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The Community Shares Fund supports community-owned enterprises seeking to raise investment through a community share issue. We offer to purchase *preference shares up-to a third of your target, to a maximum of £50,000 for a limited period to help you to get your project started.
This Investment in your society can improve the chances of a community share issue reaching its target. It will:
• Provide reassurance to your community that a financial institution has confidence in the project
• Help you to meet your share target
• Provide finance, if needed, before the share issue is concluded
• Support you to meet tighter timescales for purchasing key assets
• Enable the project to go ahead even if you don't meet your initial investment target
• Allow you to offer monthly share subscriptions for people who aren't able to commit to a one off purchase
In many cases the share issue will reach its target without our investment needing to be taken but the confidence it provides can really make the difference. See our 'Who we've helped' page.
For us to underwrite a share offer we need to complete a full due diligence appraisal of the project and society which attracts a fixed fee, currently 2% of our investment (minimum fee of £500). If the appraisal is successful and preference shares are purchased we charge fees equivalent to 8% per annum of the outstanding balance. Please see our terms and conditions for full details.
Preference shares should be seen as a short term investment, typically up to 12 months, to help a project get underway. The option of purchasing preference shares differs from conventional loan/ debt finance in that repayments are flexible and can be paid off as new community shareholders invest or perhaps a grant application is realised. With each lump sum repayment the amount of interest charged is reduced compared with conventional finance with interest reducing over a longer term.
Example Scenario:
Your society is looking to raise £75,000 through a community share offer to install solar panels on three community buildings in your town.
The society pays a one off appraisal fee of 2% = £500 (This covers the time and expense to meet with the group and undertake all the due diligence and administration required). We meet with the group and complete an appraisal. Based on the outcome of the appraisal the credit committee agrees an offer to purchase up to £25,000 in preference shares.
What happens next:
a) The society manages to raise the full £75,000 - therefore preference shares are not purchased and no further charges apply.
b) The society fails to meet its target and requires the £25,000 to ensure the project can go ahead. The Community Shares Initiative purchases £25,000 worth of class A shares which it intends to withdraw within a year. The society agrees a schedule to repay the shares, which will be in tranches of £5,000 (or the full amount could be repaid):
Each month fees of 8% (per annum) are added to outstanding balances:
Month 1 - no repayments are made, the society pays the outstanding balance (£25k) fee of £166.66
Month 2 - £5,000 is paid back - the outstanding balance (£20k) attracts a fee of £133.33
Month 3 - no repayments are made - the outstanding balance (£20k) attracts a fee of £133.33
Month 4 - a further £5,000 is paid back - the outstanding balance (£15k) attracts a fee of £100.00
Month 5 - a further £5,000 is paid back - the outstanding balance (£10k) attracts a fee of £66.66
Month 6 - the final £10,000 is paid back.
Total fees payable: £599.98 (+ £500 Appraisal Fee = £1099.98)
In some cases more conventional debt financing may be more suitable, although typically available over a longer term. For options please visit Co-operative & Community Finance website.
Ideally a Community Shares Fund investment should be agreed before a share offer is launched to ensure details are written into the share your offer document. For further specialist advice and guidance, on how to conduct a community share issue, there are a number of organisations we work with providing specialist advice including: The Community Shares Unit, The Hive, Locality and the Plunkett Foundation. Please note that we would expect your society to have received advice and support from one such organisation before an approach is made to us.
* Preference Shares are a separate class of shares and will take priority over other shares. They will be eligible for withdrawal at any point within a reasonable period (usually within about 12 months). Depending on your society, this may require a rule change. This is a straightforward process, which we can offer advice and guidance on
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