Harvest Co-op has recently secured a loan commitment from Co-op Fund New England for $50,000.00.
The Cooperative Fund of New England (CFNE) offers borrowers the opportunity to increase the amount of a CFNE loan by providing collateral in the form of member investments in CFNE or by inviting member-investors to invest funds in CFNE which are then passed on to the co-op. In either case, this requires that the loan application process has been successfully completed and that the CFNE loan committee has approved a loan to the co-op. Harvest has completed the loan application process and it has been approved.
Harvest has started a crowd-funding campaign through GoFundMe and is ready to begin a member investment campaign through CFNE. Each can provide much-needed support to the Co-op while building a culture of cooperation and participation: a crowd-funding campaign allows people to make smaller donations and help out at whatever level is best for them. A member investment campaign allows member to make larger contributions in the form of a loan and earn a small return on the investment.
CFNE has offered to be the intermediary organization that accepts investments for the Co-op. CFNE accepts investments of $1,000 or more; any investment made in CFNE that was then loaned out to Harvest would stay with CFNE until the Co-op pays off the loan. CFNE will share its prospectus with any member interested in investing.
Harvest Owner CFNE Investment options:
In the case of providing collateral, investors identify their money as securing a loan to Harvest Co-op. Your investment earns a return (0%, 1% or 2%) which may be accrued to the investment or paid out annually. Your money is held in the fund until the loan has been repaid by the Co-op. If the Co-op should fail and the loan not be repaid, the investment would not be returned, but because CFNE is a 501-c-3 the investment’s value can be declared on your, the member’s, tax form as a charitable contribution.
In the case of investing in the Co-op, you, the investor, identify your money as a loan to be passed on to the Co-op, adding on to the loan made with CFNE funds. The investment would accrue a small rate of return and would not be returned to you, the investor, until the loan to the Co-op from CFNE was repaid. As a pass-through loan, there are additional details to be worked out between the Co-op and the investor and between the investor and CFNE. Investors must understand that their loan to the Co-op is subordinate to CFNE’s loan, and is unsecured.
Option 1 and 2 scenarios:
1) Co-op supporter invest $1,000 in CFNE with the stipulation that it will serve as collateral against a loan to Harvest. The investment earns a rate of return of 2%; that percentage is accrued to the investment or sent to the investor on an annual basis. CFNE holds the money until the Harvest loan has been repaid. If the loan is not repaid, the investor forfeits the investment, but can claim it as a charitable deduction on their taxes.
2) Co-op supporter sends $1,000 to CFNE which CFNE then passes on to Harvest as a loan, added on to whatever other loan CFNE might have made to the co-op. Investor’s money can also accrue a rate of return, say 2%, and the interest rate that CFNE charges to Harvest for this $1,000 loan is 3% or 4%, enough to cover the rate being paid to you, the investor, and the administrative cost to CFNE of being the intermediary for this loan. Investor will not be repaid unless/until Harvest repays CFNE.
In this scenario, Harvest would save some money on the interest rate charged, since a loan from CFNE would be at 6%.
More information on Co-op Fund New England
The Cooperative Fund of New England (CFNE) is a 40+ year-old Community Development Finance Institution whose mission is to work for economic, social, and racial justice by advancing community-based, cooperative, and democratically-owned or -managed enterprises with a preference to assisting cooperatives in low-income communities. The Fund does this by providing financial products at reasonable rates, developing business skills, and offering an investment opportunity that promotes socially conscious enterprise.
CFNE was founded in 1975 by co-op activists and social investors to provide financial and technical assistance to food cooperatives. Since 1984, the organization has offered loans and technical assistance to a wide range of cooperatives and nonprofit groups that share CFNE’s vision of equality, justice, and social responsibility. CFNE serves the New England region through an administrative office in North Carolina and six offices located across New England. Since its inception, CFNE has disbursed more than $45 million in over 840 loans to co-ops and community organizations without loss of any investor funds.