Community Shares investing alongside the Community Ownership Fund
Matched equity investments can help communities access a recently re-opened government fund, so there’s a strong case to inject further money into boosting community share offers like we do with the Booster Fund in England...
At the Community Shares Unit at Co-operatives UK, we recently relaunched the Booster Fund. This is our unique way of supporting community business to raise funds and build a membership through community shares.
To date, through the Booster Fund, we have invested over £3m as withdrawable share capital in more than 50 community led organisations. We have supported many more with advice and development grants. Our ‘equity match’ helps boost share offers, and it builds momentum as the community invests alongside us.
Many of our investees are raising money to buy physical assets in their community – much loved land and buildings that local people care about. These usually provide a whole range of services, activities and space for building social capital and community infrastructure – something noted as vital in the recent Levelling Up White Paper.
The government has recognised the importance of this work with their £150m Community Ownership Fund (COF). This fund has just reopened, offering grants up to £250,000. Community Shares Unit partners have fed back suggestions to improve the Fund from round one. It is good to see more flexibility, with more time to draw down the grant and requirements for past community use.
One Fund criteria is still the need for match investment. We know there is a limit to the amount of debt many projects can afford, as well as lenders’ appetites to offer debt to early stage projects without a track record.
This is where more communities are turning to community shares as part of their fundraising mix, which can sit well alongside grant investment and smaller levels of debt. Community shares are long term, patient and flexible investments meaning ‘repayments’ are not fixed, but instead linked to the performance of the business. They are also unsecured, leaving any lenders happier to lend.
At round one, COF has now made 39 awards of £10m. By our calculations almost a third of those awardees either had or are raising their match funding through community shares. That figure is higher than might be expected, given community shares are a form of finance unique to co‑operative and community benefit societies.
Awardees using shares include projects in each part of the UK including The Old Forge in Knoydart Scotland; Ballymacash in Lisburn Northern Ireland for a community sports facility; Tyn Llan community pub near Caernarfon in Wales who raised £458k and Fontmell Magna Village Shop in Shaftesbury England. From publicly available information, this is at least £2.2m raised through community shares so far.
The share offers also build an active following of people whose investment is tied to the business doing well. So not only does it demonstrate community support to other funders, but it also builds in long term resilience with a community of local advocates. This is borne out in the success factor of 92% of societies still trading.
While our Booster Fund will help many more to use community shares, we are currently oversubscribed for matched equity investments. There is a strong case to inject further money into boosting community share offers like we do on Booster in England.
Government and funders need to seize this opportunity. Using some of the upcoming Dormant Accounts Act money to do this would be just one way to turbo charge the community shares space, help communities to raise money investment and help the Community Ownership Fund to reach its potential.