Funding

Circular business models create value and potential revenue over the entire life of a product. This goes hand in hand with economic profitability. But it does have a different investment and cash flow sequence than linear revenue models. For example, a product's payback period is typically longer. For example, because customers pay a monthly fee for a Product as a Service, rather than purchasing a product all at once. As a circular company, it is therefore important to create sufficient long-term working capital. But what forms of financing fit the bill? And how do you shape the relationships between financiers, product providers, users and other stakeholders?

The financing needs and risk profile of circular producers change from the linear model. And different circular models in turn bring different financing issues. For example, the financing need for a party that recovers its used product and gives it a second life is very different from one that offers its product as a service.

Financial institutions are not yet used to doing risk assessments for circular business models. Alternative collateral must be developed and new forms of financing are emerging. Moreover, linear risks - such as resource scarcity - are now often not included in standard risk models. Methods for including multiple value in financing trade-offs are also still being sought.

This requires attention from both the applicant for financing and the provider. The financial sector faces the design question of developing new circular financing arrangements. On this page, we share knowledge on this topic. Indeed, the availability of appropriate forms of financing is an important precondition for the circular transition. Only then can we sustainably finance a circular future.