THE Sitawi opened a call to support businesses, cooperatives and non-profit organizations whose mission is to generate a positive socio-environmental impact in Brazil and will work towards economic recovery. The selected organizations will participate in an investment round for the Collective Loan Platform, an initiative of the Sitawi and Instituto Sabin, and will be able to raise between R$ 200 thousand and R$ 700 thousand.
To participate, organizations must have a mission of positive socio-environmental impact of any legal formats, operation with a viable business model and payment capacity. Access to credit will allow entrepreneurs to continue growing and increase their impact, contributing to Brazil's economic recovery.
Applications have been extended until August 23, 2020. At call page there is an application form, in which entrepreneurs must describe information about the organization related to the mission, income, impact and objective of fundraising, among other aspects.
?We know that many companies are committed to the country's economic recovery and mitigating the effects of the pandemic and social isolation, and that some are also facing financial challenges with the crisis. We want to welcome organizations that have a solid business plan, with conditions to execute and generate a positive socio-environmental impact on society, but need capital to expand their operations?, says Andrea Resende, Impact Investment Manager at Sitawi.
THE Sitawi, which since 2008 has mobilized capital for businesses with a positive socio-environmental impact and is the most active impact investor in Brazil, will carry out the business evaluation and selection processes. Organizations that fit the purpose of this call will undergo a thorough and in-depth analysis, which includes aspects of finance, business model and impact.
Among the financial criteria analyzed are history of revenue generation, cash flow and planning. Furthermore, analysts at Sitawi make financial projections and study the sensitivity of scenarios to assess the ability to repay funding and the financial health of the organization.
As for the business aspect, team, leadership, execution capacity, market and business model will be evaluated. Regarding the impact, the Sitawi studies both the extent (how many people will benefit) and the depth of impact (to what extent this initiative changes the lives of these people).
The assessment also includes conversation with founders, employees, customers and grantees.
In addition to raising money to leverage their operations and increase the scale of their impact, selected entrepreneurs have access to mentors and workshops for their businesses and personalized follow-up by the team of experts at Sitawi.
How the Platform works
THE Sitawi Collective Loan Platform works on the Peer-to-Peer lending model (P2P), in which individuals lend money, together with Sitawi, directly to the businesses. The loan takes place in collective action rounds, in which several investors invest with quotas from R$ 1 thousand.
The model allows social entrepreneurs to have access to credit at low interest rates and without abusive fees, making the process efficient and fair. The amount raised must be returned in monthly installments within 36 months. The interest rate charged to entrepreneurs varies with each round, and this year it will range from 7 to 8%.
The special loan conditions of this model are important at a time when small and medium-sized companies are facing a drop in revenue, low cash balances and difficulties in accessing financing. According to research by Sebrae in partnership with FGV, of the 6.7 million small entrepreneurs who have applied for credit since the beginning of the pandemic, only 16% have succeeded. The most recent data indicate that 41% of companies have debts or loans in arrears and that for 87% the impact of the pandemic continues to be a decrease in revenue.
Investors interested in supporting high-impact businesses with financial returns will be able to register on the Platform to be notified of upcoming collective loan rounds.
The Collective Lending Platform Sitawi it has already carried out two investment rounds for small businesses with a positive impact, which in total mobilized R$ 4.8 million in 10 fundings.
The first round was held last year and businesses from all over the country participated. Fundraising was open for 58 days and counted on the contribution of 159 individuals, in addition to the Sitawi. In the second round, at the beginning of March this year, the selected organizations focused on the sustainable development of the Amazon, and investment reserves were exhausted in less than 24 hours.
?With the platform, we bring our expertise in impact investing to bridge the gap between individuals and organizations that are promoting positive transformations in society. We have observed in the market a greater demand from people to financially support businesses and causes in which they believe?, says Andrea Resende.
Model of blended finance
To fund the operation of the Collective Loan Platform and thus expand and democratize access to impact investing, the Sitawi counts with the support of the Sabin Institute within a model of blended finance (or mixed financing).
The blended finance occurs when money intended for social impact – in this case, support from Sabin – is mobilized to leverage investment in sustainable development by other actors – individuals who invest through the Platform.
The model is strategically used to encourage investments in projects that contribute to achieving the goals of the Sustainable Development Goals (SDGs), established by the UN.