Key terms

A financial benefit recorded on a balance sheet, including properties, claims for money owed, cash, inventories, and property rights.

Auspicing means one organisation takes on the legal and financial duties for a project led by another group or individual.

This often occurs when a smaller or newer group needs funding but lacks the legal framework to apply. An established organisation, known as the auspicor, supports the project. They handle contracts, insurance, compliance, and financial reporting.

In the social enterprise field, auspicing helps early-stage initiatives begin, test ideas, or run community projects before forming their own entity. It can create momentum, especially where trust, flexibility, and shared purpose thrive.

Auspicing works best when roles, responsibilities, money flows, and decision-making are clear from the start. When done right, it helps promising ideas take off and reduces risk, providing a strong foundation for future growth.

A snapshot of an organisation's assets and liabilities at a single point in time.

A formal contract to repay borrowed money with interest at fixed intervals, similar to a loan.

The rate at which an organisation uses or consumes money, indicating when it will run out of funds and helping manage sustainability.

Financial resources or money, including the cash and other assets held by an organisation.

The total amount of money flowing into and out of an organisation.

A commitment to take an action, made legally binding by inclusion in a contract's terms.

Debt finance is money that an organisation borrows and agrees to repay over time, usually with interest. It is one of the main ways organisations raise capital to start, grow, or sustain their operations.

In practice, debt finance can come in several forms. The most common is a term loan, where a lender provides a lump sum that is repaid in regular instalments over an agreed period. There are also lines of credit, which work like an overdraft and allow an organisation to draw on funds up to a set limit as needed. Some lenders offer concessional loans, which charge a lower interest rate than the market rate in recognition of the social or environmental purpose of the borrower. Debt finance is different from a grant because it must be repaid. It is also different from equity investment because the lender does not take ownership in the organisation in exchange for the funds.

In Australia, social enterprises seeking debt finance have a growing range of options beyond traditional banks. Community development finance institutions, such as the Social Enterprise Finance Australia (SEFA), specialise in lending to purpose-driven organisations that may not meet the criteria of mainstream lenders. Philanthropic foundations are also increasingly offering low-interest loans alongside grants. For social enterprises delivering services under government contracts, particularly in areas such as disability support, aged care, or employment services, debt finance can help bridge the gap between when costs are incurred and when payments arrive. This is sometimes called working capital finance, and it can be critical for organisations managing the cash flow pressures that come with government-funded contracts.

There are important risks to understand before taking on debt. Borrowed money must be repaid regardless of whether revenue targets are met. For social enterprises with variable or uncertain income, this can create real financial pressure. Interest costs also reduce the funds available for mission-related activity. Before taking on debt, organisations should carefully assess their ability to service the loan over its full term, and ensure the repayment schedule is realistic given their revenue projections. It is also worth checking whether taking on debt could affect eligibility for certain grants or government funding, as some programmes have restrictions on organisations that carry commercial liabilities.

A sum of money paid (usually annually) by a company to its shareholders from profits.

Investment in exchange for a stake in an organisation, usually in the form of shares, representing ownership of a portion of the company's value. Non-profit organisations are unable to access equity investment because they are not privately owned.

A strategy focused on selecting investments that avoid negative impacts on society and the environment, prioritising companies and projects that align with positive social and environmental values.

The process of providing funds for business activities, making purchases, or investing. Financing can come from a variety of sources, such as banks, investors, or personal savings, and can take different forms, such as loans, credit, grants, or equity investments.

Regular, unchanging expenses a business must pay, such as rent, salaries, and insurance.

Money given by individuals, organisations, or governments for a specific purpose.

A conditional or unconditional gift of money with no expectation of financial return.

A strategy that expands the pool of funds available for social and environmental purposes, encouraging innovative approaches to persistent problems. It recognises that the challenges facing society are too large and complex to be solved by government, philanthropy, and not-for-profit organisations alone.

Investments made into organisations, projects or funds with the intention of generating measurable social and environmental outcomes, alongside a financial return.

The different sources of revenue for a business, such as grants, sales, or fees.

When an organisation's expenses exceed its income.

Summarised accounting data (balance sheet, cash flow, and income statement) prepared for a charity's management and Board.

The costs of running an organisation, including fixed and variable expenses.

Patient capital is money invested or lent with the understanding that returns will come slowly, if at all, in the short term. It prioritises long-term social or environmental impact over quick financial profit.

