In a basement storefront on Church Street, the operations of Gateway Linens are in full swing. The sound of classic rock from the radio rises over the clack and hum of the perpetually running washing machines and dryers. A team of employees folds clean sheets and stack them on wire racks, ready to ship out to clients. The company's delivery van arrives at the back door and loads up.

According to Curtis, a Gateway staffer, the company's five staff do a lot of washing -- about 5,000 sheets every week, plus pillowcases, blankets, and some tablecloths and napkins for a restaurant client. Business is good. But more than that in this case, business is doing good.

That's because Gateway Linens is operated by residents of the Salvation Army Gateway shelter, a 108-bed "two hots and a cot" facility serving homeless men. Since it opened in 2007, the shelter's linen business has diverted money Salvation Army Shelters in Toronto were already spending on laundry and trained and employed 11 men while further generating revenue from outside clients to fund other services throughout the shelter. It's a social innovation that Gateway Executive Director Dion Oxford describes as "win-win-win," and it is the start of a whole new avenue for delivering services for Gateway.

As Oxford describes it, there were two main inspirations for the program's founding. "Over the years, one of the things that I've developed as a mantra is that all people need three things to have a life: a home, a job and a friend. If they don't have all three of those things, they're not really living, they're merely surviving." With the Gateway shelter, he says, he came to realize it had long been doing well at helping men find companionship and housing, "but we had not been so great at helping people find meaningful work for meaningful pay."

At the same time, it occurred to Oxford that his shelter was spending more than $50,000 sending out sheets, pillowcases and towels for washing. Inquiries to four other local Salvation Army shelters showed they were spending a combined $325,000 on laundry. A solution was obvious: "We've got these able-bodied men who want to work, and they have essentially been declared unemployable by our culture. Then we have this amount of money we're already spending. Why can't we build an industrial laundry facility and do the laundry ourselves and train the guys who live here to help them reintegrate into the workforce?"

So that's exactly what they did. The $250,000 in necessary capital funding was raised from the Rotary Club, the Tippet Foundation and a grant from the city of Toronto. K-Bro Linen Services partnered with Gateway to help train workers and agreed to hire graduates of the program into full-time jobs. Since opening for business in 2007, the company has taken on a diner, two halfway houses and a funeral home and a drop-in centre as clients in addition to the five local Salvation Army shelters. A liability line on the social service agency's budget has become a revenue line � producing money to provide more services � and lately Gateway Linens has been turning down new clients because the facility is operating at capacity.

Oxford says Gateway Linens is planning to expand to a larger facility at Broadview and Gerrard, where the company will double the number of shelter residents it is able to employ and generate a larger surplus to fund even more services. Most of the necessary $340,000 in capital for the expansion has already been raised. Oxford predicts that when the expansion is complete, the operation will pay for itself and generate a $50,000 surplus that the Salvation Army can funnel back into services.

Michael Shapcott, director of affordable housing and social innovation with the Wellesley Institute, says by email that the program is a great model for social service agencies. "The laundry is quite a simple but wonderfully creative and innovative idea. Oxford is in the process of turning a liability� into both a revenue stream and also a great employment opportunity for the homeless men in the shelters," Shapcott writes.

But he says the way social service agencies are funded has not caught up with the creativity of program's like Oxford's. "Funding programs are geared to past practices� and not to support innovation. While there is some support in the private sector for emerging enterprises, there is virtually no support for innovation in the community sector."

Shapcott points to the Ontario's government's planned $20 million social innovation fund, which has been on hold and uncapitalized since its announcement in 2008. "The Wellesley Institute, and others, are calling on the Ontario government to capitalize this fund," Shapcott writes. "We think it's a false economy to put on hold a fund that would have such a significant social and economic impact."

But while the government may have been slow to respond, Oxford says he's found the City of Toronto and, especially, private sector partners, exceedingly willing to help fund this type of innovation.

And he sees more of it in his agency's future. In February, Gateway's second social enterprise was launched � a waste hauling service that will employ another shelter resident, and generate more revenue. Once you get started, Oxford says, this model presents all kinds of opportunities.

"We're excited. We believe fully that this is just the tip of the iceberg."

Ed Keenan is Yonge Street's Innovation & Job News editor.