact.
It enhances financial viability. Implementing sustainability measures often reduces costs through energy efficiency, waste reduction, renewable energy use and more. This can improve cash flow and make companies a lower financial risk.
It attracts additional capital. Strong sustainability performance and commitments help companies gain interest from impact investors looking to support positive change. This can bring in more lending and investment.
It increases your competitive edge. Leading companies are embracing sustainability to gain a competitive advantage with consumers and clients. Green lenders want to back organisations with this forward-looking perspective.
Securing Green Investment For Your Business
For too long, we have had an economic system reliant on perpetually extracting resources and generating waste. Today, we must transition to a circular economy aiming to eliminate waste, continually reuse materials, and regenerate natural systems.
Between government grants, green business loans, and crowdfunding, entrepreneurs now have avenues to explore to secure the necessary capital for piloting new ideas, scaling up innovations, and achieving a greater impact.