TerraFund Grants, Loans, and Equity Investments

This article provides an overview of the innovative funding mechanisms that TerraFund offers.

TerraFund offers grants to non-profit organizations and loans or equity investments to for-profit enterprises that restore land by growing trees. Funding ranges from $50-$500,000 USD. 

Regardless of the type of investment received, all funded projects must submit reports on TerraMatch, create geospatial data for their restoration areas, and update know-your-customer (KYC) documentation at the intervals specified in their contract.

TerraFund Grants

TerraFund Loans

TerraFund Equity Investments

TerraFund Grants 

Non-profit organizations can receive grants for restoration work - in this model, funding would cover the cost of executing a restoration project, for environmental and social benefit. After careful vetting of an organization's financials, restoration and community engagement experience, and proposed project, the TerraFund team will work with an organization to finalize and sign a contract for a TerraFund project at an agreed-upon budget. You can find a blank non-profit contract template attached to this article, for reference.

Typically, grant payments go out from VIA Foundation in 14 tranches over the project lifecycle, with a bulk of funding disbursed in the first two years to cover active restoration work, and the remaining funding disbursed over the remaining years of the project following report submission. This usually looks like:

• 3 payments in Year 1
• 2 payments in Years 2-6 (potential for an extra "success" payment at Year 5, depending on funding availability and if satellite data indicates your project has reached its contractual survival rate)
• 1 payment in Year 7 (after project completion)

TerraFund Loans

For-profit enterprises can receive loans for restoration work - in this model, TerraFund (specifically Africa Trees) would offer up-front funding for restoration work that the enterprise would pay back over time. After careful vetting of an enterprise's financials, restoration and community engagement experience, and proposed project, the TerraFund team will work with an organization to finalize and sign a contract for a TerraFund project at an agreed-upon budget. You can find blank enterprise term sheet, equity purchase agreement, and promissory note agreement templates attached to this article, for reference.

Typically, debt funding goes out from Africa Trees according to each project's agreed-upon schedule, over a loan term of 1-5 years. Entrepreneurs pay back portions of the loan on a monthly basis (starting with interest only). Loans are provided at an 8% interest rate in USD, 12% in KSH, and 14% in RWF, and 15% in GHS with the last payment forgiven upon submission of reports and on-time payments throughout the life of the loan.

If a project makes all its repayments on time and submits all reports on TerraMatch, final payments are forgiven. If the final loan payment is forgiven, the effective interest rate of the loan decreases to 4%. Repaid capital is reinvested in restoration enterprises within TerraFund (including, potentially, to the same enterprise again).

To understand how loan repayments work, entrepreneurs can download this example loan repayment schedule here, which provides examples of interest and principal payments over the life of a 24, 36, 48, or 60 month loan. 

TerraFund Equity Investments

For-profit enterprises can receive equity investments for restoration work - in this model, TerraFund (specifically Africa Trees) would purchase shares in the company and play an advisory role in growing the business over time. After careful vetting of an enterprise's financials, restoration and community engagement experience, and proposed project, the TerraFund team will work with an organization to finalize and sign a contract for a TerraFund project at an agreed-upon budget. You can find blank enterprise term sheet, equity purchase agreement, and promissory note agreement templates attached to this article, for reference.

Africa Trees never purchases more than 33% of a company’s total shares and will consult the champion before selling its shares to a third party.​ Africa Trees would have the right to appoint one board member and will serve as a close advisor. Africa Trees does not intend to sell its shares in the company.