Thanks for the opportunity to share a few thoughts on financing worker controlled enterprises. I am a member/owner of Ganesh Community Development Co-operative, a worker co-op, and a board member of the Canadian Alternative Investment Co-operative, which provides loans to a number of social ventures including worker co-operatives.

I have a few points about worker co-ops, and similar initiatives, before I start taking about money.

The first is that new worker co-operatives are more likely to succeed than
other new businesses. According to reports cites on the On Co-op website twice as many co-ops stay in business over a 10 year period than other forms of business.

The second is that new worker co-operatives fail. In can be due to poor planning, personal differences between members, an economic downtown or something unique to the venture. But just because you form a co-op doesn’t mean that it will succeed.

The third point is that whether a worker co-op succeeds or fails, the effort is worthwhile. It is exciting and stressful and always a challenge, but being a part of a worker co-op is taking a real step towards building a new world. As part of a worker co-op we are stating, in the clearest terms possible, that we truly believe that with our brains and muscle we can run the economic world.

With these in mind, let’s touch on one practical aspect of co-op development—money.  Starting a co-op, maintaining a co-op and expanding a co-op our different challenges, but at all stages you’ll need access to funds and other resources. I’m going to touch on four basic sources—the co-op members, the broader community, institutional resources and state resources.

1. Own resources:

Member Shares
Member Loans
Cost Sharing
Skill Sharing

These are the resources that the members of the co-operative bring together.
They reach into their own pockets and use their knowledge and skills to support the enterprise. While things can be done informally, I do think that when money is involved things should be done formally to avoid confusion and lessen one common source of tension.

Most co-operatives require the purchasing of member shares in order to become a member. The share amount can be small or large; the number of shares to be purchased vary from co-op to co-op. But share purchasing is a conscious and active decision—it provides the co-op with needed capital and helps ensures that the member has a real stake in the success of the organisation, a collective responsibility individually expressed. There can be different classes of shares; not all shares need to be ownership shares; shares may pay interest. They are an asset for the co-op

Member loans are different than shares. They are investments in the co-operative and are expected to be able to be paid back, usually bearing interest based on the success of the venture. The amounts can be large or small—the initial member loan at Ganesh is $1,000. Member loans can be far larger—purchasing tools and equipment can be quite expensive. They are a corporate liability but for many co-ops member loans are essential for the co-operative to be able to provide a service or a product.

Cost sharing is a part of the reality of worker co-ops. At Ganesh we contribute 10% of our billings to the organisation to pay for our shared rent and other administrative costs. These shared costs may not always be apparent but each member does share a responsibility not only to the governance of the co-operative but to its financial viability. If they are not built into the cost you charge for the co-operative’s goods and services they still need to be met.

Not everyone in a worker co-op comes in with the same set of skills. Even where specialisation is expected—not everyone can develop a 20 year financial projection or skilfully use a lathe— there needs to always be skill and information sharing in order for good joint decision making to occur. The co-op will find hidden skills and interests among their members—the person who brought financial expertise to the co-op might turn out to be the best coffee roaster—essential for the long term viability of the co-op.

2. Community Resources


Co-ops don’t exist in a vacuum. They need support to develop. In the long term co-ops must provide enough goods and services to be financially viable. However, at several points along the way co-ops may need something more from the community they serve. This includes both money and expertise. Whether it to buy a coffee roaster or equip an office, co-ops will have real needs that the members can’t meet on their own. Co-op members do have to become comfortable with asking those that know or service to share in their work
by providing needed funds.

Loans will need to be backed by some form of collateral, which can include promissory notes from co-op members, and are a liability for the co-op. The paying back of loans, both principle and interest, needs to be built into the operating budget. Supportive individuals will usually expect interest on their loans. Loans shouldn’t be taken out lightly, but are often necessary to have the physical resources necessary for the co-op to actually produce goods or provide services.

Some classes of shares in the co-op can be sold to non-members. They have a modified ownership role in the co-op, but the selling of shares can raise necessary capital. They are usually redeemable, either on demand or in a way outlined in the co-op by-laws. Most shares pay interest, which will have to be built into the operating budget.

Community bonds are a way to raise capital from the broader community. Like other corporate bonds they are usually fixed term investments for a fixed rate of return—-for example $1,000 for five years at five percent. They are usually used for a specified purpose—the purchase of a building—and to raise a specified amount—$250,000 in total issued bonds. The rates and class of bonds can vary.
Issuing of community bonds almost always involves dealing with government regulators in some way. They are a liability for the co-op.

Co-ops do need expertise beyond their members. From developing co-op by-laws to payroll services to audits and legal advice the co-op will need to obtain the services of individuals and firms in the broader community in order to be successful. Consultants can help put funding packages in place, engineers can do building assessments, lawyers can make sure the contracts the co-op enters into are clearly understood by all parties.

3. Institutional Resources

In-kind support

Credit unions, investment co-operatives, banks and organisations like the Community Forward Fund can provide loans to co-ops at any stage of development. As well, there are co-op sector organisation that provide loan and related assitance to worker co-ops. Loans should be asked for when substantial funds are required as the work required to obtain a loan is the same for $25,000 as it is for $750,000. The request for loans need to be very well put together and are often reviewed by committees who have expertise in co-op and grassroots based economic development initiatives. Collateral will be required and the repayment of the loan, both principle and interest, built into the operating budget.

Grants are ideal, but harder to obtain, funds to meet specific operating or capital needs. There are foundations that do make grants to support community economic initatives. The type of application to obtain a loan from a credit union is similar to that required to obtain a grant.

It is rare for a co-op to come across a completely new challenge. Sector organisations can provide help and support to address challenges as they come up. Consultants, who need be paid if they provide help in an ongoing way, can be be found through sector organisations for assistance in everything from long term planning to relationship building with fair trade suppliers.

Over the years community organisations such as FoodShare have provided in-kind support.   From free office space to photocopying to website hosts,in-kind support is invaluable and a practical expression of community solidarity.

4. State Resources


Almost every level of government has a programme or programmes devoted to small business development. Co-ops can obtain help through these programmes for everything from loans to grants. Several government departments have advisors or consultants who will make referrals if they do not have the time or expertise to help.

Online Resources

Canadian Community Economic Development Network:

Canadian Worker Co-operative Federation

Tenacity Works Loan Fund

Alterna Microfinancing

Ontario Catapult Microloan Fund                              

Canadian Alternative Investment Co-operative

ON CO-OP (CCA Ontario Region)

CoopZone Developers’ Network Co-operative Network Co-operative

Canadian Co-operative Association Co-op Development Information Service

The International Organisation of Industrial, Artisanal and Service Producers’ Cooperatives

Ontario Ministry of Economic Development Guide to Small Businesses

Industry Canada Small Business Financing Programme

Enterprise Toronto


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