Securing financing for your co-op is a key step. Of course members are a key source of capital, however rarely do members have all the financial resources required. This means that securing additional capital from others is usually a necessary part of all co-op start-ups.
There are many different types and sources of financing and each source will require specific information about your co-op to determine whether or not they will provide the co-op any money. The co-op will also have to agree to specific requirements and conditions to receive the money. The following are some key resources that provide financing to co-operatives:
Most Co-operative Shares are Eligible Investments in RRSPs
Most types of shares in co-operatives are eligible investments in an RRSP. These qualified investments include common, membership, preferred or investment shares. Qualified investments also include any type of these shares purchased using patronage allocations. One exception to this eligibility is the membership shares of consumer co-operatives, i.e. shares required for membership in a co-operative that one can reasonably expect to pay a patronage allocation in respect to consumer goods or services. These types of shares are not eligible. However the other types of shares noted above are eligible investments for consumer co-operatives.
What does this allow?
This means that members can place their existing co-operative shares into a Self-Directed RRSP, can purchase and place new shares into a Self – Directed RRSP or transfer funds from an existing RRSP into a Self-Directed RRSP which then uses the funds to purchase shares in the member’s co-operative.
It also allows non-members who have preferred shares or investment shares in the co-operative to place them in a Self-Directed RRSP using the same approaches noted in the above paragraph.
How Can this Help My Co-op?
Because the RRSP defers the payment of income tax, it directly benefits the members by reducing their current year’s income tax, which allows before-tax dollars to be invested by the member into the co-op. It also means that the large pool of capital which members and non-members have already placed in RRSPs becomes a potential source of capital for the co-op.
Who Can Help?
The Canadian Worker Cooperative Federation has a RRSP Plan, which is accessible to any co-op. In order to access the Plan, the co-op must be or become a member of the CWCF. This includes both Regular Members i.e. worker co-operatives, as well as any other co-operative (non-worker co-op) that becomes an Associate Member of the CWCF For more information, see the document on the CoopZone Financing page called “CWCF RRSP PLAN QA fnl8-09.doc”.