Conventional finance tends to expect relatively fast returns. Banks want loans repaid on a set schedule. Equity investors often want to see growth and returns within a few years. This timeline can be difficult for social enterprises, which are often working on complex problems that take time to shift, building trust with communities that have been let down before, or employing people who need significant support before they become confident, productive workers. Patient capital works differently. It gives an organisation the time and space to grow, test ideas, learn from what is not working, and build a sustainable business model without being forced to cut corners on its mission in order to meet short-term financial obligations. Patient capital can take many forms, including long-term loans at low or zero interest, equity investment that does not demand rapid returns, grants that are paid over multiple years, or convertible notes, which are loans that can convert into a share of ownership under agreed conditions.

In Australia, patient capital is increasingly recognised as one of the most important enablers for the social enterprise sector. Organisations working in areas such as employment for people facing significant disadvantage, affordable housing, community health, or First Nations economic development often need years to build relationships, develop their model, and demonstrate results. Philanthropic foundations such as the Paul Ramsay Foundation, the Westpac Foundation, and the Lord Mayor's Charitable Foundation have moved toward longer funding cycles and below-market loans in recognition of this reality. Impact Investing Australia works to grow the supply of patient capital from institutional investors, including superannuation funds, to mission-aligned organisations. Some state governments have also begun to offer longer-term, outcomes-linked funding arrangements that reflect the time horizons social enterprises actually need.

The main tension with patient capital is that it can be hard to find and harder to secure. Many funders still operate on annual grant cycles or expect commercial returns on investment, which does not suit the reality of most social enterprises. There is also a risk that patient capital, precisely because it does not demand immediate performance, can reduce the pressure on organisations to make hard decisions about sustainability. The availability of forgiving capital is not a substitute for a sound business model. For social enterprises seeking patient capital, it is important to be clear about the outcomes being pursued, realistic about the timeline for achieving them, and transparent with funders and investors about progress. For First Nations social enterprises in particular, patient capital that is genuinely patient, flexible, and community-controlled is essential to supporting self-determined economic development on terms that respect cultural values and community priorities.

Payment by Outcomes (PBO) is a form of investing to help address long-standing social issues. PBO trials are designed to test the effectiveness of these investing contracts. How it works The government has committed $15.7 million from 2019-20 to 2026-27 to co-develop, implement and evaluate 3 PBO Trials in the social services sector. PBO is a form of social impact investing (SII) contract, between a funder and service provider. In the PBO Trials, the contract funder is the government. In the PBO Trial contracts, service providers are paid part of the contract fees upfront and part on achievement of agreed outcomes. This means the service provider takes on more of the risk for achieving the outcomes than under a traditional grant arrangement. The objectives of the PBO Trials are to inform: -the appropriateness and efficiency of PBO contracts -how to improve the design and use of robust outcome measurement -whether PBO contracts are suitable funding tools in social services -whether the policy focus areas tested are suitable for PBO contracts. The learnings will inform future potential funding arrangements and community sector reform. The 3 PBO Trials were co-developed and are being implemented and evaluated with service provider partners.

The money remaining after all expenses, including owner compensation, have been paid.

A financial statement showing income earned and expenses incurred over a year, revealing the profit (surplus) or loss (deficit) for that period.

Investments that typically involve the provision of capital that is structured as a loan, but with some equity-like characteristics, such as flexible repayment terms, performance-based returns, or the option to convert the loan into ownership shares. The goal of quasi-equity is to provide growth capital to businesses or projects that may not qualify for traditional loans or equity investments, while balancing the risks and rewards for both the investor and the recipient. Quasi-equity can be a risk capital alternative to equity financing for non-profits.

Funds an organisation has available to freely spend, excluding restricted income, endowment funds, and tangible fixed assets held for the organisation's own use.

Funds, often provided through grants, that can only be used for a specific purpose or project and cannot be used for other purposes.

The total income generated by an organisation, before expenses are deducted.

Financial resources available to support the startup, growth, and sustainability of social enterprises, including grants, donations, impact investments, loans, and earned income from various sources. The type of funding that any given social enterprise will be able to access will depend on its legal structure.

A way of investing money to create positive social or environmental impact, sometimes with the expectation of also generating a financial return. This can include investments in social enterprises, non-profits, or projects that aim to address social or environmental challenges. Can be understood as an overarching term that includes both grants and impact investment.

A financial tool that enables private investors to fund social impact projects, with the potential to earn a return if the project achieves its targeted outcomes. If the project succeeds in delivering the desired social or environmental results, the government and/or other actors ‘purchase’ the outcome, which enables investors to be repaid with interest. If the project falls short of its goals, investors may lose some or all of their investment. Social impact bonds are a type of ‘payments for outcomes’.

Often used interchangeably with ‘impact investment’. Sometimes used to specifically denote impact investments made to address ‘social’ challenges rather than environmental ones.

