Climate change is the most pressing global issue we face today and its growing effects can no longer be ignored. As an increasing number of businesses are shifting focus to sustainability and green practices, we’re seeing how being eco-friendly can benefit a company’s bottom line as much as it does the environment.
Not only are sustainable companies able to save money by introducing cost-cutting green energy alternatives like solar power, consumers are also prioritizing social consciousness as they make purchasing decisions which can translate into more sales. Studies show that millennials in particular, who today have the most significant spending power, prefer to spend their money on sustainable products and services.
A 2018 study on green consumerism conducted by the GlobalWebindex found that the following percentages of consumer demographics agree they would pay more for eco-friendly products:
- Gen Z (16-21): 58%
- Millennials (22-35): 61%
- Gen X (36-54): 55%
- Baby Boomers (55-64): 46%
Tips on How to Become More Sustainable
It’s never too late for businesses to adapt to greener practices. Here are a variety of ways you can slowly transition your company into an eco-friendly business:
- Fixing plumbing leaks and dripping taps to help conserve water.
- Switching to sustainable lighting alternatives like LEDs or halogen light fittings.
- Donating outdated electronics to local schools or charities (instead of just throwing them out).
- Ditching plastic for eco-friendly packaging made of 100% recycled content.
- Going paperless or “paper-limited” and using digital tools for contracts, statements and other paperwork.
- Encouraging employees to use reusable water bottles instead of single-use plastic ones.
- Offering public transportation passes for employees or implementing greener transportation solutions like indoor bike storage or carpooling programs.
- Investing in renewable energy by installing solar panels to generate electricity or geothermal heating systems.
Financing Options for Green Businesses
Embracing sustainable practices can bring a lot of long-term benefits and positive opportunities to your company, but implementing these changes will cost money. Here’s a list of financing options for business owners in need of reliable green business funding:
Finance Your Invoices
Pending invoices can really interrupt your company’s cash flow. Through invoice financing, you are able to free up the money tied to those pending invoices by selling them to a lending company. This will provide immediate access to capital that can then be put towards green-related investments such as renewable energy sources or software needed to reduce paper consumption.
Here’s how it works: After you sell your invoices to a lender, the lender will immediately advance 80% to 90% of the total invoice value to you (a great solution for time-sensitive needs). You’ll receive the remaining percentage once your customers pay their dues, minus a transaction fee.
Look for Investors
It’s not just consumers who are prioritizing green practices; a growing number of investors are eager to work with sustainable businesses too. If you’re going to seek green financing, you may want to try and team up with someone that shares your passion for the environment.
Environmental, Social and Governance (ESG) investing refers to a class of investing that “seeks positive returns and long-term impact on society.” These investors evaluate companies by examining a number of ESG factors including the company’s water usage, carbon footprint and community development efforts (among others). If you go this route, then you’ll need to be able to effectively communicate these things.
Investors can offer money, advice, and growth opportunities – usually in exchange for a portion of equity – but finding the right one isn’t always easy and closing a deal can take a long time. This may not be the best solution for companies looking to make immediate transitions.
Try Business Lines of Credit
A business line of credit is another form of financing that provides businesses with an easily accessible credit limit. You can withdraw from this limit as needed and you only need to repay the amount withdrawn, plus interest. For instance, if you’ve been given a credit limit of $100,000 and you’ve only withdrawn $40,000, you only have to repay the $40,000 with interest. Your credit limit goes back up to $100,000 once you’ve repaid the amount owed.
This financing solution is a popular choice among business owners that need spending flexibility. You can use the funds for almost any kind of business need, including ventures put towards sustainability.
Use Equipment Financing
Going green doesn’t have to result in a complete overhaul of your business. An eco-friendly transformation can be done gradually in steps. A good place to start is by upgrading your equipment. Old equipment tends to use up more energy compared to its newer counterparts. For example, using a laptop instead of a desktop reduces the energy costs for computer usage by 80% to 90%.
Equipment financing provides you with the funds necessary to purchase or lease almost any type of equipment without having to dip into your working capital. This type of financing can only be used for equipment and machinery, furniture and fixtures, company vehicles and items of this nature.
Apply for Small Business Loans
If your goal is to completely overhaul your business and go fully green, the transformation will be costly. You’ll need to launch a new marketing campaign, conduct research and development, invest in new equipment and possibly create entirely new product lines. Chances are you’ll need a good amount of additional capital.
By applying for small business loans (like classic long-term loans), you can qualify for higher loan amounts compared to business lines of credit and invoice financing. Small business loans from alternative lenders can offer the same level of funding at a faster rate allowing you to start working on your green initiatives sooner.
Create a Crowdfunding Campaign
Crowdfunding is a popular way to raise capital by relying on the collective efforts of family, friends, loyal customers and individual investors. Business owners can pitch their ideas on social media or through designated crowdfunding platforms like Kickstarter, Indiegogo and CircleUp. It’s a great alternative to small business loans and allows creators and entrepreneurs to drum up early-stage support for their ideas.
Each platform runs differently. Some require processing fees and/or a fee of your overall earnings, while others only allow you to access the fundraised money if you reach your preset goal. Be sure to do your research to ensure you are choosing the platform that best supports your idea or business.
The Bottom Line
As climate change becomes more pressing, individuals and businesses alike are becoming more concerned with its effects on the environment. We’re moving towards a greener economy so adopting sustainable practices today will set your business up for success in the future. The financing options listed above can help you fund green initiatives that will allow you to stay ahead of the curve and the competition.