Community Crowdfunding basics

the ABC of community shares

We’ve written a PDF guide with our partners at Crowdfunder explaining the basics of a community share issue which is a good place to start if you’re new to community shares

We also wrote the script for this video, commissioned by the Community Shares Unit (they promote best practice for community shares world and their site’s full of useful info)

Why Community Shares work for Community enterprises

The right kind of money

Community Shares don’t leave you in debt to lenders who want their money back quickly, usually with interest, so you’re not under pressure to make annual surpluses which might be unrealistic or only possible by operating against your ethics and values

The right kind of owners

Regardless of how much someone invests in a Community Share issue, they still have one vote just like everyone else, so your enterprise is owned by the community it serves and can’t ever be controlled by a small group of people who might have different interests

The right kind of tax-break

Community Shares are classed as risk capital, so investors who pay tax could offset 30% – 50% of their buy flagyl online usa investment against their tax return, making your offer even more attractive

The right kind of investment

Community Shares can’t be sold on to third parties, so no-one can become an owner of your enterprise who doesn’t share the same values and commitment as everyone else

The right kind of leverage

Anyone can sign a petition but investment in Community Shares demonstrates just how committed people are to your project, which can help lever investment from other people who might be wary. Your share issue can start the ball rolling for your funding package or be the final part of the jigsaw.

The right amount of money

Research shows that Community Shares get people investing EIGHT times more than they would donate to the same cause. People will draw into their savings to buy Community Shares, whereas donations tend to be carved out of everyday spending

The right kind of timescale

Community Shares are patient capital. People can get a return on their investment but generally over the long-term, so they appeal to people who want to live in a world where your enterprise thrives, not people who want you to make money quickly in order to get their investment back

The right kind of incentive

The best way for investors to get their money back is if your enterprise is doing well enough to build up reserves that allow them to cash out, and the best way to make that happen is for your investors to support the business as much as possible (and encourage everyone they know to do the same)

The right kind of costs

Community Shares are by far the cheapest way to raise equity through community crowdfunding. That’s because they are exempt from the laws that normal companies have to comply with if they issue shares and compliance can cost upwards of £100,000 in professional fees. By contrast, to issue Community Shares doesn’t require input from expensive stockbrokers and lawyers meaning much more of the money you raise from your community goes directly to your project.

Could you do a community share issue?

We can help you with many of the things you need to run a successful Community Share issue – like taking the right legal structure, developing a robust business plan and marketing your offer. But there are three things you have to be sure about first:

1. Does your group have a network of supporters you can tap into?

A Community Share issue is a community crowdfunding campaign. You need a group of people who not only want to live in a world in which your project comes to life but who are also prepared to put their own money in to make it happen.

2. Does your group have a project that needs capital?

Community Share investment should have a long-term benefit. You should be able to say afterwards that you used the money to fund something that has a value (such as buying a property or new equipment) and which makes your business stronger. It isn’t a sticking plaster for a business losing money to subsidise trading losses or pay this year’s building maintenance or electricity bill.

3. Are you happy to have your enterprise owned by your community (or need to preserve what you have in community ownership)?

Community ownership is perfect for many community enterprises. Who better to own a local pier or pub than the community who want that enterprise to exist and to thrive? But community ownership isn’t for everyone.

If the idea of sharing control of your enterprise with the people who invest to make your project happen isn’t for you, then neither are Community Shares.

If you can answer yes to all these questions, then we can help you

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