Social investment is money put into organisations or programmes with the expectation of both a financial return and a positive social or environmental outcome. It sits between traditional charity giving, where money is donated with no expectation of return, and conventional investing, where financial profit is the only goal.

In practice, social investment can take many forms. It includes loans, where an organisation borrows money and repays it over time, often at below-market interest rates. It includes equity investment, where an investor takes a share of ownership in a social enterprise. It also includes more complex instruments such as social impact bonds, where repayment depends on whether agreed social outcomes are achieved, and convertible notes, where a loan can convert into equity under certain conditions. The investor might be an individual, a foundation, a community development finance institution, a superannuation fund, or a government body. What distinguishes social investment from mainstream finance is the deliberate intention to generate social or environmental value alongside any financial return.

In Australia, the social investment market is still developing but growing. Impact Investing Australia is the national peak body for the sector and works to build connections between capital and purpose-driven organisations. The federal government has supported the market through initiatives such as the Social Enterprise Development Initiative (SEDI) and earlier programmes like the Sector Readiness Fund. State governments, particularly in New South Wales and Victoria, have also been active, using social investment structures to fund programmes in child protection, homelessness, and employment. Philanthropic foundations such as the Paul Ramsay Foundation and the Minderoo Foundation have begun deploying capital through loans and equity as well as grants, recognising that grants alone cannot meet the scale of need.

For social enterprises, social investment can offer access to patient capital, that is, funding that does not need to be repaid quickly and that tolerates a lower or slower return in exchange for impact. This can be particularly valuable for organisations that have grown beyond what grants can support but are not yet attractive to mainstream commercial lenders. However, taking on investment is not without risk. Repayable finance creates obligations that grants do not. If revenue falls short, loan repayments can put serious pressure on an organisation. It is also important to ensure that the terms of any investment are genuinely aligned with the organisation's mission, and that the pursuit of financial returns does not gradually crowd out social purpose. For First Nations social enterprises in particular, it is important that investment structures respect community ownership, self-determination, and the primacy of cultural values over financial metrics.

Social procurement is when governments, businesses, or other organisations use their buying power to achieve not only the best value for money, but also positive social, environmental, and community outcomes. In plain terms: - It’s about choosing suppliers and contractors not just because they can deliver a product or service at the right quality and price, but because they also create broader benefits. - These benefits might include providing jobs or training for people who are disadvantaged in the labour market (such as long-term unemployed, people with disability, or First Nations peoples), supporting local small businesses, using environmentally sustainable practices, or reinvesting profits into community programs. - For example, if a council needs catering for an event, they might hire a social enterprise café that employs young people who are at risk of homelessness. The catering still needs to meet price and quality standards, but the purchase also creates social value by helping those young people gain skills and employment. It’s essentially buying with impact, making purchasing decisions that deliver the required goods or services and contribute to wider positive change.

Trade means the exchange of goods or services. It sits at the heart of what makes a social enterprise. It is widely understood in Australia that social enterprises primarily trade, from the Finding Australia's Social Enterprise Sector (FASES) research, to the definition of a social enterprise under the Classification of Social Sector Initiatives and Entities (CLASSIE). When Social Enterprise Australia asked the sector what makes a social enterprise, a key theme was clear: core to what a social enterprise is, is that they primarily trade.

But what counts as trade is often misunderstood, and how it has been assessed in different contexts varies. This has created real confusion in the sector.

Trade is the exchange of goods or services. A social enterprise sells something, whether that is a product, a service, or a programme, and receives payment in return. This is different from receiving a gift or donation, where money is given freely without anything being provided in exchange.

Where it gets more complicated is with grants. Not all grants are the same. Some grants are gifts or donations. They are not trade. Others are used to purchase goods or services, and they are trade.

In Australia, GST is a useful guide:

• If GST applies, the grant is for a good or service. It is trade. 
• Gifts and donations do not attract GST. They are not trade.

There are exceptions where GST may not apply to a grant that is for goods and services, including when:

• It is for GST-free goods or services (such as most basic foods, some education courses, and some medical, health, and care products),
• It is for an input-taxed activity (such as residential rent or certain financial services),
• The organisation is not registered for GST.

Where GST does not apply, the practical question is: would GST apply if these exceptions did not exist? 

Getting this right matters. Many funding bodies, government programmes, and certification frameworks assess whether a social enterprise earns a substantial portion of its revenue from trade. How each revenue stream is classified affects whether an organisation qualifies for various opportunities. Being clear and consistent about what counts as trade helps social enterprises present an accurate picture of their business model and builds credibility with funders, partners, and government.

Funds that can be used for any purpose to further an organisation's objectives.